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A seed company some love to hate

Posted Aug 14 2009, 02:31 PM by Jim Jubak
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Jim JubakI think the recent huge price increase from Monsanto (MON) is pretty much like putting a sign on the company's back saying "kick me."

Is hiking seed prices by as much as 42% when much of the developing world is on the edge of a food crisis really the best strategy to maximize long-term shareholder value?

Monsanto is one of the stocks in the long-term Jubak Picks 50. My policy has always been that readers are adults capable of applying their own individual moral compasses to decide what they will and will not buy.

Bing: More on Monsanto

So, here's what Monsanto said on August 13. You decide.

The world's largest seed company said it will charge as much as 42% more for its genetically modified seeds.

Price increases range from 42% for the company's Roundup Ready 2 Yield soybeans (where prices will go to an average of $74 an acre from $52) to 17% for the company's SmartStax corn seeds. The cost of those seeds, developed with Dow Chemical (DOW), will go to $130 an acre.

The new seeds, said Monsanto’s chief executive officer Hugh Grant, will boost yields for farmers. For example, the company projects that the new soybean seeds, genetically engineered  so that applying Monsanto's Roundup herbicide will kill weeds but not soybean plants, will yield 7.4% more per acre than the old seeds. The SmartStax corn seed has been genetically modified so that it will resist or kill insects. The company projects that the SmartStax seeds will increase yields by 5% to 20% over conventional corn seeds.

Image credit: MonsantoThe seeds are a key part of the company's drive to double gross profit from 2007 to 2012. That's a lofty goal, since profit margins from the company's Roundup herbicide business are under pressure.

There will have to be a huge, rapid uptake of the new seeds to get there, but Monsanto clearly believes it can get the job done. The company is projecting that SmartStax corn seed will be planted on as many as four million acres, with the long-term potential for planting on 65 million acres in the United States.

Roundup Ready 2 Yield soybean seed will begin with plantings on 1.5 million acres this year, Monsanto projects, with plantings climbing to eight million acres in 2010 and a long-term potential of 55 million acres.

At the same time as Monsanto announced these new products and their prices, the company repeated its forecast of earnings per share of $4.40 to $4.50 for the fiscal year that ends in August. (The stock traded near $81 during Friday’s session.)

In my opinion, Monsanto probably has the pricing power to make this stick, but a 42% price increase for seeds during what is certainly a depression for the world's poor is likely to increase the company's already high negative numbers.

Monsanto is well on its way to becoming the ExxonMobil (XOM) of the 21st century--you know, the company that social activists love to hate.

I hope that management has a thick hide.

Related reading:

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Comments

 

Bold move by the company to pass along the true cost of a product.  I hope that is pays off for them.  Contiue to research all your stock solutions to make the best possible decision.

bob

www.totallyfreemarketanalysis.com

Monsanto promise this and that  a smart move from the farmers should be.because monsanto likes contracts to mention the yield in their contracts and cut the clause of not suing.otherwise send monsanto out the door they are liers and croocks do not bussiness with them

Monstanto: Fascist/globalists trying to food production world-wide.

The problem is.....the roundup resistant soybeans take over the native species which are not resistant to roundup herbicide, so Monsnato becomes the exclusive crop no matter what anybody likes.  The natural farmer is out of business.  This will happen with rice and any other Genetically Modified seed.  It's not worth paying them $.01 cent for the seeds.  They are evil and will ruin food sources we have had for thousands of years.   The seeds from the genetic corn and soy or others also can be modified, if not already, to not reproduce fertile seeds so Monsanto has the lock on future seed supply at whatever price they want to hold the market hostage.  The seed will eventually become void of natural nutrients and become empty food.  But food is food when you have no other food.  

They already are trying to create the false demand for the seeds by manipulating the price upward to make you think you can't do without it.   Once 100 million plus acres are planted then it's game over-they won.  Other companies beside Monsanto are doing this.   It's what they don't tell you that you need to think about.  Price isn't always everything.  And do you think they will tell you the bad parts about the scheme.  

Jubak is still pushing the Global Elites product.  Shill for the Illuminati...

Being a farmer, I love to hate Monsanto's patent lawyers and cost accountants who seem to be able to protect and price their technologically superior seeds and chemicals at the maximum possible value a farmer can pay and still justify using their products.

For the crop farmer everything was rosy when farm commodities rode a multiyear price peak as in 2008; but with corn valued at half last years price in 2009; Monsanto's 42% input price increase for 2010 on top of a large increase for the 2009 season should bring my compatriots to the ramparts.  

Worse, Monsanto can't enforce the same pain on our major competitors, particulary Latin American soybean producers where the patent laws are winked at.  Because  non-hybred seeds including Monsanto's are self replicating, farmers elswhere will use pirated seed and save their own seed for replanting wthout paying a techology fee for a second and subsequent crops incorporating the same advanced techology for with we pay through the nose. If we try to replant saved Monsanto seed here, Monsanto enforces its patent laws and basically confiscates our farms.  This places North American farmers at a serious competitive disadvantage.

There is some hope starving Third World countries in desperate need of  genetically modified (GMO) seed advances might not be left out in the cold.  Even greedy Monsanto with enough pressure from a concerned world, could develop and release regionally adapted GMO seed at cost in areas where they have little prospect of commercial gain in the same way pharmacutical developers have released affordable AIDS medicine in the same regions.  

The 42% reported here and in previous reports is not the accurate number for the increase in price for Roundup Ready 2 Yield Soybeans over the price for the same soybeans last year, but rather the difference between Roundup Ready soybeans vs. Roundup Ready 2 Yield soybeans. Two different brands. I addressed this on the Monsanto blog, which I invite you to check out.  

blog.monsantoblog.com/.../monsanto-raising-seed-prices

Ms Manning, Thank you for your link to the Monsanto corporate site.  It is good to see the verbage relative to Monsanto's efforts to help the Third World.  With your patent protection, purchases of competitors, and agreements with univerisities that let you exclusively commercialize their research in return for funding some of their operations, you are approaching a near monopoly on high tech seed development worldwide.  I think your reach in this area is greater than any government.  Accordingly your responsibility is at least as great as any government to do the right thing in food short areas of the world, particularly since your senior management protected by the rule of law in the First World is better compensated than any non-dictatorial world leadership cadre.  You can and should build on what Norman Borlog and the Rockerfeller Foundation did a generation ago to bring about the now faltering Green Revolution that beat back malnutrition in places like Mexico, China, and India.

Going back to your North Amercian pricing:  I see that you expect, as reported by Mr Jubak, that your Roundup Ready 2 soybeans will yield 7.4% more than the older Roundup Ready 1 techology.  You are pricing this new techology $22 per acre (42%) more than the old technology.  As he US trendline soy yield is now around 42 bushels per acre (bpa), a 7.4% increase  would give that average farmer an extra 3 bpa.  USDA this month projects the US average soy price for the 2009/10 crop year to be from $8.40 to $10.40 per bushel.  The farmer then could expect perhaps a $30 gross income increase for a $22 seed cost increase, pretty much a wash given the vagaries of crop production.  I expect farmers might try the new stuff on a few acres at your high prototype seed cost, but we will need a better deal from you to grow Roundup 2 on 55 million acres.  Also readers of these blogs need to know that you doubled the price you charge for Roundup 1 beans between 2005 and 2009 and nearly tripled your seed corn prices in the same period.  To be fair, your triple stacked corn is an awsome product and  may be intrinsically worth, 50% more than your 2005 product.  Still, score the last few years as usual in the win column for Monsanto's cost accountants.

Nobody should bet against Monsanto at now in the stock market.  Nonetheless you are guilty of imperial overreach and could easily falter like our recently discredited the "titans of finance" did when they though they were too big to fail, and invulnerable to public criticism.

I am not a farner, but if I understand this article correctly; you buy their enhanaced seed, buy their herbicide to kill the weeds. They have a lock on the market. I wonder what effect this will have on the fields in five or ten years. The farmers pay a higher premium for the seed which they will have to pass on to the consumer. Will we be able to afford groceries in five years?

Henry Kissinger (world-class criminal) once stated 'Control food, and you control the world'. Monsanto (corporate criminals that they are) are just another spoke in the wheel for the Global fascist/elitist/Illuminati bastards that are Hell-bent to rule the world, a.k.a. New World Order. Nothing good can come from this for farmers OR consumers. Support your local farmers and buy ONLY independently grown food, or grow your own (while you still can), that's the only way to get healthy food anymore. Has anyone noticed how ODD your meat and produce tastes these days? That's because the are NOT NATURAL, there is NO nutritional value, nothing but empty bulk. Monitor what you eat people; most of the GM foods are scientifically PROVEN to be bad for you!!!

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