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Monsanto cautious on US corn, soybean plantings

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Monsanto entered the debate over US corn and soybean sowings this year by issuing relatively downbeat acreage estimates, cautioning over South American corn planting prospects too.

Brett Bergemann, the Monsanto chief operating, said that the group was forecasting US soybean sowings this year "closer to 85m acres versus earlier estimates of 87m acres", citing the "additional clarity we have from the spring planting progress" for the downgrade.

Official data have shown US soybean sowings lagging behind the typical pace as heavy rains have prevented fieldwork, particularly in Kansas and Missouri.

The Monsanto forecast compares with a range of estimates of 83.8m-86.8m acres among brokers surveyed by Bloomberg ahead of a much-anticipated US Department of Agriculture report on Tuesday on domestic crop acreage.

The consensus forecast is pegged at 85.3m acres.

"It now appears that US acres will be modestly lower than expected," Pierre Courduroux, the Monsanto chief financial offer, told investors.

'Acres will be lower'

For corn, Monsanto is forecasting sowings "in the range of 88m-89m acres", Mr Bergemann said, below the consensus forecast of 89.1m acres according to the Bloomberg survey, and a current USDA figure of 89.2m acres.

Array

Average forecast: 89.136m acres

Range of forecasts: 88.10m-91.742m acres

Current USDA estimate: 84.199m acres

2014 plantings: 90.597m acres

Sources: USDA, Bloomberg

And the group cautioned over the potential for disappointing corn sowings for the South American planting season which kicks off in August in southern parts of Brazil.

Mr Bergemman flagged, for Latin America, "industry expectations that acres will be lower in the coming season".

Indeed, Mr Courduroux said that Monsanto's corn profits for the year to the end of August were "now expected to be down more than $200m for the full year, as we are not expecting Latin America to have as strong a start as originally anticipated", with European sowings disappointing too.

Corn vs soybeans

Hugh Grant, the Monsanto chief executive, added that for Latin America, "the early read there is [corn] acres are going to be crimped". Array

Average forecast: 85.332m acres

Range of forecasts: 83.76m-86.80m acres

Current USDA estimate: 84.635m acres

2014 plantings: 83.701m acres

Sources: USDA, Bloomberg

Still, there is some industry speculation that plantings of the oilseed may be constrained too in Brazil with Terry Reilly at broker Futures International clocking talk of farmers in the second-ranked producing country "trimming soybean plantings".

A series of data have showed Brazilian farmers slowing purchases of crop inputs although, in case of fertilizers, lower purchases could be consistent with a switch from corn to soybeans, which is a less nutrient-needy option.

Broker downgrades

The comments followed the release of results which, while showing quarterly earnings well ahead of market forecasts, cut the guidance for the current period, and unveiled cost cutting plans amid expectations of industry headwinds stretching into the group's next financial year.

"As we look at 2016, our anticipation is 2016, in many ways, looks similar to 2015," Mr Grant said.

Monsanto shares closed down 5.7% at $106.32, their weakest finish in eight months.

Deutsche Bank on Thursday trimmed by $2 to $130 its target price for Monsanto shares, on which it kept a "buy" rating, in the latest of a series of reductions to broker expectations for the stock.

Jefferies cut its price target on the stock to $120 from $125, keeping a "hold" rating, while Canaccord Genuity reduced its guidance to $134 from $143, but maintained a "buy" recommendation.

Susquehanna cut its price target for Monsanto shares by $5 to $135, but kept a "positive" rating on the stock.

By Agrimoney.com

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