Monsanto (NYSE:MON) has been beat up so much this year that the question of whether or not it may be the worst stock of 2010 has been proffered by some commentators and analysts.
While there has been some market factors involved with the poor performance of the stock, such as disappointing results from it SmartStax corn, its sugar beets being put on hold be a judge until more thorough research has been performed, prices too high in a recessionary environment, and the appearance of, and in some cases, actions, showing there is an arrogance there that the company needs to rein in. One being suing farmers who had seed from neighboring farms of Monsanto coming on their land and Monsanto saying they should have to pay for them.
There has also been some inroads into the market share of some Monsanto seeds by competitor DuPont (NYSE:DD), and of course the loss of patents and market share to products now being offered at commodity prices.
Even with all that stuff that sound ominous, there are numerous other products which make Monsanto still the giant in the field, with little in the way of competition which will knock them out of that spot in the short- or mid-term. It is there's to hold onto if they want to remain the market leader.
What that leads to is their performance this year. While some have openly wondered why Monsanto is performing as they are, they are largely technical analysts who don't understand the public relations side, or simply ignore it.
In today's digital media world, those who don't approve of genetically modified seed and other Monsanto products, can make a lot of noise beyond their numbers to give the appearance of a groundswell of opposition, when in reality it's more noise than a real grass roots uprising.
That's not to say opposition isn't real and effective, just that it's not as big as it seems, and it doesn't stop Monsanto from opening up new markets.
With a company like Monsanto an investor must look past the news that will always be there and look at their pipeline and competitive advantage.
In other words, don't read media stories and assume because there is controversy that the company is doing poorly. Look at their actual performance and whether they're valued closed to what they should be.
For 2010 Monsanto is down over 33 percent, which isn't a reflection of their actual or future performance. While the SmartStax corn seed is important and a part of the reason for such negative share performance. It is because it was considered the major engine of growth in the short-term of the company.
It's not that it isn't a good product, but it hasn't measured up to expectations, and the company has rightly paid the price for it. But it seems there may have been far too much focus on that, by both the company and investors, so the company took a big hit when results showed it wasn't up to par.
But in a relatively short time the price of corn has skyrocketed because of corn yields being lower than expected, so the reasons farmers were disgruntled and pulling back before, which related to whether or not paying the higher price was worth the yield, are pretty much gone with the higher corn prices, and Monsanto could generate higher sales for the spring planting because of that.
New markets are also opening up via approval of Monsanto products, especially in Latin America markets; specifically Brazil and Argentina. Once they gain approval to sell products overseas, Brazil will plant large amounts of Monsanto seed to meet the demand.
The bottom line is Monsanto is so out of favor that it's due for a rebound, and although there are obvious challenges, the underlying fundamentals are still in place. And when they do take off, they could soar.
Showing posts with label SmartStax corn seed. Show all posts
Showing posts with label SmartStax corn seed. Show all posts
Tuesday, October 19, 2010
Friday, October 15, 2010
Will Monsanto (NYSE:MON) Go Any Lower? Time to Buy?
Monsanto (NYSE:MON) is the type of stock that is extremely difficult to gauge, as many factors work against getting a solid grip on the fundamentals of the company. So when numbers and guidance are thrown around, most investors are left scratching their heads.
For example, two major factors are the media noise created from the strong opposition in some quarters to the company and its purpose. Secondly, the technology connected to the products of the agriculture giant isn't understood by most, and even when explained, leave most people in somewhat of a daze.
So when you have strong media opposition coupled with complicated technology, it leaves room for all types of assertions and interpretations which simply can't be confirmed or understood by those trying to look into the company.
Even with the opposition, that isn't the major reason behind the struggles of Monsanto. It is a part though, as the injunction against sugar beets recently revealed.
But overall, it's their patents running out and new products not performing to expectations which is driving down the stock price. That and higher prices in a recessionary period. Higher crop prices could help solve that dilemna.
So even though they're looked upon as an agricultural company, operationally they're very similar to a pharmaceutical company with patents running out and new drugs hopefully in the pipeline for them.
Still, Monsanto does have a strong competitive edge with some of their products, and that will remain in place, even though they've lost market share to DuPont (NYSE DD) with some seed.
The question is whether or not the bad news has been fully priced into the stock or not, and if it's time to buy again.
It did start to rebound at the beginning of October after plummeting in share price at the latter part of September.
We do have to leave off the political correctness and assertions from the celebrity "financial experts" and simply look at the company itself.
The key in the short term is the performance of their SmartStax corn seed. Early returns were disappointing, and the final returns from more northerly states haven't come in yet.
If they're closer to estimates, it could help push Monsanto back on the upward path again.
Other news is in some part of the world, including Brazil, some products are being cleared for use, and over the long term that will help the company.
Again, the hardest thing about Monsanto is the enormous amount of clutter and complexity associated with them. It takes a lot of work to sift through what's real and what's not to get even close to the truth.
Just the pure negative sentiment and being called by some possibly the worst stock of 2010, is a reason to take a second look at them to see if they're reaching bargain levels.
For example, two major factors are the media noise created from the strong opposition in some quarters to the company and its purpose. Secondly, the technology connected to the products of the agriculture giant isn't understood by most, and even when explained, leave most people in somewhat of a daze.
So when you have strong media opposition coupled with complicated technology, it leaves room for all types of assertions and interpretations which simply can't be confirmed or understood by those trying to look into the company.
Even with the opposition, that isn't the major reason behind the struggles of Monsanto. It is a part though, as the injunction against sugar beets recently revealed.
But overall, it's their patents running out and new products not performing to expectations which is driving down the stock price. That and higher prices in a recessionary period. Higher crop prices could help solve that dilemna.
So even though they're looked upon as an agricultural company, operationally they're very similar to a pharmaceutical company with patents running out and new drugs hopefully in the pipeline for them.
Still, Monsanto does have a strong competitive edge with some of their products, and that will remain in place, even though they've lost market share to DuPont (NYSE DD) with some seed.
The question is whether or not the bad news has been fully priced into the stock or not, and if it's time to buy again.
It did start to rebound at the beginning of October after plummeting in share price at the latter part of September.
We do have to leave off the political correctness and assertions from the celebrity "financial experts" and simply look at the company itself.
The key in the short term is the performance of their SmartStax corn seed. Early returns were disappointing, and the final returns from more northerly states haven't come in yet.
If they're closer to estimates, it could help push Monsanto back on the upward path again.
Other news is in some part of the world, including Brazil, some products are being cleared for use, and over the long term that will help the company.
Again, the hardest thing about Monsanto is the enormous amount of clutter and complexity associated with them. It takes a lot of work to sift through what's real and what's not to get even close to the truth.
Just the pure negative sentiment and being called by some possibly the worst stock of 2010, is a reason to take a second look at them to see if they're reaching bargain levels.
Tuesday, October 12, 2010
Monsanto (NYSE:MON) Helped by Lower Corn Yield Projections?
With almost everything going against it, Monsanto (NYSE:MON) may get some help from the recent corn yield estimates which were about 25 percent lower than projected, which should inevitably drive corn prices up even more.
One of the major and successful strategies of DuPont (NYSE:DD) has been to put in the minds of farmers whether or not the added traits of Monsanto's SmartStax corn is worth the extra price.
When early returns from the field revealed yields were lower for SmartStax corn, that added fuel to the fire, and Monsanto is left wondering, along with their shareholders, where future growth was going to come from.
Now that the overall corn yield in the U.S. is far lower than expected, and corn prices sure to increase, that leaves higher margins for farmers to work with, which may persuade them to give Monsanto another try.
Of course DuPont will probably respond to that challenge and lower their prices to gain even more market share.
Even so, if yields are enough to generate interest from more northerly fields, which haven't revealed results yet, Monsanto just may get an unexpected boost from higher corn prices.
That could also include higher soybean prices as well, where soybean yields are over 20 percent lower than estimates too.
One of the major and successful strategies of DuPont (NYSE:DD) has been to put in the minds of farmers whether or not the added traits of Monsanto's SmartStax corn is worth the extra price.
When early returns from the field revealed yields were lower for SmartStax corn, that added fuel to the fire, and Monsanto is left wondering, along with their shareholders, where future growth was going to come from.
Now that the overall corn yield in the U.S. is far lower than expected, and corn prices sure to increase, that leaves higher margins for farmers to work with, which may persuade them to give Monsanto another try.
Of course DuPont will probably respond to that challenge and lower their prices to gain even more market share.
Even so, if yields are enough to generate interest from more northerly fields, which haven't revealed results yet, Monsanto just may get an unexpected boost from higher corn prices.
That could also include higher soybean prices as well, where soybean yields are over 20 percent lower than estimates too.
Thursday, October 7, 2010
Citigroup (NYSE:C) Reiterates "Buy" on Monsanto (NYSE:MON)
Market sentiment for Monsanto (NYSE:MON) has been varied, and for the last quarter it has been difficult finding anything positive for the company. Even so, Citigroup (NYSE:C) maintains their "Buy" rating on the seed company, citing a long-term positive outlook.
Citi said, “Pricing adjustments and a focus on working with farmers will support adoption of the refuge-reduction corn platform next year. We maintain our Buy on the stock, as it is attractive on a long-term basis after the massive decline this year. However, we acknowledge that the path toward the realization of our thesis has lengthened and we are removing the stock from Top Picks Live. We have lowered our 2011 EPS by 5¢ to $2.80; target price unchanged at $62.”
Things like patents running out, pricing, legal rulings against them, and lower-than-expected results from SmartStax corn seeds isn't something that can be remedied in the short term, and Monsanto is on a long road to growth as a result, with no quick fixes which will change that.
Major competitor DuPont (NYSE:DD) has also gained market share in an environment where farmers are angry at Monsanto pricing and wondering if the premiums are worth paying for in what is increasingly being perceived as lower yields.
DuPont has successfully marketed the idea of whether or not the higher traits of seeds sold by Monsanto are worth the higher price. A growing number of farmers are saying no.
Citi said, “Pricing adjustments and a focus on working with farmers will support adoption of the refuge-reduction corn platform next year. We maintain our Buy on the stock, as it is attractive on a long-term basis after the massive decline this year. However, we acknowledge that the path toward the realization of our thesis has lengthened and we are removing the stock from Top Picks Live. We have lowered our 2011 EPS by 5¢ to $2.80; target price unchanged at $62.”
Things like patents running out, pricing, legal rulings against them, and lower-than-expected results from SmartStax corn seeds isn't something that can be remedied in the short term, and Monsanto is on a long road to growth as a result, with no quick fixes which will change that.
Major competitor DuPont (NYSE:DD) has also gained market share in an environment where farmers are angry at Monsanto pricing and wondering if the premiums are worth paying for in what is increasingly being perceived as lower yields.
DuPont has successfully marketed the idea of whether or not the higher traits of seeds sold by Monsanto are worth the higher price. A growing number of farmers are saying no.
Monsanto (NYSE:MON) Price Target Raised by JPMorgan (NYSE:JPM)
Response to the volatility and unpredictability of Monsanto (NYSE:MON) has generated responses from analysts all over the board. The latest is from JPMorgan (NYSE:JPM), who increased their price target on Monsanto from $47 to $49. They maintain a "Neutral" rating on the seed company.
In a report JPMorgan said, "We rate Monsanto Neutral for year-ahead performance. Monsanto's business model for F2011 was built on moving its customer base from its triples to SmartStax at a price premium. The poor yield results for SmartStax in Southern Illinois, if duplicated in the northern Corn Belt, could call the model into question. Moreover, we believe Monsanto has a healthy valuation selling at 9.6x EBITDA and a 17.4x multiple of EPS for F2011E."
There is no doubt in the short term that Monsanto is completely reliant upon the results of their SmartStax corn seed in the northern corn belt. If it is as bad as it was in Illinois, they're going to have difficulty building momentum for some time, even with their strong advantage in other seed varieties.
They also took a blow when their sugar beet seeds were ruled against by a judge, and unless overruled or adjusted, won't be able to be planted next season.
In a report JPMorgan said, "We rate Monsanto Neutral for year-ahead performance. Monsanto's business model for F2011 was built on moving its customer base from its triples to SmartStax at a price premium. The poor yield results for SmartStax in Southern Illinois, if duplicated in the northern Corn Belt, could call the model into question. Moreover, we believe Monsanto has a healthy valuation selling at 9.6x EBITDA and a 17.4x multiple of EPS for F2011E."
There is no doubt in the short term that Monsanto is completely reliant upon the results of their SmartStax corn seed in the northern corn belt. If it is as bad as it was in Illinois, they're going to have difficulty building momentum for some time, even with their strong advantage in other seed varieties.
They also took a blow when their sugar beet seeds were ruled against by a judge, and unless overruled or adjusted, won't be able to be planted next season.
Monsanto (NYSE:MON) Dropped from Goldman (NYSE:GS) "Conviction Buy List"
Goldman Sachs (NYSE:GS) said they've removed Monsanto (NYSE:MON) from their "Conviction Buy List," citing weaker guidance for 2011 and uncertainty concerning results in the fourth quarter.
Although Monsanto reported stronger results year-over-year in their earnings report, they failed to meet analysts' expectations, and as mentioned, lowered guidance going forward.
A lot of uncertainty over the performance of SmartStax corn seed hangs over the company, which they had been counting on to be a major revenue and earnings driver. Initial feedback has the seed underperforming estimates.
Immediately after Monsanto released their quarterly results Wednesday, the stock jumped on better than expected sales, but that was quickly tempered as the market digested the overall report, closing slightly up at $48.65, gaining $0.13, or 0.27 percent.
Goldman maintains their "Buy" on the stock, with a price target of $64.
Although Monsanto reported stronger results year-over-year in their earnings report, they failed to meet analysts' expectations, and as mentioned, lowered guidance going forward.
A lot of uncertainty over the performance of SmartStax corn seed hangs over the company, which they had been counting on to be a major revenue and earnings driver. Initial feedback has the seed underperforming estimates.
Immediately after Monsanto released their quarterly results Wednesday, the stock jumped on better than expected sales, but that was quickly tempered as the market digested the overall report, closing slightly up at $48.65, gaining $0.13, or 0.27 percent.
Goldman maintains their "Buy" on the stock, with a price target of $64.
Wednesday, October 6, 2010
Monsanto (NYSE:MON) Losses Deeper Than Expected
Right after Monsanto Company (NYSE:MON) reported losses has shrunk from the fourth quarter last year, narrowing from $233 million, or 43 cents a share, to $143 million, or 26 cents a share in the fourth quarter this year, the share price skyrocketed, but it quickly came down to earth on the realization the losses were still deeper than expectations.
Operating losses came to 9 cents a share from an operating profit of 2 cents a share. Revenue increased from $1.9 billion to $2 billion.
Dissatisfaction from farmers over some crop yields in the midst of high seed prices had the company struggling during the quarter.
Guidance wasn't encouraging for the seed giant either, as the company said next year the results could continue to be weak, as they revise prices and work with their product line.
SmartStax seed corn is the main culprit in the results, as the expected yields are below estimates, and the high price of the seed has opened the door for major competitor DuPont (NYSE:DD), which has managed to take share away from the company with some crops.
Monsanto Chairman Hugh Grant said, "We've focused on giving farmers the most profitable product options. We're trying hard to back that with our actions from our new products and new price points."
Margins were the key to the poor performance, as sales increased to $1.95 billion in the quarter, as low margins and a $132 million restructuring charge cut gains.
Along with losing market share with soybeans and corn share remaining level, the herbicide business of the company remains under pressure as low-cost alternatives are offered on the market after the patents of the company ran out on them.
Analysts had been looking for a loss of 6 cents a share for the fourth quarter.
Guidance for earnings in 2011 came in at a range from $2.72 to $2.82, down from the $2.83 analysts are estimating.
The shares of Monsanto popped on the guidance for 2011 because it wasn't downwardly revised, and the increase in sales, but has pulled back as the market digested the numbers.
Operating losses came to 9 cents a share from an operating profit of 2 cents a share. Revenue increased from $1.9 billion to $2 billion.
Dissatisfaction from farmers over some crop yields in the midst of high seed prices had the company struggling during the quarter.
Guidance wasn't encouraging for the seed giant either, as the company said next year the results could continue to be weak, as they revise prices and work with their product line.
SmartStax seed corn is the main culprit in the results, as the expected yields are below estimates, and the high price of the seed has opened the door for major competitor DuPont (NYSE:DD), which has managed to take share away from the company with some crops.
Monsanto Chairman Hugh Grant said, "We've focused on giving farmers the most profitable product options. We're trying hard to back that with our actions from our new products and new price points."
Margins were the key to the poor performance, as sales increased to $1.95 billion in the quarter, as low margins and a $132 million restructuring charge cut gains.
Along with losing market share with soybeans and corn share remaining level, the herbicide business of the company remains under pressure as low-cost alternatives are offered on the market after the patents of the company ran out on them.
Analysts had been looking for a loss of 6 cents a share for the fourth quarter.
Guidance for earnings in 2011 came in at a range from $2.72 to $2.82, down from the $2.83 analysts are estimating.
The shares of Monsanto popped on the guidance for 2011 because it wasn't downwardly revised, and the increase in sales, but has pulled back as the market digested the numbers.
Monday, October 4, 2010
Monsanto (NYSE:MON) Should Add Debt for Share Repurchase Says Morgan Stanley (NYSE:MS)
Morgan Stanley (NYSE:MS) has said Monsanto (NYSE:MON) shouldn't be afraid of adding debt to their balance sheet in order to buy back shares in the company.
"We believe that the company could take on up to - $6.5 bn of debt (-2x net debt to EBITDA), buy back 20-25 percent of shares outstanding, and still have a BBB investment grade credit rating. We estimate this scenario would be 14 percent accretive in the first full year. Importantly, given both the favorable lending rate environment (we estimate debt could be taken on at no more than 4.5 percent) and the company's current 2.3 percent dividend yield, the after-tax cost would be just 0.9 percent," said Morgan Stanley analysts Megan Davis and Vincent Andrews.
Monsanto Chief Executive Officer Hugh Grant had been counting on SmartStax corn seed to make up for the loss of revenue and earnings associated with Roundup herbicide, where generic brands have expectedly pummeled the margins of Monsanto after the patents ran out.
That hasn't happened so far, as disappointing early results are coming in lower than projected, although that could improve as results come in from more northerly states.
Monsanto has projected earnings from SmartStax increasing profits as high as 17 percent. The upcoming earnings report is eagerly being looked to to see if improvements have come from latest field reports.
Morgan Stanley has a price target of $70 on Monsanto, which was trading at $47.66, down $0.60, or 1.34 percent, as 12:52 PM EDT.
"We believe that the company could take on up to - $6.5 bn of debt (-2x net debt to EBITDA), buy back 20-25 percent of shares outstanding, and still have a BBB investment grade credit rating. We estimate this scenario would be 14 percent accretive in the first full year. Importantly, given both the favorable lending rate environment (we estimate debt could be taken on at no more than 4.5 percent) and the company's current 2.3 percent dividend yield, the after-tax cost would be just 0.9 percent," said Morgan Stanley analysts Megan Davis and Vincent Andrews.
Monsanto Chief Executive Officer Hugh Grant had been counting on SmartStax corn seed to make up for the loss of revenue and earnings associated with Roundup herbicide, where generic brands have expectedly pummeled the margins of Monsanto after the patents ran out.
That hasn't happened so far, as disappointing early results are coming in lower than projected, although that could improve as results come in from more northerly states.
Monsanto has projected earnings from SmartStax increasing profits as high as 17 percent. The upcoming earnings report is eagerly being looked to to see if improvements have come from latest field reports.
Morgan Stanley has a price target of $70 on Monsanto, which was trading at $47.66, down $0.60, or 1.34 percent, as 12:52 PM EDT.
Friday, October 1, 2010
Monsanto (NYSE:MON) Meets Roundup Ready 2 Soy Yield Projections
Monsanto (NYSE:MON) has finally received some good news about its seed pipeline, as its yield projections for its Roundup Ready 2 Yield soybeans have been met, according to research firm OTR Global.
Last year OTR reported yields weren't as strong as expected.
Based on feedback from close to 30 farm managers and distributors of seeds, the Roundup Ready 2 soybean seeds are now yielding at their promised rates of 7 percent to 11 percent over their prior soybean seed.
Monsanto had hitched their growth projections to SmartStax corn seed, which so far has underperformed the former seeds from a range of 3 percent to five percent.
So they've been scrambling to get some positive news out as their share price continues to take big hits. Last year on October 1 the share price of Monsanto stood at $75.11. Today it was trading at $48.12 at 2:21 PM EDT.
Last year OTR reported yields weren't as strong as expected.
Based on feedback from close to 30 farm managers and distributors of seeds, the Roundup Ready 2 soybean seeds are now yielding at their promised rates of 7 percent to 11 percent over their prior soybean seed.
Monsanto had hitched their growth projections to SmartStax corn seed, which so far has underperformed the former seeds from a range of 3 percent to five percent.
So they've been scrambling to get some positive news out as their share price continues to take big hits. Last year on October 1 the share price of Monsanto stood at $75.11. Today it was trading at $48.12 at 2:21 PM EDT.
Wednesday, September 29, 2010
Goldman (NYSE:GS) Says Monsanto (NYSE:MON) Smartstax Corn Won't Outperform Triples
Monsanto (NYSE:MON) Chief Executive Officer Hugh Grant has been counting on the performance of their Smartstax corn to battle their major competitor DuPont (NYSE:DD), who has been gaining market share on them.
As data come in though, the news hasn't been that good, as the corn seed, which includes eight genetic traits, is unlikely to outperform less expensive seed with fewer traits, according to Goldman Sachs (NYSE:GS).
Goldman Sachs analyst Robert Koort said, “We no longer expect SmartStax to outyield its robust triple stacks. Yield parity is the new target.”
Yields from Iowa confirm Koort's statement, as the are behind the triple stacks yield by 3 percent to 5 percent. Koort added the gap between the two seeds could shrink as northern areas with larger insect infestation return data.
While Goldman maintains their "Neutral" rating on the stock, along with earnings estimate of $2.87, they did lower the price target on Monsanto from $71 to $64.
As data come in though, the news hasn't been that good, as the corn seed, which includes eight genetic traits, is unlikely to outperform less expensive seed with fewer traits, according to Goldman Sachs (NYSE:GS).
Goldman Sachs analyst Robert Koort said, “We no longer expect SmartStax to outyield its robust triple stacks. Yield parity is the new target.”
Yields from Iowa confirm Koort's statement, as the are behind the triple stacks yield by 3 percent to 5 percent. Koort added the gap between the two seeds could shrink as northern areas with larger insect infestation return data.
While Goldman maintains their "Neutral" rating on the stock, along with earnings estimate of $2.87, they did lower the price target on Monsanto from $71 to $64.
Tuesday, September 28, 2010
Monsanto (NYSE:MON) Plunges on SmartStax Concerns
Monsanto (NYSE:MON) are taking a big hit again today as what appears to be ongoing concerns over genetically modified corn seed brand SmartStax.
Farmers have been gradually moving away from some Monsanto seed in general because of the way the company marketed them, as well as high prices.
Major competitor DuPont (NSYE:DD) has also successfully embedded the question in the minds of farmers over whether or not the extra traits of the seed is worth the extra cost, implying their seed, while having less traits, still produces well for farmers.
Developing new pipelines is becoming a challenge for Monsanto because of legal issues as well as the economic environment we're in.
But with corn prices rising during the summer, if farmers didn't acquire the seed strongly when margins aid the sales, it has to be extremely concerning for Monsanto on how to position themselves going forward.
If SmartStax hasn't yielded the sales and earnings expected, as a number of analysts believe, Monsanto will have to downwardly revise their profit targets, which the market now seems to be pricing into the shares at this time.
Monsanto dropped to $48.03, down $5.04, or 9.50 percent at 2:11 PM EDT.
Farmers have been gradually moving away from some Monsanto seed in general because of the way the company marketed them, as well as high prices.
Major competitor DuPont (NSYE:DD) has also successfully embedded the question in the minds of farmers over whether or not the extra traits of the seed is worth the extra cost, implying their seed, while having less traits, still produces well for farmers.
Developing new pipelines is becoming a challenge for Monsanto because of legal issues as well as the economic environment we're in.
But with corn prices rising during the summer, if farmers didn't acquire the seed strongly when margins aid the sales, it has to be extremely concerning for Monsanto on how to position themselves going forward.
If SmartStax hasn't yielded the sales and earnings expected, as a number of analysts believe, Monsanto will have to downwardly revise their profit targets, which the market now seems to be pricing into the shares at this time.
Monsanto dropped to $48.03, down $5.04, or 9.50 percent at 2:11 PM EDT.
Friday, August 13, 2010
JPMorgan (NYSE:JPM) Says Monsanto (NYSE:MON) Cutting Seed Prices
Under pressure on numerous fronts, Monsanto (NYSE:MON) is taking one step they have control over, and that is to lower the prices of some of their seeds.
JPMorgan Chase & Co. (NYSE:JPM) said after a private meeting for investors and analysts Thursday that Monsanto will cut the price on SmartStax corn seed by 67 percent from the 2010 prices, and for their Roundup Ready 2 Yield soybean seed, they'll cut prices by 75 percent.
Monsanto has been battling with farmers over the price of seed over the last year or so, and this is obviously their response to slowing sales and earnings.
The percentage in cuts are important because they're a strong improvement over previous projected price cuts for the 2011 season of about 50 percent.
JPMorgan Chase & Co. (NYSE:JPM) said after a private meeting for investors and analysts Thursday that Monsanto will cut the price on SmartStax corn seed by 67 percent from the 2010 prices, and for their Roundup Ready 2 Yield soybean seed, they'll cut prices by 75 percent.
Monsanto has been battling with farmers over the price of seed over the last year or so, and this is obviously their response to slowing sales and earnings.
The percentage in cuts are important because they're a strong improvement over previous projected price cuts for the 2011 season of about 50 percent.
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.
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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