November 11, 2009

Monsanto's plan to win back market with advanced seeds looks shaky as Dupont strides forward

 

 

DuPont, the second-biggest seed maker, grabbed US sales from Monsanto this year, showing its larger rival that farmers would not always pay for the most advanced seeds. Monsanto aims to regain market share with corn that contains eight genetic changes and the first update of its herbicide-resistant soy in 13 years.

 

Monsanto chief executive officer Hugh Grant is counting on the new soy and corn varieties to add US$1 billion to profit by 2012. A survey of growers early in the harvest now under way indicates the seeds are not meeting yield expectations, contributing to an 11-percent decline in Monsanto's shares the week the results were circulated.

 

The new soy, known as Roundup Ready 2 Yield, was planted on 1.5 million acres in 2009, and Monsanto said it will boost yields 7 percent to 11 percent over the original version. The company forecasts it will be planted on 8 million acres in 2010. The new product costs US$74 an acre, 42-percent more than the previous product.

 

Investors sent Monsanto's shares to their biggest weekly decline in almost a year in the last week of October.

 

Monsanto fell 48 cents to US$69.52 in the New York Stock Exchange composite trading, and DuPont dropped 52 cents, or 1.5 percent, to US$33.68. Monsanto dropped 0.5 percent this year through Monday (Nov 9), while DuPont climbed 37 percent.

 

Robert Koort, a Houston-based analyst at Goldman Sachs Group Inc., said investors are now growing concerned about yield results for Monsanto's key Roundup Ready 2 Yield soy and results from the field appear highly variable.

 

Monsanto last month lowered its price increase on triple-stack corn seed to 7 percent, after saying prices would gain as much as 10 percent earlier.

 

The new seeds are the heart of Monsanto's plan to grab at least 45 percent of the US corn seed market by 2012, from 36 percent in 2008, and 34 percent of the soy market, from 29 percent, Grant said in May.

 

Monsanto said SmartStax corn, which costs 17-percent more than the version it is replacing, will boost yields 5 percent to 10 percent.

 

DuPont gained 2 percent of US corn seed sales this year, largely because it sells growers what they need, rather than the most advanced products, said Paul Schickler, president of DuPont's Pioneer seed unit.

 

DuPont sold more double-stack seeds this year, which contain two gene modifications, than higher-priced triple stacks, while Monsanto sold almost eight times more triples than doubles.