Wednesday, April 7, 2010

Monsanto (NYSE:MON) Cutting Prices to Increase Profits

Monsanto Seed Prices

As a number of its customers have expressed dismay at the prices of Monsanto (NYSE:MON) seeds, the company has been receiving lukewarm responses to some of its product line, which has resulted in lowered sales. In response, Monsanto is ready to cut costs by about 15 percent a year on some of its seed to generate more profits.

Two of the seeds that have been underperforming are SmartStax corn seed and Roundup Ready 2 Yield soybeans.

A strategy is to to generate rapid adoption by farmers which would increase profit through volume of sales rather than margins alone.

In 2007 Monsanto has set a goal of doubling their gross profit by 2012, and with the resistance to their prices, that is not likely to happen now.

Original estimates for sales of SmartStax and Roundup Ready 2 have been lowered by a large 25 percent, to give an indication on resistance to prices.

Although sales of corn seed should remain about the same as far as market share, the high price of their Roundup Ready 2 and lower sales will cause them to lose market share in soybeans this year.

It seems Monsanto attempted to do business as usual in an economic climate that couldn't support it. Pricing from competitors and lower farm income from declining crop prices are the major reasons behind the slowing sales in Monsanto seeds.

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