Monsanto highlighted the impact on seed companies of South
American growers' switch from corn to soybeans as it unveiled a bigger-than-expected
rise in earnings, helped too by strong demand for Roundup weedkillers.
The group, the world's biggest seed producer, revealed that
profits from corn seeds, its biggest earner, fell 5.2% to $650m in the September-to-November
quarter, on revenues down 7.5% at $1.05bn.
The decline reflected the "expected decrease in corn acres
in Latin America", where farmers - for whom soybeans are typically the default row
crop compared with corn, in contrast to the US – have extended the trend this
season thanks to price signals.
In Brazil, Latin America's most important farm economy, corn
prices did not, thanks to a weaker real, match the 40% tumble in Chicago
futures over 2013, they still fell 22% to R$26.74 per 60 kilogramme bag,
according to the Cepea research centre.
And demand for corn seed is expected to remain weak for now,
with many Brazilian farmers expected this year to eschew a safrinha corn crop,
planted on ground vacated by the newly-started soybean harvest, or sow a second
soybean crop instead.
However, Monsanto's profits on soybean seed for the quarter soared
42% to $168m, on revenues up 15.6% to $168m, thanks to the increased popularity
of the oilseed in Latin America, enhanced by the release of a cutting-edge
genetically modified seed, Intacta RR2 Pro.
This brand offers protection against many insect pests,
including the Helicoverpa caterpillar which has become an increasing problem in
Brazil, besides being tolerant to glyphosate herbicides, so allowing for the spray
off of weeds.
"Emerging insect pressure" has set the stage for a "rapid
ramp up" in Latin America of high-technology seed, the group said.
'Largest soybean launch'
Brett Bergemann, the Monsanto chief operating officer, told investors: "This is a year where some heavy insect pressure actually showcases the benefits of Intacta more visibly.
"Across Brazil, there are common reports of growers already spreading normal soybean fields four to five times to deal with heavy pressure. When you can reduce two to three sprays with Intacta, it speaks to the direct value in savings that gets combined with the improved yield."
Monsanto said that, with an expected 3m acres of the variety to be planted worldwide, Intacta RR2 Pro was on track to deliver the company's "largest soybean launch".
In Brazil alone, farmers are expected to sow 29.3m hectares
overall with soybeans, up more than 1.5m hectares year on year, according to estimates
by the US Department of Agriculture's Brasilia bureau.
Rising agrichemical profits
While Monsanto's profits from cotton and vegetable seeds
fell too, the former dented by "timing effects" in Australia, the company saw
its profits from agrichemicals soar 50% to $558m, "reflecting the continued
benefit of a favourable marketplace environment".
Group earnings for the quarter rose 9% to $368m, on revenues
up 7% at $3.14bn.
The earnings were equivalent to $0.67 a share, narrowly ahead of Wall Street forecasts for a $0.64-a-share result.
Monsanto shares stood 3.1% higher at $116.26 in late morning trading in New York.