Why Nufarm Limited (ASX:NUF) shares are sinking lower today

One of the worst performers on the market on Monday has been the Nufarm Limited (ASX: NUF) share price.

In afternoon trade the crop protection and specialist seeds company’s shares are down 11.5% to $6.68.

Earlier in the day they were down as much as 17% to a two-year low of $6.27.

What happened?

Investors appear to have been heading to the exits in their droves following two developments over the last few days.

The first was news that jurors in a U.S. civil court ruled that Monsanto’s Roundup, the world’s most popular weed killer, gave a former school groundskeeper terminal cancer.

According to CNN, he has been awarded US$289 million in damages, which could set a precedent for thousands of other cases claiming Monsanto’s herbicide causes non-Hodgkin’s lymphoma. Monsanto is expected to appeal.

The key ingredient in Roundup is glyphosate, which is allegedly what caused the cancer.

Nufarm has previously sold Roundup in Australia and currently sells a Weedmaster product which also contains glyphosate. Investors may be concerned that Nufarm could potentially be hit by legal challenges of its own.

In addition to this, last week a Brazilian judge placed a suspension on the use of glyphosate in the country. This ban is expected to start next month and there may be concerns that other countries will follow suit and impact sales.

Should you buy the dip?

This afternoon the company released a statement advising that it “does not expect that these issues will have any impact on Nufarm’s business.”

Management also reminded investors of glyphosate’s long history of safe use. Stating that:

“Regulatory authorities around the world have approved the use of Glyphosate, including the US Environmental Protection Authority, the APVMA here in Australia and more recently, the European Food and Safety Authority. The product has a 40‐year history of safe use and continues to be an important tool for farmers. Nufarm will continue to work with regulatory authorities around the globe to maintain its Glyphosate registrations.”

This could arguably make it worth considering an investment while its shares are down so low.

However, as it isn’t an area of the market I’m particularly bullish on, I intend to sit this one out. Instead I would look at other shares in the materials sector such as BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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