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  • From: "Tradingpost" <tradingpost@lobo.net>
  • To: livingontheland@lists.ibiblio.org
  • Subject: [Livingontheland] Monsanto seems to be everywhere as prices soar
  • Date: Tue, 12 Aug 2008 21:05:31 -0600

NOTE: A typically incisive piece on the rapidly escalating cost impact on
farmers of Monsanto's monopolistic position, from agricultural writer Alan
Guebert whose weekly column is published in more than 75 papers in North
America.
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Seed giant flexes muscle
Monsanto seems to be everywhere as prices soar
By Alan Guebert
The Hawk Eye, AUGUST 11 2008
http://www.thehawkeye.com/column/Guebert-081008

In late March, Monsanto Co. sent a "Dear Valued Customer" letter to most
U.S. corn and soybean farmers. The reason, wrote Jim Zimmer, Monsanto's vice
president of U.S. branded business, was "to discuss" some current
marketplace dynamics that will directly affect you in terms of increased
prices for Monsanto's line of Roundup herbicides for 2008."

Demand of glyphosate, Roundup's generic counterpart, "is at an all-time
high," explained Zimmer. As such, "We have seen the demand for Roundup brand
herbicide increase more than our current ability to supply."

That's a problem, he continued, because, "We have a reliable supplier
commitment to farmers who choose to purchase Roundup Ready technology and
who choose to purchase Roundup brand herbicide that we will have supply
available."

The solution?

"Our competitive challenges have put our commitment at risk, forcing us to
increase our price for Roundup herbicide."

Golly, a farmer who phoned me about the letter asked, "How much is their
promise to me going to cost me?"

Globally, about $411 million, the amount Roundup net sales increased from
March through May over the same three months in 2007, according to
Monsanto's third quarter, Form 10-Q filed with the Securities and Exchange
Commission June 27.

That's a 54 percent increase.

Additionally, the 10-Q reports, "Net sales of Roundup and other
glyphosate-based herbicides increased 63 percent, or $1,222 million" --
$1.222 billion -- "in the nine-month comparison" with fiscal 2007's first
three quarters.

Remarkably, however, that $1.2 billion increase in Roundup sales, notes the
10-Q, was posted despite a 7 percent sales volume drop in "Roundup and other
glyphosate-based herbicides in third quarter 2008" and only an 8 percent
increase in global Roundup sales for the nine-month period ending in May.

Clearly, Roundup -- mostly because Monsanto boosted its price -- hit a home
run. "Gross profit increased $927 million because of higher sales of Roundup
and other glyphosate-based herbicides in the first nine months of 2008."

What Monsanto did for Roundup herbicide this spring, it promises to do for
Roundup seed corn next year, according to a July interview company officials
held with DTN and Progressive Farmer editors.

Indeed, wrote Marcia Taylor for DTN after the gathering, "Even the list
price on seed corn will topple the $300 per bag barrier starting this fall,
up about $95 to $100 per bag, or 35 percent on average, according to
Monsanto officials."

Monsanto "thinks it deserves some extra profit sharing," offered Taylor,
because it "claims" its triple-stacked, genetically modified corn hybrids
deliver a 12-bushel yield advantage over competitors in a normal year and
maybe as much as a 35-bushel increase in a dry year.

As such, the company -- which estimates 76 percent of all its 2009 seed corn
sales will be triple stacked varieties -- wants a hunk of that value. In
short, that's why seed prices are set to soar.

But, John Jansen, a Monsanto executive, told the editors, the company is
certain its seed is so hot that "We can pass the red-faced test from the
Panhandle of Texas to McLean County, Ill."

Well, maybe not your red-faced test, so you check out a competitor.

Again, according to Monsanto's most recent

10-Q: "In the first quarter 2008, Monsanto entered into an agreement on corn
herbicide tolerance and insect control technologies with Pioneer Hi-Bred
International Inc. (whereby Monsanto will receive) cumulative cash receipts
of $725 million over an eight-year period."

Drat. How about a soybean competitor?

"In third quarter 2008, Monsanto and Syngenta entered into a Roundup Ready 2
Yield Soybean License Agreement (under which) the minimum obligation from
Syngenta over this (nine-year) period is $81 million," reports the 10-Q.

Is Monsanto everywhere?

Almost. According to its June SEC filing, it recently bought a vegetable
seed company in Europe, a seed corn company in Guatemala, another in Brazil.

Guebert's weekly column is published in more than 75 papers in North
America. His e-mail address is agcomm@sbcglobal.net.





  • [Livingontheland] Monsanto seems to be everywhere as prices soar, Tradingpost, 08/12/2008

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