June 18, 2007

Corn boom fuels Monsanto's profit, brightens forecast as stock trades at record high

Monsanto Co., the world's biggest seed producer, has increased its profit forecast for fiscal 2007 as soaring demand for ethanol and animal feed led to a surge in US corn planting with shares ascending to US$1.80 per US share.

Profit in the year ending August 31 will be US$1.75 to US$1.80 US per share, excluding some items, compared with a previous forecast of US$1.60 to US$1.65, St. Louis-based Monsanto said in a statement. Earnings were expected to be US$1.69, the average estimate of 13 analysts surveyed by Bloomberg.

Monsanto said it grabbed considerable market share from competitors such as DuPont Co. and increased sales of genetically-modified corn seed. Demand also rose for Monsanto's Roundup herbicide. US corn farmers, the world's largest growers of the crop, planted 15 percent more acres this year as the price of the grain jumped to a 10-year high.

For the third quarter ended May 31, profit was about US$1 per share, including a five-cent gain from the resolution of tax audits, Monsanto said in a preliminary earnings statement. Ten analysts surveyed by Bloomberg had estimate 77 cents, on average. Profit one year earlier was 61 cents per share.

Shares of Monsanto rose US$1.55, or 2.4 percent, to US$64.86 in New York Stock Exchange composite trading. Earlier in the day, shares reached a record US$67.86. The stock has gained 65 percent in the past year.

The profit increase mostly reflects Monsanto's growing share of the genetically-modified corn market, spokesman Glynn Young said, without further elaborations.

Monsanto in April said its share of US corn seed sales rose three percentage points to 30 percent. Analysts said that would rival DuPont's Pioneer unit, the world's largest corn-seed producer.

The company may have exceeded its previous market-share forecast as competing producers struggled to meet surging corn-seed demand, Soleil Securities analyst Mark Gulley said. He had estimated third-quarter profit at 77 cents per share and recommends buying the shares.

US farmers said in a survey released March 30 that they planned to sow 90.5 million acres with corn this year, the most since the Second World War. The US Department of Agriculture will update the planting estimate on June 29.