Monsanto Co. (MON), the world’s biggest seed company, may increase its share of the U.S. genetically modified corn- and soybean-seed market for the first time in three years after cutting prices to entice farmers.
Monsanto may gain about 1 percentage point in corn and soybean seeds this year, Chief Executive Officer Hugh Grant said today on a conference call to discuss earnings. The outcome depends on the government’s final tally of U.S. plantings and grower returns because of an unusually wet spring, he said.
Grant lowered prices on the newest modified corn and soybean products after farmers bought more seeds from DuPont Co.’s Pioneer unit, St. Louis-based Monsanto’s biggest rival. DuPont has grabbed the largest share of U.S. soybeans in recent years and tied with Monsanto for the lead in corn seed, said Don Carson, a New York-based analyst at Susquehanna Financial Group.
“They are pricing for penetration and trying to gain back some of that lost volume,” Jeff Windau, an analyst at Edward Jones & Co. in St. Louis who rates Monsanto “neutral,” said in an interview. “There is a bit of relief they are executing.”
Monsanto’s newest modified seeds are meeting forecasts for the year, Grant said. Roundup Ready 2 soybean plantings increased to 17 million acres from 6 million. Reduced-refuge corn climbed to 13 million acres from 3 million acres.
Those gains, and higher sales of Roundup weed killer, helped net income jump 77 percent to $680 million, or $1.26 a share, in the fiscal third quarter ended May 31, topping the $1.10 average estimate of 17 analysts in a Bloomberg survey.
Monsanto raised its full-year profit forecast excluding some items to $2.84 to $2.88 a share from a previous prediction of $2.72 to $2.82. The average of 16 analysts surveyed by Bloomberg was for $2.82.
The shares rose $3.36, or 5 percent, to $70.26 as of 4:15 p.m. in New York Stock Exchange composite trading, the biggest gain since Nov. 4. Monsanto has increased less than 1 percent this year.
The company’s share of U.S. corn plantings dropped 1 percentage point through last year since peaking at 36 percent in 2008, and its soybean share is down 4.5 percent from a peak of 29 percent, Carson said in an interview. Roundup Ready 2 soybeans are particularly important because the company is trying to switch growers before patents on the original Roundup- tolerant soybean expire at the end of 2014, he said.
“It’s these second-generation products that are going to be their future,” said Carson, who rates Monsanto and DuPont shares “positive.”
DuPont, which is based in Wilmington, Delaware, said June 14 that it gained market share this year in corn and soybeans. Monsanto and DuPont are gaining at the expense of smaller competitors, Marc Gulley, a New York-based analyst at Ticonderoga Securities LLC, said in an interview.
Monsanto’s share of the U.S. cotton seed market also grew, gaining “several” percentage points, Grant said.
Total sales in the three months through May rose 21 percent to $3.59 billion. Revenue from crop chemicals such as Roundup gained 57 percent and seeds and gene license fees climbed 12 percent. Roundup, the world’s best-selling herbicide, and other crop chemicals returned to profit after a $175 million loss before interest and tax in the year-ago quarter. Gross profit from seeds and genetics rose 21 percent.
Monsanto’s loss in the fourth quarter, traditionally a money-losing period because of crop-planting seasonality, will be 26 cents to 30 cents a share, the company said in a presentation. The average estimate of 16 analysts surveyed was for an 18-cent loss.
Investors appear to be brushing aside the company’s disclosure that the Securities and Exchange Commission is investigating customer incentives for Roundup weed killer, Windau said.
Monsanto said the probe involves customer-incentive programs relating to glyphosate products, the generic name for Roundup, in fiscal years 2009 and 2010. Monsanto said it received a subpoena for documents and is cooperating. John Nester, a SEC spokesman, declined to comment.
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