Monsanto sees higher corn prices as boost to business

ST. LOUIS (Reuters) - Monsanto expects corn prices to rise next year, which will help the seeds and agrochemical company reach its earnings forecast, executives said.

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ST. LOUIS (Reuters) - Monsanto expects corn prices to rise next year, which will help the seeds and agrochemical company reach its earnings forecast, executives said.

But they added that the majority of its growth will come from new products and expanding its reach to new markets.

Monsanto made its forecasts for corn amid a steep downturn in commodities markets that have dragged crop prices to multi-year lows, triggered belt-tightening among farmers and unleashed a flurry of talk about consolidation in the agricultural sector.

Monsanto expects corn prices will recover to $4.50 a bushel in the next 8 to 12 months from less than $4 currently, sticking to its forecast just a week after the U.S. Department of Agriculture cut its price outlook for the marketing year to Aug. 31 by 15 cents a bushel to a range of $3.35 to $3.95 a bushel.

The company is maintaining its forecast for EPS of $5.10 to $5.60 by fiscal year 2016, said Mike Frank, vice president of Global Commercial.


Eighty percent of Monsanto's earnings over the next three to four years are expected to be from innovation such as newly developed products, according to presentations made on Wednesday. The remaining 20 percent is tied to the price of commodities like corn and soybeans.

The non-commodities part of Monsanto's business would be expected to yield roughly an additional $4 in earnings per share on top of current earnings by fiscal 2019, Frank said. "If the 20 percent doesn't happen, then we can grow about $4," he said.

If corn prices fall or fail to show "modest improvement" from current levels, Monsanto would find "another path" to hit its earnings per share (EPS) target.

Frank did not disclose how the company would offset the difference in expected results from commodities. He said Monsanto was not forecasting company performance based on specific commodity prices.

Monsanto also said it expects regulatory approval by top importer China of its next-generation Roundup Ready 2 Xtend biotech soybean line in the "December timeframe." The company has presold more than half of the seed it expects to sell for the upcoming U.S. planting season.

It expects U.S. farmers to plant its new soybeans in 3 million acres next spring, growing by 2019 to about two-thirds of all U.S. soybean acreage, which was about 83 million this year.

Monsanto is looking at "select M&A" possibilities, particularly in agrochemicals intended to fight insects and plant disease, said Chief Technology Officer Robb Fraley. Products such as insecticides or fungicides would need to work with Monsanto's existing portfolio of pest management products, he said.

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