As recently as late December, Monsanto was named “company of the year” by Forbes magazine. Last week, the company earned a different accolade from Jim Cramer, the television stock market commentator. “This may be the worst stock of 2010,” he proclaimed.
Monsanto, the giant of agricultural biotechnology, has been buffeted by setbacks this year that have prompted analysts to question whether its winning streak from creating ever more expensive genetically engineered crops is coming to an end.
The company’s stock, which rose steadily over several years to peak at around $145 a share in mid-2008, closed Monday at $47.77, having fallen about 42 percent since the beginning of the year. Its earnings for the fiscal year that ended in August, which will be announced Wednesday, are expected to be well below projections made at the beginning of the year, and the company has abandoned its profit goal for 2012 as well.
The latest blow came last week...Monsanto’s newest product, SmartStax corn...was providing yields no higher than the company’s less expensive corn...Monsanto has already been forced to sharply cut prices on SmartStax and on its newest soybean seeds, called Roundup Ready 2 Yield, as sales fell below projections...Sales of Monsanto’s Roundup...have collapsed this year under an onslaught of low-priced generics made in China. Weeds are growing resistant to Roundup, dampening the future of the entire Roundup Ready crop franchise. And the Justice Department is investigating Monsanto for possible antitrust violations.
Until now, Monsanto’s main challenge has come from opponents of genetically modified crops, who have slowed their adoption in Europe and some other regions. Now, however, the outspoken critics also include farmers and investors who were once in Monsanto’s camp.
“My personal view is that they overplayed their hand,” William R. Young, managing director of ChemSpeak...They are going to have to demonstrate to the farmer the advantage of their products.” Brett D. Begemann, Monsanto’s executive vice president for seeds and traits, said the setbacks were not reflective of systemic management problems and that the company was already moving to deal with them...Begemann said that Monsanto used to introduce new seeds at a price that gave farmers two thirds and Monsanto one third of the extra profits...But with SmartStax corn and Roundup Ready 2 soybeans, the company’s pricing aimed for a 50-50 split. That backfired as American farmers grew only 6 million acres of Roundup Ready 2 soybeans this year...and only 3 million acres of SmartStax corn...So now Monsanto is moving back to the older arrangement.
Monsanto has also moved to offer farmers more varieties with fewer inserted genes...farmers...often have to buy traits they do not need — such as protection from the corn rootworm in regions where that pest is not a problem — in order to get the best varieties. This issue has surfaced in the antitrust investigation. ...The yield of a crop is mainly determined by the seed’s intrinsic properties, not the inserted genes...Mosanto is bound at some point to face diminishing returns from its strategy of putting more and more insect-resistance and herbicide-resistance genes into the same crop, at ever increasing prices.