Reflection on Earnings

April 9, 2010

On Wednesday morning, I sat with my coffee cup in hand and listened via Webcast to our CEO Hugh Grant talk with investors and analysts about Monsanto’s second quarter earnings. At the same time, I had my Tweetdeck and Google Reader up to scan and follow the latest comments from our farmer customers. It was refreshing to hear what our execs said in that call, because it matched what I’ve been seeing online from our customers.

What Monsanto executives said this week—including CEO Hugh Grant—was the result of feedback they picked up from meeting with farmers across the U.S. for the past several months. What we heard consistently from these farmers is that they find value in our products and in our technology. But we also heard that our pricing methods on new products such as Genuity Roundup Ready 2 Yield and Genuity SmartStax can be an obstacle for customers who want to try new technologies.

This feedback is partly why we reset our financial goals yesterday, acknowledging that the goal of doubling gross profit from 2007 to 2012 was unlikely.

As Mr. Grant told analysts yesterday:

“We refuse to achieve our growth objectives to the detriment of our customers….we can either make a stubborn push for the targets we’ve set for ourselves and strain those valuable customer relationships – or, we can do more to work with our customers and let the growth come more naturally. That will change some things.  I’d like to say it’s pure altruism, but the reality is it’s the right thing to do for the business – today and tomorrow.”

Moving forward, we’ll be looking at ways we can provide customers with more options to evaluate the technology and then decide the right combination of products for their farm.

**Please note: The comments section has been shut down temporarily until Monday, April 12 due to some maintenance on the site. If you’d like to leave a comment on this post, please check back on Monday.

Corn, Maize

I’m Kobus Lindeque, the business lead for Africa. As some of you have heard, a few weeks ago we started hearing from some of our farmer customers about a pollen issue with three white maize hybrids grown in South Africa.  In some instances, farmers experienced reduced yield. We’ve committed to reimburse the farmers for their lost yield.

This is an issue involving seed production that we will correct.

Yesterday, we posted a news release on our South Africa Monsanto Web site that provides an update.  I’ve included a copy of that news release here for those who might be interested.

News release – 1 April 2009

Monsanto Announces Results of First Phase of White Maize Inquiry – Next Phase Will Determine Farmer Compensation

Johannesburg – Monsanto announced today it has completed the first phase of inquiry into a reduction in yield in three white maize hybrids caused by production of less pollen than expected.

For the past five weeks, teams of company representatives have either visited the farms or talked by phone with about 400 farmers who make up all of the growers who said they had a potential reduction in pollination. Initially, there were reports of about 120,000 hectares affected. After detailed, in-field investigations involving Monsanto and the farmers, the teams concluded about 25 percent of the total planted hectares — or roughly 75,000 hectares — were affected in some way by this variation in pollination, according to Kobus Lindeque, South Africa Area Director Monsanto Africa.

“We personally examined tens of thousands of hectares. While there is variation in pollen production, the average pollination rate in the fields is about 90 percent pollination. That means, on average, the yield reduction is about 10 percent, keeping in mind that portions of some fields were significantly more affected than that,” Lindeque said.

Research teams confirmed, as Monsanto previously announced, that the biotechnology traits provided superior weed and insect protection. They worked exactly as they should in all of the fields visited, Lindeque said.

The issue was a traditional seed production technique that was used with the hybrid breeding, he said.

“During 2007 seed production, we reversed the male and female cross of these three hybrids to maximize seed production yields,” Lindeque said. “This process of reversing the male and female is a common practice in hybrid production that existed before the development of biotechnology.”

“In this situation, the three hybrids produced using this particular female inbred have experienced variable pollen production. We have reviewed the seed production method for the three hybrids and will make the necessary changes,” he said.

Pollination variation is not uncommon and can be influenced by several factors such as weather or agronomic practices. In some cases, such as this one, seed production methods can also contribute to lower pollination, he said.

Further, Lindeque said the maize hybrids with biotechnology traits are safe. The two traits contained in the three white maize hybrids have been thoroughly tested in South Africa for genetic quality and purity of these seeds.

“These hybrids meet all of our strict quality-control standards,” Lindeque said. “The safety of maize with one or both of these biotech traits has been independently reviewed and approved by regulatory authorities in 19 countries in Europe, Asia, North and South America. They agree that these products are safe and protective of the environment.”

Maize with the YieldGard trait has been grown for a decade in South Africa. Maize with the Roundup-Ready trait has been grown for the past four years in South Africa, he said.

The next phase of the inquiry will involve meetings between Monsanto and every farmer impacted by the yield loss. Monsanto has committed to compensate farmers for any yield loss in these three hybrids. These meetings should take place over the next two months.