October 8, 2010

 

Monsanto's earnings plunge to US$1 billion

Monsanto's fiscal year profits drop to US$1.1 billion from last year's US$2.1 billion due to reduced sales and pricing pressure on its Roundup herbicide.

 

For Q4 that ended August 31, Monsanto reported a net loss of US$143 million, an improvement from the US$233 million loss a year earlier. Losses are common in the seed industry in the late summer quarters before the selling season begins on September 1.

 

Roundup, the longtime herbicide leader on farm fields, is no longer protected by patent, and the product has struggled in recent years as a glut of generic glyphosate herbicides has flooded the market.

 

Monsanto, the owner of DeKalb, Asgrow and other corn and soy brands, last year cut Roundup prices by 50% to protect market share.

 

Chairman Hugh Grant said, "Pricing actions for Roundup and other glyphosate-based herbicides had a significant effect on overall net sales and gross profit." He said the company's sales fell by 10% in fiscal 2010 to US$10.5 billion as a result of a 35% drop in sales for its agricultural productivity business.

 

Conversely, sales of seeds and licensed genetic traits increased 4% to US$7.6 billion, boosted by higher corn and cotton revenues in the US. Seed corn sales amounted to US$4.3 billion of Monsanto's US$7.6 billion in seed sales. Seed sales now account for more than 70% of Monsanto's revenues. The company is the market share leader in corn seed sales, with 36%.

 

Pioneer Hi-Bred of Johnston last year added two percentage points to its market share and has close to 34% of the corn seed market. According to the latest figures, Monsanto's soy trails Pioneer in market share, 26% to 22%.

 

Grant said Monsanto has lost two to three points of market share in soy seed sales in the past year as it replaces its long-standing Roundup Ready soy with a new generation of Roundup Ready to Yield products, which like its SmartStax seeds carry a higher price.

 

Monsanto's stock has dropped more than 40% this year on reports that its new Smartstax corn seed is not selling up to expectations. For the 2009-10 sales year, the company was obliged to cut prices in the face of slack sales.

 

"Previously has indicated early hybrids containing SmartStax have not demonstrated yield advantages over the company's hybrids containing YieldGard VT Triple," Monsanto said Wednesday (Oct 6).

 

Grant said one reason SmartStax has had a rocky start is that because of reduced root worm populations in parts of the Corn Belt, many farmers might not feel the need for the reduced refuge afforded by the new seed.

 

"It's good news for the farmer. But it's the hand we've been dealt," Grant said of the reduced root worm pressure.