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Nufarm’s share price under spotlight from “fake farmers” campaign

Agriculture chemicals and seed company Nufarm Limited (ASX: NUF) will get some unwanted attention this morning from a report that it made a donation to a controversial public relations campaign to derail attempts to ban the use of glyphosate in Europe.

The glyphosate issue has already cost the company dearly with the Nufarm share price tanking over 50% over the past year when other chemical companies like the Incitec Pivot Ltd (ASX: IPL) share price is down 2% and Orica Ltd (ASX: ORI) share price is up 15%.

In contrast, the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index is up nearly 8% over the period and Nufarm is the only ASX company that’s linked to glyphosate, which it uses in its weed killers.

Nufarm’s small link to fake farmers campaign

It has been revealed that Nufarm contributed €1000 ($1600) to a campaign run by Irish PR agency Red Flag Consulting that was successful in getting European lawmakers to allow the sale of the chemical until 2022, according to the Australian Financial Review.

Successful multi-million-dollar lawsuits between cancer patients and global glyphosate producer Monsanto have forced Nufarm to make a provision for legal challenges as management thinks its likely that it will also be used by users of its products who later developed cancer.

Other global chemical giants like Monsanto made bigger contributions to the EU campaign of up to €200,000 but the campaign was so controversial that Monsanto’s new owner Bayer became concerned and severed ties with the “Freedom to Farm” campaign.

Red Flag has been accused of using fake farmers and astroturfing (a deceptive practice where unsolicited comments from farmers were used to spearhead an orchestrated campaign) but Red Flag has denied this.

Will Nufarm’s share price suffer?

Nufarm was quoted in the AFR article that it thought its contribution was for a project “to engage directly with farmers and glyphosate users at agricultural industry events to understand their concerns about a potential ban on glyphosate and empower them to make their concerns known by writing to or calling political representatives.”

The spokesperson for Nufarm added that the company did not direct or implement the project and had not hired any spin-doctors in Australia to lobby on its behalf.

I do not think the Nufarm share price will suffer from the news given its very limited involvement with the “Freedom to Farm” campaign, although it may not be able to launch any other PR activity (controversial or otherwise) without drawing criticism.

What’s more, I think the Nufarm share price has been oversold given that the company doesn’t manufacture glyphosate but buys it from manufacturers.

There are also reports that some parts of Australia is getting some decent rain and this could help its earnings as Nufarm had recently issued a profit downgrade due to the drought.

There are other stocks that are also well placed to outperform in FY20, according to the experts at the Motley Fool.

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Motley Fool contributor Brendon Lau owns shares of Nufarm Limited. Connect with him on Twitter @brenlau.

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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