Monsanto to Charge as Much as 42% More for New Seeds

Monsanto to Charge as Much as 42% More for New Seeds
Jack Kaskey
Bloomberg
August 13 2009

Monsanto Co., the world’s largest seed maker, plans to charge as much as 42
percent more for new genetically modified seeds next year than older offerings
because they increase farmers’ output.

Roundup Ready 2 Yield soybeans will cost farmers an average of $74 an acre in
2010, and original Roundup Ready soybeans will cost $52 an acre, St. Louis-based
Monsanto said today in presentations on its Web site. SmartStax corn seeds,
developed with Dow Chemical Co., will cost $130 an acre, 17 percent more than
the YieldGard triple-stack seeds they will replace.

“Our pricing has the flexibility built in to ensure the grower captures the
greatest return from his seed investment, irrespective of market volatility,”
Chief Executive Officer Hugh Grant said today in a statement.

Grant is introducing new modified seeds that boost yields as part of a plan to
double gross profit from 2007 to 2012. The new soybeans, which resist Monsanto’s
Roundup herbicide, produce 7.4 percent more soybeans per acre than the older
version. SmartStax kills insects in multiple ways, reducing the amount of
conventional corn that must be planted to deter insecticide resistance.

“SmartStax pricing is higher than we initially expected,” Vincent Andrews, a New
York-based analyst at Morgan Stanley, said today in a report.

Monsanto rose $1.57, or 1.9 percent, to $84.03 at 4:15 p.m. in New York Stock
Exchange composite trading. The shares have gained 19 percent this year.

Acreage Forecasts
SmartStax corn seed will be planted on as many as 4 million acres in 2010, its
first year on the market, with a potential for as many as 65 million acres in
the U.S. eventually, the company said. The new seed boosts yields 5 percent to
10 percent compared with other products, partly by reducing the amount of land
that must be planted with conventional corn to 5 percent from 20 percent,
Monsanto said.

Pricing for SmartStax is at the high end of expectations, Laurence Alexander, a
New York-based analyst at Jefferies & Co., said by telephone.

Roundup Ready 2 Yield soybean seeds were planted on 1.5 million acres this year
and will be planted on as many as 8 million acres next year in the U.S. with a
potential to one day reach 55 million acres, Monsanto said.

The company is pricing its seeds to share the benefit of increased yields with
farmers, said Mark Gulley, a New York- based analyst at Soleil Securities.

Prices include seed treatments designed to protect seedlings from pests and
disease, Monsanto said.

“They are in essence splitting the value of the extra yield 50-50,” Gulley said
by telephone.

Monsanto repeated its forecast for earnings in the fiscal year that ends this
month at the low end of a range of $4.40 to $4.50 a share. The average estimate
of 16 analysts surveyed by Bloomberg was for profit of $4.41 a share.

To contact the reporter on this story: Jack Kaskey

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