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Monsanto rides out SA switch from corn to soybeans

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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.

'Emerging insect pressure'

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.

By Agrimoney.com

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