April 4 (Bloomberg) -- Monsanto Co., vying to become the biggest U.S. maker of corn seed for ethanol, raised its annual profit forecast after second-quarter earnings rose 23 percent because of surging demand.

The shares rose 3.2 percent to a record. Net income in the quarter ended Feb. 28 climbed to $543 million, or 98 cents a share, from $440 million, or 80 cents, a year earlier, St. Louis-based Monsanto said today in a statement. Profit exceeded analysts' estimates, and the full-year forecast was raised to $1.60 to $1.65 a share from $1.50 to $1.57.

Sales of corn seeds and related licenses jumped 47 percent after Chief Executive Officer Hugh Grant boosted output of kernels engineered to resist weed killer and insects. U.S. farmers said last week they will plant the most acres of corn since World War II as ethanol demand soars. Monsanto said it gained a record 3 percentage points of U.S. corn-seed sales.

The increase in market share ``is the largest one-year gain ever, and that was a bit of a surprise,'' said Jason Dahl, an analyst who helps manage $1.2 billion, including Monsanto shares, at New York-based Victory Capital. ``Top and bottom line beat pretty handsomely. Corn was the big driver.''

Monsanto, the world's largest developer of genetically modified seeds, rose $1.79 to $57.79, the highest close ever in New York Stock Exchange composite trading. The shares have gained 34 percent in the past year.

Sales Climb

Sales in the second quarter gained 18 percent to $2.62 billion from $2.2 billion. The company was forecast to earn 93 cents a share in the period, the average estimate of six analysts surveyed by Bloomberg. Profit in the year ending in August was estimated to be $1.64.

U.S. farmers plan to sow 90.5 million acres of corn this year, a 15 percent increase from last year and the most since 1944, the Department of Agriculture said March 30. Corn prices reached a 10-year high of $4.5025 a bushel on Feb. 26.

Monsanto's gain in U.S. corn-seed sales gives its Asgrow and DeKalb brands a 22 percent market share this year, CEO Grant said today on a conference call with investors. The American Seeds unit will have 8 percent of U.S. sales, spokesman Lee Quarles said. The combined 30 percent share rivals DuPont Co., the largest U.S. corn-seed producer.

Pass DuPont?

Banc of America Securities analyst Kevin McCarthy said Monsanto's gain may allow the seed maker to pull even or pass DuPont's Pioneer unit in U.S. corn. Monsanto may gain 4 percentage points, said Soleil Securities analyst Mark Gulley.

``Monsanto has the wind at their back, particularly in U.S. corn,'' said Gulley, who raised his stock-price target to $67 from $60.

Monsanto grabbed 6 percentage points of U.S. market share in two years and will continue to gain 1 to 2 points a year, Grant said on the call.

Increased planting caused Monsanto to sell out of its ``triple-stack'' seeds, which are the company's most profitable variety and are modified to resist weed killer and two kinds of pests.

``The company is really in the sweet spot,'' said Frank Husic, chief investment officer at San Francisco-based Husic Capital Management, which manages $600 million, including 140,000 Monsanto shares. ``Selling out triple stacks is hugely positive, and they significantly raised guidance.''

Triple-stack corn will be grown on 16 million acres this year, up from 6 million, Monsanto said.

`Tipping Point'

``Triple-stack products have exploded,'' Grant said on the call. ``Without a doubt, the 2007 season is a tipping point.''

Monsanto will boost seed production capacity this year, adding as much as $100 million to a capital-spending plan of $400 million, Chief Financial Officer Terrell Crews said on the call. The increase will allow Monsanto to meet rising corn-seed demand, Grant said.

``We are at the leading edge of what's become a sustainable opportunity, driven by growing demand for biofuels, expanding need for food and feed, and expansion of growing international markets,'' Grant said. ``2008 will be even more meaningful than 2007 in terms of advancing our seeds and traits.''

Monsanto is boosting crop yields faster than rivals that lagged behind in producing genetically modified seeds, he said.

DuPont's shares fell 33 cents to $49.56. They have gained 15 percent from a year ago. Corn futures rose 13 cents, or 3.8 percent, to $3.5925 a bushel on the Chicago Board of Trade. They have climbed 53 percent in the past 12 months.

Profit from all seeds and genetics rose 21 percent to $744 million as sales gained 22 percent, Monsanto said. Revenue from corn genetics and seeds rose to $1.19 billion from $811 million. Soybean-seed sales dropped 17 percent to $373 million as farmers shifted acres to corn, Monsanto said.

Profit in the agricultural productivity segment, including Roundup weed killer, gained 12 percent to $779 million on higher sales of Roundup in Brazil, the U.S. and Argentina.

To contact the reporter on this story: Jack Kaskey in New York at jkaskey@bloomberg.net.

Last Updated: April 4, 2007 16:18 EDT