Monsanto’s SmartStax Won’t Top Triples, Goldman Says

Monsanto Co.’s SmartStax corn, a new seed with eight genetic changes, probably won’t yield more than a less-expensive technology that has three added genes, Goldman Sachs Group Inc. analysts said.

Monsanto still will increase its corn-seed sales because the new technology provides a yield benefit by allowing farmers to reduce plantings of conventional corn, Goldman Sachs analysts led by Robert Koort said today in a report. Regulators require conventional corn to be sown near insect-killing corn to prevent bugs from developing insecticide resistance.

“We no longer expect SmartStax to outyield its robust triple stacks,” Houston-based Koort said in the report. “Yield parity is the new target.” Koort reduced the share-price target for the world’s largest seed producer to $64 from $71.

Monsanto Chief Executive Officer Hugh Grant is counting on SmartStax, billed in December as “the highest yielding corn product available,” to halt DuPont Co.’s recent market-share gains and help boost annual profit 13 percent to 17 percent after earnings from Roundup herbicide collapsed.

Monsanto fell 75 cents, or 1.5 percent, to $48 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have tumbled 15 percent since the St. Louis-based company said on Sept. 20 that early harvest data showed some SmartStax corn hybrids were missing yield projections.

Jefferies Report

SmartStax corn yields in Iowa are so far trailing so-called triple stacks, which have three genetic modifications, by 3 percent to 5 percent, Laurence Alexander, an analyst at Jefferies & Co., said yesterday. Koort said the gap may narrow as the harvest extends north into regions with more insect infestation.

“While the early harvest data is disappointing, we believe developments are not as poor as implied” by the stock’s performance, Koort said in the report. Goldman maintained its 2011 earnings estimate of $2.87 a share and its “neutral” rating on the shares.

Deutsche Bank AG analysts led by David Begleiter said in a report today that the share-price decline is “overdone.” They said the yield under-performance is correctable because it was caused by one specific variety of seed, known as DeKalb 61-21, not the SmartStax technology that was applied to that seed.

The Deutsche Bank analysts cut their 2011 earnings estimate by 10 cents a share to $2.80 to reflect costs that Monsanto may incur under its SmartStax satisfaction guarantee. They lowered their share-price target by $5 to $65 and maintained their “buy” rating.

Monsanto Policy

Monsanto will provide credits for future seed purchases to farmers who are dissatisfied with SmartStax corn seed, Kelli Powers, a company spokeswoman, said yesterday.

SmartStax, developed with Dow Chemical Co., is still expected to yield 5 percent to 10 percent more than triple stacks when all the data is collected, Powers said. Better genetics, insect resistance and the requirement for a smaller refuge of conventional corn will improve yields, she said.

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

To contact the editor responsible for this story: Simon Casey at scasey@bloomberg.net

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