Monsanto risks losing a "big block" of revenues if the seeds and sprays giant, fresh into promotion drive for its cutting-edge seed, does not succeed in winning over customers, a leading supplier has said.

Monsanto has four years before its first-generation Roundup Ready soybeans, genetically modified to tolerate glyphosate weedkillers, come off patent, allowing generic competitors into this part of the seeds market.

The group's challenge is by then to get customers switched to its higher-tech Roundup Ready 2 Yield soybeans, which are also marketed as giving significantly better yields, and will still be on patent, John Brady, chief executive at alternative agrichemicals group Plant Health Care, said.

"They have to convert everyone to Roundup Ready 2, or lose a big block of their royalty income," he told Agrimoney.com.

Price cuts 

The comments follow Monsanto's announcement last week that it would slash prices of its most expensive seeds, after failing to gain market share in the US corn and soybean markets for a second successive year.

In soybeans, the premium on Roundup Ready 2 over first generation seed would be cut from $20 an acre to $5 acre, a reduction largely made through making as optional Monsanto's seed treatments - including Plant Health Care's Harpin product, which improves plants' resistance to nematode worms.

The challenge for Plant Health Care was to ensure that distributors, which would now regain control over seed treatment, employed Harpin, which cost the equivalent of about $1-1.50 an acre, Mr Brady said.

"We feel farmers might be more willing to pay for Harpin, rather than a full package of treatment of $10 an acre."

Additional prospects 

Mr Brady also highlighted that, with Harpin now eligible for application to all Monsanto soybean seed and for cotton rather than just Roundup Ready 2, it could potentially be applied to 40m-45m acres.

This year, about 6m acres were planted with Roundup Ready 2 soybeans, compared with a Monsanto target of 10m acres.

Indeed, Plant Health Care, whose shares slumped by one-third in June when it warned over the impact from the Roundup Ready 2 shortfall, restated that results for 2010 would "be behind original expectations".

However, it said that its longer-term prospects remained "very strong", with a Harpin deal also signed with Swiss-based Syngenta, the world's top agrichemicals group, and "extensive", government-sponsored trials of its Myconate root stimulant in Brazil.

Plant Health Care reported sales up 14.1% at $5.64m for the first six months of the year but, with product development costs soaring 69%, losses widened by 21% to $4.68m.

More difficult to predict

Evolution analyst Philip Sparks added that the change to Monsanto's seed strategy made forecasting Harpin sales "difficult" in the short-term.

"The fact that Harpin is available for first generation seeds as well as second widens the potential market in the long-term," he said.

"But we have no idea what Monsanto will charge for Harpin, nor how aggressively it will market the product."

Mr Sparks kept a "buy" rating on Plant Health Care shares, and a 150p price target.

The stock ended 10.0% lower at 113p in London.

Monsanto shares ended 0.7% higher at $57.70 in New York.