Monsanto Cuts Seed Prices More Than Analysts Expected

Monsanto Co., the world’s biggest seed company, will reduce prices for its most expensive crop seeds next year by as much as 75 percent, more than some analysts expected, in a bid to combat market-share gains by rival DuPont Co.

The premium on SmartStax corn seed will be cut 67 percent to about $8 an acre, Kelli Powers, a spokeswoman for St. Louis-based Monsanto said today in a telephone interview. The premium represents the extra amount farmers must pay for SmartStax, which has eight genetic traits added, compared with so-called triple-stacks, which have three traits.

Roundup Ready 2 Yield soybean seed will cost about $5 an acre more than the first-generation herbicide-resistant product introduced in 1996, Powers said. That’s a 75 percent reduction versus a premium of at least $20 that Monsanto charged this year. About $10 of the reduction comes from making seed treatments optional, she said.

“Reductions in price premia for SmartStax corn seed and Roundup Ready 2 Yield soybeans will be larger than we anticipated, particularly in corn,” Kevin McCarthy, a New York- based analyst at Bank of America Corp., said today in a report. “This is not necessarily negative for Monsanto in that price elasticity should drive more rapid grower adoption and possibly market share gains.”

Market Share

Monsanto gained no share in U.S. corn and soybeans in 2010 for a second year in a row after farmers bought fewer premium seeds than the company forecast. In those two years, Wilmington, Delaware-based DuPont gained four percentage points of share in corn seed and seven points in soybean seed, according to Doyle Karr, a spokesman for DuPont’s Pioneer unit.

Monsanto rose 41 cents to $57.18 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have declined 30 percent this year.

Chief Executive Officer Hugh Grant said on a June 30 conference call that the SmartStax premium would be cut by about half and that Monsanto would “skinny down” the Roundup Ready 2 premium in addition to making a fungicide and insecticide seed treatment optional.

Monsanto discussed the prices yesterday during its annual “Whistle Stop” tour, an event for investors and growers that’s closed to the media. Pricing information disclosed at the event in Gothenburg, Nebraska, “is all consistent” with Grant’s June 30 comments, Powers said. Prices will vary by region, she said.

‘More Enthusiastic’

“Farmers in attendance were decidedly more enthusiastic about the prospect of buying SmartStax under the new value proposition,” Jeffrey J. Zekauskas, a New York-based analyst at JPMorgan Chase & Co., said today in a report. “The emphasis of the presentations was articulating the value proposition for farmers: There was little account of the causes of static corn market share in 2010.”

Laurence Alexander, a New York-based analyst at Jefferies & Co., said the SmartStax price for 2011 is at the low end of the range he expected and the premium on Roundup Ready 2 is half what he expected.

McCarthy and Zekauskas rate the shares “neutral” and Alexander rates them “hold.”