Monsanto's Biotech Makeover Takes Root
It scores with corn and soybeans. Next up: battling drought
While best known as a research powerhouse, Monsanto has also led the industry in marketing and distribution. Growing seed and getting it to the right markets, on time, is a huge logistical challenge, says Ben Johnson, an equity analyst at Morningstar. "Every production run for seed is an entire growing season," he says.
Less weeding. There have been commercial flops. Genetically altered wheat appeared close to market when, under CEO Grant, Monsanto killed the venture after farmers voiced concerns that foreign markets would close to all U.S. wheat. But the move also helped assure producers that Monsanto was becoming less arrogant and more willing to work with exporters and regulators. "It's been a learning experience for everyone involved," says Martin Barbre, who farms 4,300 acres of corn and soybeans with his son and son-in-law in southeastern Illinois and considers himself a fan of biotech. But even Barbre is given pause by Monsanto's success. "As a producer, it bothers me a bit that there isn't more competition in the traits in beans," he says.
Still, the Roundup-ready beans have meant fewer of the more toxic herbicides that he used before, and he plants the beans more closely together—he doesn't have to till later for weeds. Farming's more productive, and more fun, he says. "Otherwise, I'd probably be out on a tractor right now in this heat."
Like a lot of producers, Barbre has his eye on planting more corn. Demand for ethanol has as much as doubled prices in recent years. Where the nation once consistently planted 80 million acres in corn, it has planted 93 million acres this year, with more expected next. It's an extraordinary shift in a business, says Grant, that since the 1940s has been extraordinarily predictable. For Monsanto, corn has already displaced soybeans as the company's biggest profit maker. And crops have eclipsed the plummeting income from Roundup, which is no longer protected by Monsanto's patent. But in corn, the St. Louis company has competition in Roundup-ready and pest-protected strains from other seed companies, including the Pioneer subsidiary of DuPont and Syngenta, two that are also racing to produce drought-tolerant strains.
Monsanto execs have said they're confident they'll be first with water-efficient corn, somewhere around 2010. Monsanto hopes other new products will keep its momentum going until then, including seed that yields more soybeans and beans with more healthful oils. But drought tolerance is a trait that can be applied across the company's seeds, including cotton and fruits and vegetables. It's what he focuses on now more than anything, Grant says: "We have to get it right."
At a Glance
Name: Monsanto Co.
Headquarters: St. Louis
Chairman and CEO: Hugh Grant
Employees: 17,000
2006 profit: $689 million
2007 profit: $1 billion (estimate)
Major products: Genetically modified corn and soybeans, herbicides
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