It’s becoming increasingly harder to figure out whether Monsanto (NYSE: MON) is a bargain or a value trap. Yesterday, the agriculture giant announced less-than-stellar guidance for its 2010 fiscal year, which started at the beginning of the month.
It’s really a tale of two product lines for Monsanto. The seed and trait business is growing and competing well against — and sometimes with — DuPont (NYSE: DD), Dow Chemical (NYSE: DOW), and Syngenta (NYSE: SYT).
Its Roundup product, on the other hand, is headed in the wrong direction. Once a cash cow, Roundup now faces generic competition, and a glut of chemical herbicides in the supply chain is pushing down prices. Unlike drug companies such as Pfizer (NYSE: PFE) and Merck (NYSE: MRK), which can pretty much kiss off most of their sales once generic competition starts, Monsanto does expect to bring in $650 million to $750 million in gross profits from Roundup in the coming year. Still that’s a long drop from the nearly $2 billion in gross profits that the herbicide brought in during fiscal 2008.
In a couple of years, it’s not going to matter much: By 2012, the company expects that seeds and licensed traits will make up 85% of the company’s total gross profit. But in the meantime, the drop is hurting the bottom line.
Earnings per share, after adding back restructuring charges, are expected to come in between $3.10 to $3.30, a sharp decline from the $4.40 or so that’s expected from the recently completed year. Trading at a forward price-to-earnings ratio of more than 24, Monsanto is a little cheaper than we’ve seen in the past, but it doesn’t leave investors much breathing room, if Roundup sales continue to fall faster than expected.
Most U.S. Stocks Advance as Retail Sales Beat Forecasts – Bloomberg.com
Commodities Gain
A group of mining companies, seed producers and chemical makers increased 1 percent as raw-material prices jumped. Gold advanced to a six-month high, reaching $999.50 an ounce, while copper rose for a second day. The Reuters/Jefferies CRB Index of 19 commodities climbed 0.2 percent.
Most U.S. Stocks Advance as Retail Sales Beat Forecasts – Bloomberg.com
Syngenta (SYT)
Syngenta (SYT) has been included in the charts of Stocks, ETFs and ETNs being tracked, both by the previous year and previous week, on the Hawaii Agriculture Blog after Howard Dicus pointed out Syngenta’s importance to the States Economy by growing seed for mainland farmers. View the video here.
Hawaii and Related Agriculture Daily Charts for the week ending 08-28-09
The annual charts have been updated also. CLICK HERE to view.
Maui Land and Pineapple (MLP)
Calavo Growers (CVGW)
Alexander and Baldwin (ALEX)
iPath DJ AIG Sugar TR Sub-Idx ETN (SGG)
Monsanto (MON)
Syngenta (SYT)
Business Update on Hawaii’s Agriculture – KGMB9 News Hawaii
Business Update on Hawaii’s Agriculture
Written by Sunrise on KGMB9 – sunrise@kgmb9.comAugust 27, 2009 07:02 AM
Balance reporting on Hawaii’s recession requires reports on industries that are still growing in these times. That includes the business of growing seed for mainland farmers.
Mark Phillipson is the new GM for the Hawaii operations of Syngenta. He joined KGMB9’s Howard Dicus Thursday morning.[flv image=”https://hawaii-agriculture.com/newblog/wp-content/uploads/2009/08/2009_08_27_Syngenta_flv.JPG”]https://hawaii-agriculture.com/newblog/wp-content/uploads/2009/08/2009_08_27_Syngenta_flv.flv[/flv]
Business Update on Hawaii’s Agriculture | KGMB9 News Hawaii | (KGMB9
Monsanto and Dow Create Super Corn (DOW, MON)
By Brian Orelli
Sometimes you need a little help from a friend — even if that friend is also a competitor.
Monsanto (NYSE: MON) and Dow Chemical (NYSE: DOW) certainly couldn’t have developed a seed with such blockbuster potential so quickly without each others’ help. The two announced yesterday that the Environmental Protection Agency (EPA) and Canadian Food Inspection Agency (CFIA) had completed the authorization process for their SmartStax seed, which combines eight different traits into one corn seed.
The eight combined traits will increase yields by 2% to 4% compared to the triple-stacked standard, but the biggest advantage to farmers will come from changes by the government.
Farmers are required to plant a certain percent of their acreage with seeds that don’t have insect resistance — it’s called a refuge, but "sacrificial lamb" might be more appropriate. The point of the refuge is to avoid selecting for insects that are resistant to the trait. Since SmartStax contains multiple disease-resistant traits, it’s less likely that insects will become resistant, so farmers will be able to decrease the required refuge from 20% to 5% in the corn belt and from 50% to 20% in the cotton belt. Increasing the acreage planted with higher-yielding disease-resistant corn should boost the farm’s yield by an additional 3% to 6%, for a total potential increase of 5% to 10%.
Monsanto and Dow will market the seed under their own brand names and pay royalties to each other for the shared traits. The friendly competition should make for an interesting rivalry, but in any case the new seed, which should launch next year, should compete well against rivals Syngenta (NYSE: SYT) and DuPont (NYSE: DD). In fact, the companies are planning to make it the largest biotech corn seed launch ever.
Who knows — maybe they’ll send the first ears to Joe Cocker.