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Monsanto lifts Argentine corn area hopes, as it unveils surprise profit

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Monsanto raised its forecast for the surge in Argentine corn sowings in 2016-17 as it reported a surprise quarterly profit and forecast rising earnings ahead – backed by hopes for sales in South America.

The US-based group, which has agreed a $66bn takeover by Germany's Bayer, flagged the "potential for a greater than 25%" growth in corn sowings in Argentina, the-third ranked producer of the grain.

The forecast represents on an upgrade from a forecast in June, when Brett Begemann, the group's chief operating officer, said that "with an expected lift in commodity prices and reduction in export taxes, we believe that corn acres in the country could increase greater than 20%".

Argentina's government last year ditched export taxes on corn, as well as wheat, allowing more value from shipments to flow back to growers, and increasing the grains' appeal to farmers.

The lure of planting cereals has only increased since Argentina's government earlier this week scrapped plans to cutting its export tax on soybeans, the main rival to corn in sowings plans, by 5 points to 25%.

Indeed, Michael Cordonnier, the respected analyst, on Wednesday flagged the potential for corn sowings to increase by an extra 200,000 hectares, above 3.5m hectares, at the expense of soybeans.

Separately on Wednesday, the Buenos Aires grains exchange forecast a 20% rise to a record 36m tonnes in Argentina's commercial corn output in 2016-17, thanks to higher sowings.

'Continued momentum'

With Monsanto unveiling plans for price rises "across South America", the group said it was placed for "continued momentum" in the region in its 2107 financial year, which started last month.

And the group stuck, in soybeans, by its expectation for South American sowings of 45m-55m hectares with its Intacta genetically modified seed brand, despite the swing by Argentine growers away from the oilseed.

Gross profits in the core seed division will grow in the mid-single digits in the newly-started financial year, driven by the popularity of the Intacta and Roundup Ready 2 soybean seed brands, and market share gains in corn, Monsanto said.

The group forecast underlying earnings per share for the 2017 year coming in at $4.50-4.90 a share, a little below the $4.91 a share that Wall Street has forecast, although the company has a history of opening with a conservative forecast.

Ahead of forecasts

The profits forecast compares with earnings of $4.48 a share reported for the year to the end of August 2016, a little above market expectations, boosted by an unexpectedly strong finish to the period.

The group reported a 71% slide to $191m in its headline loss for the June-to-August quarter, on sales up 8.8% at $2.56bn.

Excluding one-off factors, Monsanto achieved earnings of $0.07 a share, compared with a market forecast of a $0.03-a-share loss.

Gross profit in the seeds division jumped 44% to $869m, led by near-doubling in corn and soybean results.

Monsanto shares stood 1.2% higher at $102.87 in late deals in New York, remaining well below Bayer's $128-a-share offer price, a discount which reflects doubts that the takeover, which is seen as likely to attract close regulatory scrutiny, will ultimately succeed.

By Mike Verdin

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