Oct. 8 (Bloomberg) -- Monsanto Co., the world's largest seed producer, surged in New York trading after Chief Financial Officer Terry Crews said farmers haven't been affected by the global credit crisis.

Monsanto climbed $7.26, or 9.8 percent, to $81.44 at 4:15 p.m. in New York Stock Exchange composite trading, the biggest gain since March 25. The St. Louis-based company's shares declined 27 percent this year.

Tight credit markets don't appear to be preventing farmers in the U.S., Brazil and Argentina from getting loans, Crews said on a call with analysts. About one-third of U.S. farmers borrow from a federally backed credit system and 40 percent use regional or community banks that continue to extend loans, he said.

``There continues to be confidence in the availability of credit for farmers going into the 2009 season,'' Crews said, citing the company's own lender survey.

Monsanto's net debt may drop to zero during the current quarter, allowing the company to offer credit to customers, he said. About 70 percent of Monsanto's U.S. seed sales were prepaid last year and the company doesn't offer credit for chemical purchases, he said.

``One of the things they did was quiet this concern that the credit crisis has spread to the Farm Belt,'' Mark Gulley, an analyst at New York-based Soleil Securities, said by telephone. ``Main Street suburbia and Main Street rural America couldn't be any more different. Main Street rural America is doing pretty well in terms of income and balance sheet.''

Farm Debt

U.S. farm debt is low, about 10 percent of assets, after record grain prices provided farmers with more income to repay loans, Crews said. Sales in Latin America have gotten off to a strong start, he said.

``The credit crisis is not derailing demand for their products,'' Jefferies & Co. analyst Laurence Alexander said in a telephone interview from New York. ``Monsanto directly addressed the concerns about the short, medium and long-term outlook.''

Gulley and Alexander are among 13 analysts who recommend buying the shares. Three have ``hold'' ratings and none recommend selling.

Chief Executive Officer Hugh Grant said grain stockpiles will remain tight for the foreseeable future, increasing farmers' demand for genetically modified seeds that boost output.

Global inventories of grains such as rice, wheat and corn fell to 16.9 percent of demand this year, the lowest since 1974, according to the U.S. Department of Agriculture. Stockpiles may rise to 17.3 percent of consumption next year, the third lowest since 1974.

`Dangerously Low'

``All the evidence says that the combination of historically low -- even dangerously low -- ending stocks, with continued increased protein consumption, will drive the demand for more grains and thus more yield,'' Grant said on the call. ``More productivity requires innovation, and that's us.''

Monsanto will widen its gross profit margin by 2 percentage points next year as the company raises prices and extends its lead in U.S. corn seed sales, CFO Crews said. The gross margin will widen to as much as 60 percent by 2012, from 54 percent in 2008, Grant said.

Monsanto accelerated share repurchases to about $200 million in the quarter ended Aug. 31, exceeding buybacks in the three previous quarters combined, Crews said. Free cash flow of about $1.8 billion in 2009 will be used to acquire seed companies outside the U.S., invest in technology, increase dividends and repurchase shares, Grant said.

Net income in 2009, which started Sept. 1, will rise to $4.20 to $4.40 a share, from $3.62, Monsanto said. Profit excluding some items was expected to be $4.61, the average of 14 analysts surveyed by Bloomberg. Five analysts estimated net earnings of $4.73, on average.

Profit Increase

The profit increase will be driven by rising sales of engineered corn seed, conventional vegetable seeds and Roundup herbicide, Crews said. Monsanto alters corn, soybean and cotton to resist Roundup and insects.

Corn plantings wouldn't be materially affected if the U.S. abandoned its ethanol mandate, Grant said. That's because ethanol distilleries also produce dried grains for animal feed, so land now dedicated to ethanol crops still would be used to grow corn for animal feed, he said.

Monsanto expanded its lead in U.S. corn-seed sales in 2008 by 4 percentage points to 36 percent of the market, the company said. Monsanto has said it expects to capture an additional 3 percentage points in 2009.

Profit Forecast

Monsanto raised its forecast for gross profit in 2012 to $9.5 billion to $9.75 billion from an earlier estimate of $8.6 billion to $9.1 billion. Seed sales and genetic licenses to competitors will account for as much as $7.5 billion of gross profit by then, Monsanto said. The new range is as much as 2.3 times more than gross profit in 2007.

``I remain confident we can deliver on our commitments and then some,'' Grant said.

Gross profit in 2008 jumped 46 percent to $6.18 billion, led by a doubling of Roundup weed-killer profit and a 28 percent gain in the business that makes seeds and licenses genetic technology.

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

Last Updated: October 8, 2008 16:33 EDT