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Monsanto sees further glyphosate price gains - and highlights Brazil swing from corn to soy

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Monsanto forecast “continued improvements” in prices of glyphosate, the herbicide which has cleared regulatory hurdles in Europe and the US, in results which underlined too the improved popularity among farmers of soybeans over corn.


The world’s biggest seed producer, which also owns the RoundUp glyphosate weedkiller label, said that rises in prices of the herbicide had already fuelled a 51% jump to $119m in gross profits in its crop protection division in the September-to-November quarter, on revenues up 10.7% at $888m.


“The primary contributor to the segment’s growth in the quarter was stronger pricing, as generic pricing for glyphosate continues to improve,” Monsanto said.


And the group named “continued improvements in pricing for glyphosate” first in a list of expected growth drivers” over the rest of its financial year, which ends in August.


Although, amid its takeover by Germany’s Bayer, stopping short of making a detailed forecast for earnings growth this year, Monsanto said that it was expecting a rise in its pre-tax profits.


Cancer claims furore


The upbeat outlook for glyphosate prices follows a series of fillips for the herbicide, which has encountered some opposition over claims that it is linked to cancer, with a World Health Organization panel saying in 2015 that the weedkiller was “probably carcinogenic”.


Monsanto on Tuesday took to 11 the number of US states it has won support from, in a drive to stop California requiring cancer warnings on glyphosate products.


Missouri, where Monsanto is based, joined states including Iowa and Indiana in a court filing decrying California’s proposal as imposing “confusing and potentially inconsistent obligations on non-resident businesses, creating a strong incentive to abandon glyphosate markets altogether”.


The US Environmental Protection Agency two weeks ago said that glyphosate was not likely to be carcinogenic to humans, saying that the weedkiller posed "no other meaningful risks to human health" when used according to label instructions.


‘Challenging corn and soybean prices’


Earlier last month, the European Commission renewed for five years its licence for glyphosate, following a bitter debate between European Union countries, with France, the bloc’s top crop producer, leading protests against the weedkiller.


Belgium, Greece, Luxembourg, Slovenia and Malta were also among opponents.


Nonetheless, Monsanto highlighted a threat from another source – weak agricultural commodity prices, and their impact on farmer spending – to the potential for glyphosate price rises.


“As we look to the balance of the year, we continue to expect strong adoption of our newest technologies and improved pricing for glyphosate to be tempered by challenging global corn and soybean prices, even as demand for both continues to grow,” said Hugh Grant, the Monsanto chairman and chief executive.


Corn vs soybeans


In the seeds business, Monsanto reported gross profit for the September-to-November quarter flat at $1.14bn, on revenues down 4.2% at $1.77bn, as improvements in soybean takings were cancelled out by a decline in corn.


Indeed, soybean seed, in which Monsanto’s profits rose by 30% to $588m for the quarter, overtook corn as a company earner, with the grain experiencing a decline of 22% to $415m.


“In South America, growers continue to adopt” the group’s latest Intacta genetically modified soybean seed “at an unprecedented pace”, Monsanto said, forecasting sowing in the region “to reach 60m acres in fiscal year 2018”.


By contrast in corn, the drop in takings reflected “mostly… lower volumes”, the group said, adding that a “significant portion of this was in the US, and is expected to be recovered later in the year”, but with “some” reflecting lower corn seedings in Brazil too.


Brazil corn prospects


Indeed, hopes for sowings of the so-called “safrinha” crop in Brazil - seeded in the first three months of the calendar year typically on land freed up by the soybean harvest – have proven particularly weak.


In top safrinha growing state Mato Grosso, research institute Imea estimates safrinha corn sowings down by more than 9% for calendar 2018, undermined by weak prices of the grain, besides the prospect of a late soybean harvest following a delayed planting season.


While Imea puts the corn breakeven price for Mato Grosso farmers at R$19.23 per 60kg-bag, equivalent to about $2.65 per bushel, “the current price of corn in Sorriso, Mato Grosso is in the range of R$15.00 per sack”, said Dr Michael Cordonnier at Soybean and Corn Advisor.


In Parana, the second largest safrinha corn state, the Deral farm office estimates that safrinha sowings will drop by 11%.


“When all the states are combined, the 2017-18 safrinha corn crop in Brazil is expected to be 5m-6m tonnes less than in 2016-17,” Mr Cordonnier said, adding that, including a forecast decline in the main corn crop too, total Brazilian output of the grain “could be 10m-11m tonnes” down year on year.


Earnings rise


Monsanto reported overall earnings of $169m for the latest quarter, up from $29m a year before, on sales flat at $2.66bn.


The earnings equated to $0.41 per share from continuing operations, marginally behind the $0.42-per share result that investors had expected.

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