Monsanto Targets Higher US Corn Planting, To Boost Prices

CHICAGO -(Dow Jones)- Monsanto Co. (MON) predicts a rebound in U.S. corn planting next year while targeting further expansion in Europe and Asia for its seeds and herbicides.

The world's largest seed producer, which on Wednesday reported a 42% increase in fiscal third-quarter profit, forecast U.S. farmers will plant around 90 million acres of corn for the 2009 harvest, responding to the continued rise in prices fueled by surging global food demand.

U.S. farmers cut corn planting from 92.5 million acres in 2007 to 86 million acres this year, switching to higher-priced soybeans and wheat.

"The vote at Monsanto is that we're going to see a lot of corn going in the ground next year," Hugh Grant, Monsanto's Chairman and Chief Executive Officer, said Wednesday during a conference call following the release of the third- quarter results.

Monsanto is already the largest provider of corn seeds to U.S. farmers, and boosted its own forecast of market share gains next year. The company also plans to raise prices for corn seeds by an average of 20% next year. Prices on a new range of soybean seeds due to be launched in 2009 will be released later in the summer.

Grant said U.S. corn planting next year would also hinge on the level of damage to the current crop from widespread flooding in the Midwest.

He said it would be several weeks before the impact on crop yields could be assessed, though Monsanto expects little financial impact from the flooding. While farmers may buy additional seeds to replant damaged crops, the replacement seeds carry low margins.

While attention has been focused on the immediate impact of the floods, Monsanto said the wet conditions could also intensify the problem of pests. " It's likely there will be significant bug pressure," said Brett Begemann, executive vice-president global commercial.

Targeting Europe And Asia

Soaring sales of Monsanto's genetically modified corn seeds offering protection against pests and bad weather contributed to record third-quarter profits, and the company raised its full-year forecast for the fourth time in six months.

Net income rose from $570 million to $811 million in the quarter ended May 31, with earnings per share of $1.45 surpassing the consensus among analysts by around 10 cents. Sales rose to $3.6 billion.

For fiscal 2008, it expects earnings per share of $3.63, though the increase trailed analysts' forecast by 8 cents.

The company's shares were down 6.4% to $127.10 in recent trading. The stock has nearly doubled over the past year, with rising commodity prices encouraging more farmers to buy its higher-yielding crop seeds.

Grant said Monsanto continues to seek opportunities for acquisitions and organic growth, notably in Europe and Asia, though said he was "not sure" if the large agricultural regions in Russia and Ukraine would be target markets.

The company has bought seed companies in Latin America and central America in recent months, as well as vegetable seed businesses to expand into the high- margin protected crop market.

Grant said he would update investors later this summer on Monsanto's five-year plan to double sales by 2012, a target that had been based largely on organic growth.

Blogged with the Flock Browser