Monsanto Needs to Charm

Tweaking crop DNA has been good for Monsanto (NYSE: MON  ) . The agricultural technology giant saw its fiscal 2006 revenue climb 17% to $7.3 billion, thanks in large part to ongoing growth in its corn seed and traits business. The success is impressive, but recent comments from a General Mills (NYSE: GIS  ) executive suggest that unless it takes action soon, Monsanto might have trouble maintaining its torrid growth rate.

Not everyone is a fan of Monsanto. Plenty of folks have raised questions about genetically modified (GM) crops' impact on human health and the environment, even as millions regularly consume foods containing GM ingredients. In the U.S., concern over GM foods is relatively muted, in part perhaps because most consumers probably aren't aware that they are buying and eating such products.

For its part, Monsanto seems relatively content to allow U.S. consumers to remain blissfully ignorant about what they are eating. Unfortunately, if Monsanto hopes to keep expanding the scope of crops with genetically modified components, it may have to change its "what they don't know won't hurt 'em" position.

A recent statement from General Mills' vice president of grain operations, Ron Wilson, in an interview with Reuters shows the limitations of Monsanto's current course. Wilson indicated that the maker of such well-known cereals as Cheerios and Wheaties will avoid GM wheat for the time being. The comment shows that food giants are happy to use GM items such as soybean or canola oils as secondary ingredients, but won't put altered crops front and center as primary ingredients.

Granted, General Mills' wariness has little immediate impact for Monsanto. Syngenta (NYSE: SYT  ) has continued work on GM wheat, but Monsanto dropped development of its version of the crop in 2004. Even so, Monsanto has the most to lose from food companies' concerns over modified crops.

Monsanto has led the agricultural biotechnology drive, and has signaled that it wants to keep expanding the number of crops with altered DNA. Its longer-term plans likely include altered versions of fruit and vegetable seeds. However, unless opinions in the food industry change, Monsanto may have a tough time marketing new GM seeds.

To keep flourishing, the company has to open up and convince consumers that GM crops are not only safe but also invaluable. For Monsanto, the time is ripe for a charm offensive.

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Fool contributor Brian Gorman does not own shares in any of the companies mentioned. The Fool's disclosure policy is aliiiiiiiiiive.


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