Monsanto Officer Believes It Is 'on the Verge of a Technology Explosion”
Monsanto hopes the grass will be greener with new crop of products
Monsanto, the world’s biggest seed maker, is pinning its hopes on a string of “game-changing” products as its long-time moneyspinner, Roundup weed killer, comes under sustained attack from cheaper generic versions.
Hugh Grant, the US company’s Scottish chairman and chief executive, said this week that the new products should help Monsanto to fulfil its promise to double 2007’s gross profit to $7.5 billion (£4.7 billion) by 2012, as it shifts its focus away from herbicides to its more profitable biotech seeds business.
The two biggest new products, which have just been launched, are Roundup Ready 2 Yield soya beans — a second-generation version of Monsanto’s herbicide-tolerant soya beans, which the company expects to be planted on between 8 million and 10 million acres this year. The other is SmartStax, a line of herbicide-tolerant and pest-resistant corn, which is expected to be planted on more than 4 million acres.
The two are part of a pipeline of 11 products offering farmers better yields and weed and pest control, as well as nutritional benefits. Others include SDA Omega-3 soya beans, aimed at the consumer nutrition market, and Vistive Gold, which can produce reduced-fat soya bean oil.
Products such as these should “give farmers a compelling choice to upgrade to next-generation technologies”, Mr Grant said.
Robb Fraley, chief technology officer, believes Monsanto is “on the verge of a technology explosion”. He said: “This year you will see the first of those game-changing products delivering on the farm.” Pro-jects in the early phases of development will fuel the next wave of technological breakthroughs, he added.
The challenge facing Monsanto was made clear this week by the company’s results for the first quarter of its financial year, which showed an 89 per cent drop in gross profit from Roundup and other glyphosate-based herbicides, as prices were driven down by growing generic competition, particularly from China.
For the year to November 30, Monsanto reported a loss of $19 million, or three cents per share, compared with a profit of $556 million, or $1 per share, a year ago. Analysts had been looking for a breakeven quarter.
Revenue fell 36 per cent to $1.7 billion. The company reaffirmed its previous forecast for earnings of $3.10 to $3.30 per share for 2010.
The world has moved on since Monsanto’s first genetically modified (GM) products in the 1990s were labelled by some, mostly in Europe, as “Frankenstein foods” threatening ecological catastrophe.
Changing diets in the developing world, the effects of climate change and the need to feed a growing world population from a finite supply of farmland have pushed food security up the political and public agenda.
In the UK, the Government is pushing for a more open attitude towards GM and Hilary Benn, Secretary of State for Environment, Food and Rural Affairs, is launching a “food strategy”. Although much of Europe still bans the planting of GM crops, it permits the importation of foods made from them.
In the US, 90 per cent of the soya bean crop and 80 per cent of the corn crop and cotton crop are grown with seeds containing Monsanto’s technology. Other countries are also growing its biotech crops, including India (20 million acres of cotton), Brazil (35 million acres of soya beans) and Argentina (43 million acres of soya beans).
Chris Shaw, an analyst at Ticonderoga Securities, the broker, believes that Monsanto’s short-term prospects are mixed and has issued a sell notice on the shares.
“I have worries about the coming planting season in North America. I think there may be some resistance to the new products, based on pricing,” he said. Mr Shaw said that Monsanto’s Ready 2 Yield soya beans and SmartStax corn were selling at a $20 and $23 premium per acre to their predecessor products.
However, in the long term, Mr Shaw believes that prospects for the company are strong, even though Monsanto is facing increased competition from companies such as Dow Chemicals, Syngenta and BASF. Mr Shaw said: “Their R&D pipeline is robust. And if there is a global food shortage, GM crops are one way to produce more food on less land.”