Monsanto's Trade Dividend

It's become so common that the investment news media hardly batted an eye.

Monsanto (NYSE: MON  ) raised its earnings guidance on Monday, this time for its first quarter. Rather than earnings of $0.10 per share, as initially projected, the agricultural biotechnology firm now anticipates EPS will be $0.20.

A doubling in the quarterly earnings forecast is certainly newsworthy, but Monsanto's other comments in the press release may be more intriguing. Specifically, the firm pointed to better-than-expected performance for cotton traits in Australia as among the reasons for its improved outlook. In addition, Monsanto noted that there could be 15% more U.S. acres using its Roundup Ready and YieldGard Rootworm-protected corn than in previous estimates.

That Australia is eagerly adopting genetically modified (GM) cotton and U.S. farmers are embracing GM corn may be just small signs of a growing trend. I have written before that Monsanto will probably have more customers in the developing world in the future due to changes in the global trading system. However, it seems equally true that market penetration of GM crops in the developed world also probably continue to expand.

The Doha round of global trade talks drags on, and a major sticking point is agriculture. However, after years of keeping agricultural subsidies off the agenda, the U.S. and European Union may finally be forced to commit to cuts, which would hurt domestic farmers. Leading the charge against these subsidies are developing countries such as Brazil and India that have increasing clout thanks to their rapidly expanding economies. Indeed, Brazil has already successfully challenged the U.S.'s cotton subsidies. The end of agricultural supports in the U.S. and EU looks to be a question of when, not if.

Interestingly, Australia has no agricultural subsidies. Faced with competition from developing countries where labor is abundant, Australia's cotton farmers adopted the latest productivity-improving technologies, including GM seeds. Doing so allowed Australia to lead the world in cotton yields per hectare last growing season.

With agricultural subsidies under attack, U.S. farmers may already be making the calculation that they need more GM seeds to compete. Even the EU, which has been squeamish about GM crops, may be forced to change its attitude when confronted with the global market. That's good news, of course, not only for Monsanto, but also for its competitors, like Syngenta (NYSE: SYT  ) and Bayer (NYSE: BAY  ) .

For related stories, see:

Fools, now is the time to open your hearts and wallets to worthy causes! Please support our five Foolish charities at www.foolanthropy.com.

Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 498485, ~/Articles/ArticleHandler.aspx, 10/2/2014 4:29:47 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement