August 17, 2010

Lower GM soy seed demands may risk Monsanto's revenue

Monsanto risks shedding revenues if the seeds and sprays giant, fresh into promotion drive for its cutting-edge soy seed, does not succeed in winning over customers, a leading supplier has said.

Monsanto has four years before its first-generation Roundup Ready soy, genetically modified (GM) to tolerate glyphosate weedkillers, come off patent, allowing generic competitors into this part of the seeds market.

The group's challenge is by then to get customers switched to its higher-tech Roundup Ready 2 Yield soy, which are also marketed as giving significantly better yields, and will still be on patent, John Brady, chief executive at alternative agrichemicals group Plant Health Care, said.

The comments follow Monsanto's announcement last week that it would slash prices of its most expensive seeds, after failing to gain market share in the US corn and soy markets for a second successive year.

In soy, the premium on Roundup Ready 2 over first generation seed would be cut from US$20 an acre to US$5 acre, a reduction largely made through making as optional Monsanto's seed treatments-including Plant Health Care's Harpin product, which improves plants' resistance to nematode worms.

Brady also highlighted that with Harpin, now eligible for application to all Monsanto soy seed and for cotton rather than just Roundup Ready 2, it could potentially be applied to 40-45 million acres. This year, about 6 million acres were planted with Roundup Ready 2 soy, compared with a Monsanto target of 10 million acres.

Indeed, Plant Health Care, whose shares slumped by one-third in June when it warned over the impact from the Roundup Ready 2 shortfall, restated that results for 2010 would be behind original expectations.

However, it said that its longer-term prospects remained positive, with a Harpin deal also signed with Swiss-based Syngenta, the world's top agrichemicals group, and extensive, government-sponsored trials of its Myconate root stimulant in Brazil.

Plant Health Care reported sales up 14.1% at US$5.64 million for the first six months of the year but, with product development costs soaring 69%, losses widened by 21% to US$4.68 million.