August 13, 2010

Monsanto's Q4 sales stays on track on crop-protection revamp

Monsanto's performance for its current Q4 sales remains on track after it announced price cuts for key new seed products and revamped its crop-protection unit, said Monsanto Co.'s (MOS) CEO Wednesday (Aug 11).

Fierce competition in the herbicide sector and farmers' poor reception of high-priced genetically modified seeds have weighed on the US agribusiness company and forced it to abandon a long-term profit target.

Hugh Grant, chairman and chief executive, have told investors Wednesday (Aug 11) that "significant drivers of the company's fourth-quarter fiscal-year 2010 operating plan continue to track well with management's expectations."

The company is cutting prices for two lines of genetically modified seeds to spur broader adoption by US farmers, who bought far fewer of the seeds this year than Monsanto had anticipated. The move had been well-received by farmers, though an internal survey showed almost half of respondents wouldn't buy more of its Genuity SmartStax corn and Genuity Roundup Ready 2 Yield soy even if prices were lowered. The survey "trends well with the product choice and pricing actions the company previously outlined," the company said.

The corn seed includes several traits conferring herbicide tolerance and protection against insects, while the soy seed is protected against glyphosate, a key herbicide.  Monsanto's corn and soy seeds "appear to be on track to show differentiated benefits" from its competitors this year.

After two very mild years, insect infestations have increased this year, which gives the corn seeds' insect resistance a chance to shine, Monsanto said. In particular, Monsanto's corn earworm protection could be valuable.

Grant will tell investors that with the cheaper pricing, the SmartStax corn seed returns value to the farmer even with only mild insect pressure. According to Monsanto, farmers planting the Roundup Ready soy seed will benefit even if yields are increased by only one bushel an acre.

Monsanto said the beginning of the South American season for corn seed sales is "making good progress," and that its repositioning of its Roundup glyphosate business has "gone well." The company said in June it was scaling back its herbicide business and focusing more on the seed side of its business.