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Monsanto Plunges on SmartStax Corn-Yield Concerns

Monsanto CEO Hugh Grant
Hugh Grant, chief executive officer of Monsanto Co. Photographer: Tim Boyle/Bloomberg

Sept. 28 (Bloomberg) -- Monsanto Co., the world’s largest seed company, fell the most in 21 months in New York amid concerns that its new SmartStax corn seeds aren’t performing as well as predicted.

Monsanto, based in St. Louis, tumbled $4.32, or 8.1 percent, to $48.75 at 4:15 p.m. in New York Stock Exchange composite trading, the largest drop since Dec. 11, 2008, and the biggest decline today in the Standard & Poor’s 500 Index. The shares have slumped 40 percent this year.

Early harvest data from Iowa show SmartStax seeds, which have eight added genes to protect against weeds and bugs, are yielding 3 percent to 5 percent less than cheaper seeds with two or three added traits, said Laurence Alexander, an analyst at Jefferies & Co. in New York.

“The initial data is weaker than we expected,” Alexander, who is based in New York and rates the shares “hold,” said in a report today.

Monsanto, led by Chief Executive Officer Hugh Grant, in December promoted SmartStax, its most expensive seed, as “the highest yielding corn product available.” Monsanto is counting on SmartStax to help boost profit as much as 17 percent a year after earnings from Roundup herbicide collapsed as competitors cut prices on generic versions.

Farmers this year planted 3 million acres of the new product, developed with Dow Chemical Co. Monsanto said Sept. 20 that early harvest data showed some SmartStax corn hybrids were missing yield projections.

Seed Credits

SmartStax is still expected to yield 5 percent to 10 percent more than so-called triple stacks when all the data is collected partly due to better genetics and insect resistance, Kelli Powers, a company spokeswoman, said today in a telephone interview. Yields also benefit from regulators allowing growers to plant less conventional corn alongside SmartStax, she said.

Corn modified to produce insecticides must be planted alongside conventional corn to prevent bugs from developing resistance to the plant’s pesticides.

Monsanto will provide credits for future seed purchases to farmers who are dissatisfied with SmartStax corn seed, Powers said. That could become a financial “headwind” for the company next year, Alexander said in his report.

It’s too early to judge SmartStax’s performance because only 10 percent of the plantings have been harvested and the data isn’t statistically significant until 70 percent of the harvest is completed, John E. Roberts, a New York-based analyst at The Buckingham Research Group, said today in a report. He rates the shares “buy.”

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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