Nov. 10 (Bloomberg) -- Monsanto Co., reeling from its first market-share losses to DuPont Co. in a decade, may be losing the confidence of some investors based on early results from the new modified seeds it’s counting on to beat competitors.

DuPont, the second-biggest seed maker, grabbed U.S. sales from Monsanto this year, showing its larger rival that farmers won’t always pay for the most advanced seeds. Monsanto aims to regain market share with corn that contains eight genetic changes and the first update of its herbicide-resistant soybeans in 13 years.

Monsanto Chief Executive Officer Hugh Grant is counting on the new soy and corn varieties to add $1 billion to profit by 2012. A survey of growers early in the harvest now under way indicates the seeds aren’t meeting yield expectations, contributing to an 11 percent decline in Monsanto’s shares the week the results were circulated.

“The distrust that could be building in the market is very negative for Monsanto,” Paul Baiocchi, a senior market strategist at Delta Global Advisors, which manages $1.5 billion, including Monsanto shares, said in a telephone interview from San Francisco.

The new soybeans, known as Roundup Ready 2 Yield, boosted yields 7.3 percent, St. Louis-based Monsanto said today in a presentation. That’s at the low end of the company’s prior forecasts for a 7 percent to 11 percent gain.

The new soybeans were planted on 1.5 million acres in their first year on the market and will be on as many as 10 million acres in 2010, a 2 million acre increase from previous plans, Monsanto said. They cost growers $74 an acre, 42 percent more than the earlier product.

Farmers’ Expectations

About 20 farm managers and seed distributors in five states said in a report released Oct. 27 that yields from the new soybean seeds didn’t meet their expectations, said Jon Gates, research director at OTR Global, the research firm that conducted the study.

“The initial performance here is not meeting the expectation in a pretty broad area,” Gates said in a telephone interview.

Monsanto argues OTR’s research is flawed because of the small sample size and because half of the soybean crop hasn’t been harvested, Brett Begemann, Monsanto’s executive vice president of seeds and traits, said in a telephone interview.

‘Dust Settles’

“When all the dust settles and all the harvest is in, I think we are going to see ourselves right in that 7 to 11 percent range” in yield improvement, Begemann said.

Monsanto will give a full presentation on yields Dec. 8, he said.

Investors sent Monsanto’s shares to their biggest weekly decline in almost a year in the last week of October, when Purchase, New York-based OTR began sharing its findings with clients.

Monsanto rose $3.66, or 5.2 percent, to $73.66 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have climbed 4.7 percent this year.

Wilmington, Delaware-based DuPont dropped 44 cents, or 1.3 percent, to $33.76. Its shares still have risen 33 percent this year.

“Investors are now growing concerned about yield results for Monsanto’s key Roundup Ready 2 Yield soybeans,” Robert Koort, a Houston-based analyst at Goldman Sachs Group Inc., said in a Nov. 4 report. “Results from the field appear highly variable.”

Price Increase

Monsanto last month lowered its price increase on triple- stack corn seed to 7 percent, after earlier saying prices would gain as much as 10 percent.

The new seeds are the heart of Monsanto’s plan to grab at least 45 percent of the U.S. corn seed market by 2012, from 36 percent in 2008, and 34 percent of the soybean market, from 29 percent, Grant said in a May presentation.

Monsanto says SmartStax corn, which costs 17 percent more than the version it is replacing, will boost yields 5 percent to 10 percent. That’s mostly because the Environmental Protection Agency ruled farmers can plant 95 percent of their acres with SmartStax, compared with 80 percent for earlier varieties.

Farmers won’t be able to confirm yield claims until next year, when Monsanto plans to sell 4 million acres of SmartStax, developed with Dow Chemical Co., in what would be the industry’s biggest product introduction. Monsanto plans to sell as much as 65 million acres of SmartStax a year later in the decade and 55 million acres of Roundup Ready 2 soybeans.

‘Pretty Good’

“If crop prices remain fairly high and with Monsanto having two new products coming out, it should be a pretty good 2010,” said Mark Demos, who helps manage $19.8 billion, including Monsanto shares, at Fifth Third Asset Management in Minneapolis.

Monsanto’s forecasts that SmartStax will be such a hit are “very suspect” since customers haven’t had an opportunity to try it, said Paul Schickler, president of DuPont’s Pioneer seed unit.

DuPont gained 2 percentage points of U.S. corn seed sales this year, largely because it sells growers what they need, rather than the most advanced products, Schickler said in a telephone interview.

DuPont this year sold more double-stack seeds, which contain two gene modifications, than higher-priced triple stacks, while Monsanto sold almost eight times more triples than doubles.

DuPont still is awaiting EPA approval to sell AcreMax 1 corn seed with insect-resistant and conventional seeds in one bag so growers don’t need to plant separate fields. Schickler said he expects approval in time for spring planting.

Even with a timely approval, AcreMax 1 won’t be as popular as SmartStax, Ben Johnson of Morningstar Inc. said in a phone interview from Chicago.

“Given how compelling SmartStax is, Monsanto will be able to win some market-share momentum back,” Johnson said.

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

Last Updated: November 10, 2009 16:41 EST