Rising sales of cutting edge corn and soybean seed, and the march by farmers back into cotton, helped Monsanto raise second-quarter earnings by 15%, beating Wall Street forecasts.
However, the failure of the world's biggest seed company to lift its earnings estimates disappointed investors, who sent its shares down 5%.
Monsanto reported earnings of $1.02bn for the December-to-February period, historically is most profitable quarter, equivalent to $1.87 a share on an underlying basis.
Analysts had forecast a $1.84-a-share result.
'Mix improvement'
The improvement, on revenues up 6.1% to $4.13bn, reflected the growing popularity of its genetically modified seeds among farmers expected to raise sowings of major crops by more than 8m acres this year in the US alone, and maximise yields, to cash in on high crop prices.
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Rise in US sowings of Genuity Roundup Read 2 Yield soybeans
2011: 13m-17m acres
2010: 6m acres
2009:1.5m acres
Source: Monsanto |
American farmers, expected to raise overall corn sowings by 4m acres to 92.2m acres, were on track to sow 13m-17m acres with Monsanto's high-end Genuity Reduced Refuge brand of genetically modified seed.
Growers were expected to lift the area sown with Monsanto's flagship biotech Genuity Roundup Ready soybean seed to around the same level, from 6m acres last year, despite forecasts of a small decline in overall US plantings of the oilseed.
The growing take-up of more expensive products "brings a positive mix improvement" in corn and soybean operations, the company said.
Corn, cotton popularity
Monsanto added that its sales of branded seed in Brazil and the European Union grew too, while its cotton business was "performing well", helped by the fibre's renewed popularity among growers following a rise in prices to all-time highs.
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Indexed gross profit per acre for Monsanto branded seed
Cotton: $1.30 per acre
Corn: $1.00 per acre
Soybeans: $0.50 per acre
Source: Monsanto |
However, while the group earns considerably more from corn or cotton, per acre, than soybeans, the switch to corn and cotton forecast by analysts and the US Department of Agriculture would not have a big impact on group profits.
"In 2011, for every 1m acres that shift from soybeans into corn or into cotton, we would expect only an estimated $0.02-0.03 earnings per share change on average," Monsanto said.
"With brands in corn, cotton and soybeans, Monsanto is positioned to meet demand regardless of normal fluctuations in crop planting patterns in any given year."
Market reaction
Indeed, the group stuck by a forecast of reported earnings for the full financial year coming in at $2.66-2.79 per share.
However, with analysts having already pencilled in a $2.85-a-share result, the outlook disappointed investors, who sent Monsanto stock down 5.7% to $69.16 in New York.
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