monsanto 02-14-06a

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  • 1. HUGH GRANT CHAIRMAN, PRESIDENT AND CEO MONSANTO COMPANY BIO CEO & INVESTOR CONFERENCE February 14, 2006 1
  • 2. Forward-Looking Statements Certain statements contained in this release are quot;forward-looking statements,quot; such as statements concerning the company's anticipated financial results, current and future product performance, regulatory approvals, business and financial plans and other non-historical facts. These statements are based on current expectations and currently available information. However, since these statements are based on factors that involve risks and uncertainties, the company's actual performance and results may differ materially from those described or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, among others: continued competition in seeds, traits and agricultural chemicals; the company's exposure to various contingencies, including those related to intellectual property protection, regulatory compliance and the speed with which approvals are received, and public acceptance of biotechnology products; the success of the company's research and development activities; the outcomes of major lawsuits, including proceedings related to Solutia Inc.; developments related to foreign currencies and economies; successful completion and operation of recent and proposed acquisitions; fluctuations in commodity prices; compliance with regulations affecting our manufacturing; the accuracy of the company's estimates related to distribution inventory levels; the company's ability to fund its short-term financing needs and to obtain payment for the products that it sells; the effect of weather conditions, natural disasters and accidents on the agriculture business or the company's facilities; and other risks and factors detailed in the company's filings with the SEC. Undue reliance should not be placed on these forward-looking statements, which are current only as of the date of this presentation. The company disclaims any current intention or obligation to update any forward- looking statements or any of the factors that may affect actual results. 2
  • 3. Non-GAAP Financial Information This presentation may use the non-GAAP financial measures of “free cash flow,” earnings per share (EPS) on an ongoing basis, and Return on Capital (ROC). We define free cash flow as the total of cash flows from operating activities and investing activities. A non-GAAP EPS financial measure, which we refer to as on-going EPS, excludes certain after-tax items that we do not consider part of ongoing operations, which are identified in the reconciliation. ROC means net income (without the effect of certain items) exclusive of after-tax interest expenses, divided by the average of the beginning year and ending year net capital employed, as defined in the reconciliation. Our presentation of non-GAAP financial measures is intended to supplement investors’ understanding of our operating performance. These non-GAAP financial measures are not intended to replace net income (loss), cash flows, financial position, or comprehensive income (loss), as determined in accordance with accounting principles generally accepted in the United States. Furthermore, these non-GAAP financial measures may not be comparable to similar measures used by other companies. The non-GAAP financial measures used in this presentation are reconciled to the most directly comparable financial measures calculated and presented in accordance with GAAP, which can be found at the end of this presentation. Fiscal Year In this presentation, unless otherwise specified, references to Monsanto’s fiscal years refer to the 12-month period ending August 31. Trademarks Roundup, Roundup Ready, Roundup Ready2Yield, Bollgard, Bollgard II, YieldGard, Monsanto, Imagine, Vine Design, Asgrow, DEKALB, Monsanto Choice Genetics, Posilac, Processor Preferred, Vistive, and French Kiss are trademarks owned by Monsanto Company and its wholly-owned subsidiaries and are italicized the first time they appear in this presentation. Mavera™ is a trademark of Renessen. 3
  • 4. OVERVIEW Biotechnology Poised to Expand As Increased Grain Production Required to Meet World-Wide Demand WORLD AREA GRAIN PRODUCTION EUROPE UNITED STATES ASIA 2005 2010 2005 2010 2005 2010 Corn 52M MT 55M MT Corn 278M MT 297M MT Corn 122M MT 132M MT Soy 1M MT 3M MT Soy 86M MT 81M MT Soy 22M MT 23 MT ARGENTINA BRAZIL 2005 2010 2005 2010 Corn 44M MT 53M MT Corn 23M MT 27M MT Soy 60M MT 81M MT Soy 38M MT 40M MT Production = Consumption Net Importer Net Exporter 4 Source: U.S.D.A. Foreign Agricultural Service, ABIOVE, Independent Economists & Monsanto Estimates
  • 5. OVERVIEW Early Adoption of Biotech Is Strong, But Tremendous Future Potential Still Remains 10 YEARS OF PROVEN BENEFITS U.S. CORN PRODUCTION COST PER GLOBAL ACRES USING MONSANTO 200 ACRE (2004)2 $300 BIOTECHNOLOGY TRAITS 180 160 $250 ACRES (IN MILLIONS) 140 $200 120 100 $150 80 $100 60 40 $50 20 $0 0 DEPRECIATON OTHER FIXED COSTS 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 SEEDS FERTILIZERS CHEMICALS MACHINE OPERATIONS SOYBEANS CORN COTTON CANOLA MISCELLANEOUS GLOBAL ADOPTION MARKET OPPORTUNITY Biotech was first commercialized in 1996 on Seed accounts for less than 20% of the cost per approximately 3 million acres acre for a U.S. farmer today. Biotechnology acreage has grown by double-digits Biotech traits create new value and substitute for each year. inputs like chemicals and fertilizers Cumulatively, acreage has grown The projected global value for the biotech trait market in 2005 was $5.25 billion1 with estimates of 50-fold since 1996, with biotech traits planted on more than 220 million acres in 20051 up to $25 billion in sales by 20103 1. International Service for the Acquisition of Agri-biotech Applications (ISAAA), “Global Status of Commercialized Biotech/GM Crops: 2005” 2. USDA and Monsanto estimates 3. AGROW, “The Global Crop Protection Industry in 2010,” (2001) 5
  • 6. OVERVIEW Biotechnology Is the Most Rapidly Adopted Agricultural Technology in History Because of Significant Benefits 10 YEARS OF PROVEN BENEFITS ECONOMIC BENEFITS Since 1996, global farm income increased by a cumulative total of $27 billion from a combination of higher productivity and reduced costs1 FARM PRODUCTIVITY In a single year, U.S. growers increased productivity by 5.3 billion pounds, increased net returns by $1.9 billion2 ENVIRONMENTAL BENEFITS Biotech crops has resulted in 380 million pounds of less pesticide use by growers since 1996, a reduction of over 6 percent1 PESTICIDE REDUCTION In 2003, US growers eliminated over 46 million pounds of pesticide active ingredients2 The ‘environmental footprint’ of the four most prevalent crops has been reduced by 14 percent because of the planting of biotech crops1 OTHER BENEFITS Conservation tillage practices have increased significantly since the adoption of biotechnology- derived herbicide-tolerant crops2 1. Brookes, Graham and Peter Barfoot “GM Crops: The Global Economic and Environmental Impact – The First Nine Years 1996-2004,” (2005) AgBioForum, http://www.agbioforum.org. 2. National Center of Food and Agricultural Policy (NCFAP) “Impacts on US Agriculture of Biotechnology Derived Crops Planted in 2003 – An Update of Eleven cases studies,” (2004). 6
  • 7. OVERVIEW Farmers ‘Buy Yield,’ Opening Opportunity for Seeds and Traits Strategy MONSANTO’S POSITION OPTIONS FOR FARMERS FARMERS’ DECISION EQUATION SEED Seed is locally adapted to Monsanto has three channels to geographical growing market: The starting point of all conditions agriculture; farmers National brands need to maximize Roughly 300 seed Regional/local brands ‘genetics’ in seed for companies serve U.S. Corn yield + TECHNOLOGY seed market Licensing to other brands Monsanto traits offer protection for ‘above-and-below’ ground Biotechnology traits insects and new weed control Insecticides options Technology is used to protect and maximize We’ve had 11 different traits Herbicide systems the yield potential of the approved and commercialized seed = MAXIMUM YIELD Our traits are broadly licensed to seed companies The elegance of a seed and trait In a tight-margin business, POTENTIAL approach is that the seed is the farmers need the ‘complete package and traits can be package’ to maximize yield The basic equation ‘stacked’ for maximum effect and profitability represents the maximum yield potential multiplied by In 2005, Monsanto introduced the the percent of that yield first triple-stack of biotech traits preserved by technology 7
  • 8. LEADERSHIP Monsanto Has Rare Mix of Leading Commercial Portfolio and Unmatched R&D Pipeline DISCOVERY PHASE I PHASE II PHASE III PHASE IV CURRENT COMMERCIAL Proof Of Concept Early Development Advanced Development Pre-launch Gene/Trait Identification PRODUCTS DROUGHT- 2nd GEN 2nd GEN YIELDGARD CORN YIELDGARD PEST CONTROL TOLERANT YIELDGARD YIELDGARD BORER ROOTWORM II CORN CORN BORER ROOTWORM (1997) MAVERATM 2nd-GEN DICAMBA- ROUNDUP HIGH-VALUE ROUNDUP READY GRAIN YIELD DROUGHT- TOLERANT READY2YIELD CORN WITH CORN (1998) TOLERANT CORN SOYBENS SOYBEANS LYSINE INSECT- MAVERATM I STRESS HIGHER- VISTIVE II LOW YGCB WITH RR PROTECTED HIGH-VALUE TOLERANCE YIELDING CORN LIN – MID OLEIC (1998) SOYBEANS SOYBEANS NITROGEN- HIGHER- IMPROVED- HERBICIDE OMEGA 3 ROUNDUP READY UTILIZATION YIELDING PROTEIN TOLERANCE SOYBEANS CORN 2 (2001) CORN SOYBEANS SOYBEANS 2nd-GEN HIGH- VISTIVE III LOW DISEASE YIELDGARD VALUE CORN LIN – MID OLEIC RESISTANCE ROOTWORM (2003) WITH LYSINE – LOW SAT FEED CORN HIGH-OIL LIPID YGRW WITH RR WITH BALANCED SOYBEANS FOR ENHANCEMENTS (2003) PROTEINS PROCESSING SOYBEAN MAVERATM II PROTEIN YIELDGARD PLUS NEMATODE HIGH-VALUE ENANCEMENTS (2004) RESISTANCE SOYBEANS DROUGHT- CARBOHYDRATE YGPL WITH RR TOLERANT BOLLGARD III ENHANCEMENTS (2005) SOYBEANS DICAMBA- BIOACTIVE ROUNDUP READY TOLERANT COMPOUNDS SOYBEANS (1996) COTTON DROUGHT- BOLLGARD COTTON TOLERANT (1996) COTTON ROUNDUP READY COTTON (1997) BG WITH RR (1997) BOLLGARD II (2003) BGII WITH RR (2003) ROUNDUP READY FLEX COTTON (2006) 8
  • 9. LEADERSHIP Drought Pressure in 2005 in Central Corn Belt Demonstrated Performance Value of YieldGard Rootworm KEY MARKET ACRES U.S. BRAZIL ARGENTINA YieldGard 5M 1M AVAILABLE MARKET 25-30M Rootworm Corn 2006 STATUS 16% 0% 0% PERCENT PENETRATED YIELDGARD MIDWEST DROUGHT OBSERVATIONS ROOTWORM (2003) • Approximately one- YieldGard quarter of growers Rootworm’s in U.S. drought- protection allows stricken areas in for heartier roots 2005 have that can tap what experienced >30 bu/acre advantage moisture exists over soil-applied insecticides The difference between YieldGard INSECTICIDE TREATED-CORN Rootworm plants and conventional YIELDGARD ROOTWORM ones is visible DISCOVERY PHASE I PHASE III PHASE II PHASE IV LAUNCH Proof of Concept Adv. Development Early Development Pre-Launch 9
  • 10. LEADERSHIP Market Opportunity for Roundup Ready Corn on Track for 60M Acres Longer Term KEY MARKET ACRES U.S. BRAZIL ARGENTINA Roundup Ready 20M 5M AVAILABLE MARKET 60M Corn 2 2006 STATUS 40% 0% 0% PERCENT PENETRATED ROUNDUP READY CORN 2 (2001) INFLECTION POINT: • Roundup Ready VARIABLE- corn is on pace for BASED INFLECTION 40 50M acres in 2008 PRICING POINT: EU INFLECTION in the U.S. IMPORT 35 POINT: APPROVALS DOMESTIC • We now have 30 CHANNELING supply available to PROGRAM U.S. ACRES sell 15% more 25 acres of Roundup Ready corn and 20 SUSTAINABLE YieldGard ACREAGE 15 Rootworm corn GROWTH than forecast in 10 November, up to 44M acres 5 collectively 0 1998 1999 2000 2001 2002 2003 2004 2005 2006F 2007F DISCOVERY PHASE I PHASE III PHASE II PHASE IV LAUNCH Proof of Concept Adv. Development Early Development Pre-Launch 10
  • 11. LEADERSHIP Stacking Shifts Value Opportunity to the More Profitable Acre U.S. CORN TRAIT ACRES AVERAGE U.S. RETAIL VALUE ADDED WITH STACKED TRAITS TRAIT RETAIL VALUE SINGLE TRAITS 3.42 3 .5 45 TRAIT RETAIL VALUE PER ACRE ADDED PER ACRE STACKED – DOUBLE TRAITS 40 STACKED – TRIPLE TRAITS 3 35 (INDEXED) ACRES IN MILLIONS 30 2 .5 25 2 20 1.59 15 1 .5 10 1 5 DOUBLE TRIPLE STACK STACK 0 2001 2002 2003 2004 2005 1 = INDEXED VALUE OF SINGLE TRAIT 11
  • 12. LEADERSHIP Market Potential for Biotech Traits Highlights Continued Growth Opportunity SOYBEANS COTTON CORN MARKET OPPORTUNITY: ROUNDUP KEY MARKETS BOLLGARD I ROUNDUP YIELDGARD YIELDGARD READY ROUNDUP READY AND II READY CORN BORER ROOTWORM FLEX UNITED 70M 10-15M 6-8M 60M 50-60M 25-30M STATES BRAZIL 50M 3M 2M 20M 15M 5M ARGENTINA 35M - - 5M 4M 1M INDIA - 10-15M 10-15M 3 – 5M 3 – 5M - EUROPE 1M - - 24M 8M 5M AFRICA 0.2M 11M 10M 6M 4M - AUSTRALIA - 0.5M-0.8M 0.5M-0.8M - - - TOTAL KEY 34.5- 156.2M 28.5-35.8M 118-125M 84-96M 36-41M MARKETS 44.8M 76% 0% 35% 19% 40% 10% BIOTECH ACRES PLANTED 2005 REMAINING AVAILABLE MARKET 12
  • 13. LEADERSHIP Efficient Discovery Program Is in Full Gear, Fueling Pipeline Expansion and Performance PHASE II PHASE III DISCOVERY PHASE I PHASE IV Early Development Advanced Proof Of Concept Pre-launch Gene/Trait Development Identification AVERAGE 24 to 48 MONTHS 12 to 24 MONTHS 12 to 24 MONTHS 12 to 24 MONTHS 12 to 36 MONTHS DURATION1 AVERAGE 5 PERCENT 25 PERCENT 50 PERCENT 75 PERCENT 90 PERCENT PROBABILITY OF SUCCESS2 ION AT GR E INT AIT TR ING TEST D FIEL MONSANTO DISCOVERY + REGULATORY DATA GENERATION COLLABORATIVE REG ULA PARTNERS TOR Y SU BMIS SION KEY INFLECTON POINT: SE ED BU AFTER PHASE II COMMERCIAL LK UP SUCCESS GOES TO >50% WITH LEADS ON COMMERCIAL TRACK TENS OF THOUSANDS THOUSANDS 10s <5 1 GENES IN TESTING •HIGH-THROUGHPUT •GENE OPTIMIZATION •TRAIT •TRAIT INTEGRATION •REGULATORY KEY ACTIVITY SCREENING DEVELOPMENT SUBMISSION •CROP •FIELD TESTING •MODEL CROP TRANSFORMATION •PRE-REGULATORY •SEED BULK-UP •REGULATORY DATA TESTING DATA GENERATION •PRE-MARKETING •LARGE-SCALE TRANSFORMATION 1. Time estimates are based on our experience; they can overlap. Total development time for any particular product may be shorter or longer than the time estimated here. 2. This is the estimated average probability that the traits will ultimately become commercial products, based on our experience. These probabilities may change over time. 13
  • 14. DISCOVERY PHASE I PHASE II PHASE III PHASE IV LEADERSHIP Proof Of Concept Early Advanced Pre-launch Gene/Trait 2006 Pipeline Development Development Identification AS OF JANUARY 1, 2006 Roundup Ready Flex cotton Roundup RReady2Yield soybeans Roundup RReady2Yield canola Dicamba-tolerant soybeans Dicamba-tolerant cotton 2nd-Gen YieldGard Rootworm 2nd-Gen YieldGard Corn Borer Insect-protected soybeans YieldGard Rootworm II FARMER Soybean nematode-resistance Bollgard III Drought-tolerant corn 2nd-Gen Drought-tolerant corn Higher-yielding canola Drought-tolerant soybeans Drought-tolerant cotton Higher-yielding corn Nitrogen utilization corn Higher-yielding soybeans Mavera™ High-value corn with lysine PROCESSOR Mavera™ I High-value soybeans Mavera™ II High-value soybeans 2nd-Gen High-value corn with lysine Feed Corn with balanced proteins High oil soybeans for processing CONSUMER Improved-protein soybeans Vistive II Low Lin – Mid Oleic soybeans Vistive III Low Lin – Mid Oleic – Low Sat soybeans Omega-3 soybeans 14
  • 15. LEADERSHIP Monsanto Is Upgrading the Entire Commercial Trait Portfolio to Second- and Third-Generation Traits TECHNOLOGY UPGRADES IN THE PIPELINE CORE FIRST- COMMERCIALIZED DISCOVERY PHASE I PHASE II PHASE III PHASE IV GENERATION SECOND- Proof Of Concept Early Development Advanced Development Pre-launch Gene/Trait TECHNOLOGY GENERATION Identification YIELDGARD CORN 2ND GEN YIELDGARD BORER CORN BORER (1997) UPGRADE: BROADER BENEFIT: FULL-SEASON INSECT CONTROL; CONTROL OF EUROPEAN BETTER IRM PROPERTIES CORN BORER ROUNDUP READY ROUNDUP READY CORN CORN 2 (1998) (2001) BENEFIT: NEW WEED UPGRADE: SIMPLIFIED CONTROL SYSTEM WEED CONTROL, GREATER FLEXIBILITY YIELDGARD YIELDGARD 2ND GEN YIELDGARD ROOTWORM ROOTWORM II ROOTWORM (2003) UPGRADE: NEW MODE OF UPGRADE: IMPROVED BENEFIT: CONTROL OF ACTION FOR INSECT EFFICIENCY OF STACKING CORN ROOTWORM CONTROL IN ELITE GERMPLASM ROUNDUP READY ROUNDUP DICAMBA-TOLERANT SOYBEANS RREADY2YIELD SOYBEANS (1996) SOYBEANS UPGRADE: ADDITIONAL BENEFIT: NEW WEED UPGRADE: GREATER MODE OF ACTION CONTROL SYSTEM FLEXIBILITY; YIELD BENEFIT BOLLGARD BOLLGARD II BOLLGARD III COTTON COTTON COTTON (1996) (2003) BENEFIT: BROADER BENEFIT: IN-PLANT BENEFIT: BROADER INSECT CONTROL; CONTROL OF THE INSECT CONTROL; BETTER IRM PROPERTIES BOLLWORM BETTER IRM PROPERTIES ROUNDUP READY ROUNDUP READY DICAMBA-TOLERANT COTTON FLEX COTTON COTTON (1997) (2006) BENEFIT: ADDITIONAL BENEFIT: NEW WEED BENEFIT: GREATER MODE OF ACTION CONTROL SYSTEM FLEXIBILITY; HERBICIDE REPLACEMENT 15
  • 16. LEADERSHIP Roundup Ready Flex Launch To Be Most Significant in 10- Year History of Biotech Traits KEY MARKET ACRES U.S. INDIA AUSTRALIA Roundup Ready 10-15M AVAILABLE MARKET 10-15M 0.5-0.8M Flex Cotton 2006 STATUS 0% 0% 0% PERCENT PENETRATED Anticipated trait launch of 2-3 million acres in U.S. in 2006 through 10 ROUNDUP READY FLEX COTTON (2006) cotton seed suppliers • Pricing at a Roundup Ready Flex will be only stacked with Bollgard II, at premium of $6-$11 approximately 70-80% of mix an acre over the Introductory acres planted in Australia; full launch set for 2007 first-generation of Roundup Ready Trait in initial breeding phase with licensees in India in preparation for cotton filing for regulatory field trials The Roundup Ready Flex cotton trait will be coupled with our Stoneville brand and our Cotton States licensing as a showcase of Monsanto’s cotton business DISCOVERY PHASE I PHASE III PHASE II PHASE IV LAUNCH Proof of Concept Adv. Development Early Development Pre-Launch 16
  • 17. LEADERSHIP Drought-Tolerant Corn Advances to Phase II Based on Second-Year Field Test Results KEY MARKET ACRES U.S. BRAZIL ARGENTINA Drought-tolerant corn 80M 30M 6M AVAILABLE MARKET CREATING VALUE 0% 0% 0% PERCENT PENETRATED PROJECT UPDATE Consistent results from early leads and more Drought-tolerant corn leads emerging from pipeline DISCOVERY PHASE I PHASE II PHASE III PHASE IV 2005 PERFORMANCE • In second year, lead genes tested in drought conditions in 7 locations, broad-acre application in 10 locations RESULTS • In multiple locations of drought-condition field trials, best-performing events show significant yield advantage over conventional checks 2006 FOCUS • Continue to screen lead events for performance • Continue commercial transformations for second generation of drought tolerance; Second set of genes are being evaluated in Discovery and Phase I • Select optimal germplasm for drought genes DISCOVERY PHASE I PHASE II PHASE IV LAUNCH PHASE III Proof of Concept Early Development Pre-Launch Adv. Development 17
  • 18. LEADERSHIP Vistive Is First of Family of Improved Oils for Food Uses KEY MARKET ACRES U.S. BRAZIL ARGENTINA Vistive Low- 5M TBD TBD AVAILABLE MARKET Linolenic Soy CREATING VALUE 2% 0% 0% PERCENT PENETRATED PROJECT UPDATE 800+ Farmers in Eastern and Northeastern Iowa planted Vistive Vistive Low Lin soybeans soybeans this year DISCOVERY PHASE I PHASE II PHASE III PHASE IV Vistive provides opportunity to declare zero trans fat and use the 2005 PERFORMANCE nutrient content claims of “Low in saturated fat, contains 7 g of total • Vistive was developed by screening Monsanto’s fat per serving” and “Reduced RESULTS germplasm and using advanced tools in breeding, Saturated Fat” effectively launching in 36 months from concept 100% PARTIALLY 100% PALM OIL HYDROGENATED • Successful launch, with approximately 100,000 acres 100% VISTIVE SOYBEAN OIL planted in Iowa in the Asgrow seed brand Nutrition Facts Nutrition Facts Nutrition Facts Tortilla Chips (Plain, white corn) Tortilla Chips (Plain, white corn) Tortilla Chips (Plain, white corn) Serving Size – 1 0z. (28 g) Serving Size – 1 0z. (28 g) Serving Size – 1 0z. (28 g) • Oil from the Vistive crop was sold out before Harvest Amount Per Serving Amount Per Serving Amount Per Serving Calories 140 Calories Calories 140 Calories Calories 140 Calories from Fat 60 from Fat 60 from Fat 60 2006 FOCUS % Daily Value % Daily Value % Daily Value Total Fat 7 g 11% Total Fat 7 g 11% Total Fat 7 g 11% • Expanded market, with approximately 500,000 acres, Saturated Fat 1.5 g 8% Saturated Fat 3 g 15% Saturated Fat 1 g 5% Trans Fat 2 g Trans Fat 0 g Trans Fat 0 g 0% 10+ seed brands and 4+ processors Cholesterol 0% Cholesterol 0% Cholesterol 0% Sodium 120 mg 5% Sodium 120 mg 5% Sodium 120 mg 5% Total Carbohydrate 19 g 6% Total Carbohydrate 19 g 6% Total Carbohydrate 19 g 6% Dietary Fiber 2 g 8% Dietary Fiber 2 g 8% Dietary Fiber 2 g 8% Sugars 0 g Sugars 0 g Sugars 0 g Protein 2 g 4% Protein 2 g 4% Protein 2 g 4% DISCOVERY PHASE I PHASE II PHASE IV LAUNCH PHASE III Proof of Concept Early Development Pre-Launch Adv. Development 18
  • 19. LEADERSHIP 2005 Marked Successful Completion of Initial Taste, Smell and Oil Stability Testing for Omega-3 Soybeans KEY MARKET ACRES U.S. BRAZIL ARGENTINA Omega-3 soybeans TBD TBD TBD AVAILABLE MARKET CREATING VALUE 0% 0% 0% PERCENT PENETRATED PROJECT UPDATE 400 Stabilized 20% SDA Omega-3 soybeans 350 DISCOVERY PHASE I PHASE II PHASE III PHASE IV 20% SDA w/ CA 300 PEROXIDE VALUE, MEQ/KG Stabilized Fish Oil 250 2005 PERFORMANCE 200 • Moved into Phase III • Field trials continue to confirm expression of RESULTS 150 stearidonic acid (SDA) levels at concept targets 100 • Initial sensory data superior to fish oil 50 2006 FOCUS 0 • Continue to screen to select the lead event for 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 regulatory submission DAYS AT 55°C In testing for oil stability, SDA oil produced from Omega-3 soybean plants showed less oxidation – an indicator of stability – than fish oil where both oils were stabilized with commercial products DISCOVERY PHASE I PHASE II PHASE IV LAUNCH PHASE III Proof of Concept Early Development Pre-Launch Adv. Development 19
  • 20. LEADERSHIP Monsanto’s Pipeline Is Balanced Across Multiple Market Opportunities OMEGA 3 SOYBEANS VISTIVE III >$30/ ACRE SOYBEANS HIGH: DICAMBA- TOLERANT SOYBEANS DICAMBA- ROUNDUP YIELDGARD TOLERANT RREADY2YIELD BOLLGARD III ROOTWORM II COTTON SOYBEANS 2ND GEN HIGH-VALUE VISTIVE II CORN WITH LYSINE RETAIL VALUE PER ACRE2 SOYBEANS <$30/ ACRE ROUNDUP READY MEDIUM: HIGHER- ROUNDUP 2ND GEN FLEX COTTON YIELDING RREADY2YIELD YIELDGARD FEED CORN WITH CANOLA CANOLA NITROGEN- ROOTWORM BALANCED PROTEINS UTILIZATION CORN 2ND GEN MAVERATM II HIGH- DROUGHT-TOLERANT YIELDGARD IMPROVED- VALUE SOYBEANS DROUGHT- CORN CORN BORER PROTEIN TOLERANT HIGHER-YIELDING SOYBEANS COTTON SOYBEANS MAVERATM HIGH-VALUE INSECT- SOYBEAN DROUGHT- CORN WITH LYSINE PROTECTED NEMATODE TOLERANT SOYBEANS RESISTANCE SOYBEANS <$10/ ACRE SMALL: HIGH OIL SOYBEANS FOR MAVERATM HIGH- PROCESSING VALUE SOYBEANS SMALL: <5M ACRES MEDIUM: <20M ACRES HIGH: >20M ACRES TOTAL ACRE OPPORTUNITY1 1. “Total Acre Opportunity” represents the maximum acre penetration by the trait individually and as a stacked trait during the three-year span of its peak; Second- and third-generation traits may cannibalize acre opportunities of preceding product offerings 2. “Retail Value Per Acre” represents the per-acre average value for the individual trait in the three-year span during the trait penetration peak 20
  • 21. OVERVIEW Drivers of Growth in Mid-Term and Long-Term Horizons Are On Track FY2006 AND FY2007 TARGETS FY2008 - FY2010 2006 2006 2007 LEADERSHIP TARGET UPDATE TARGET $2.35-$2.50 $2.82-$3.00 Accelerate the Current $2.35-$2.50 EARNINGS PER Up to 20% 20% growth Commercial Platform Toward upper SHARE growth from from 2006 end of range Expanded long–term opportunity 2005 projection for corn traits, reflecting opportunity in licensing, FREE CASH $825M - $900M $825M - $900M $875-$950M stacking and price-to-value FLOW strategies KEY COMMERCIAL COMMITMENTS Expand in New Markets US CORN 1 – 2 pts 1 – 2pts Penetration of new markets in SHARE Asia, Europe and South America with existing traits US RR CORN 30M ACRES 34M ACRES New opportunity in the high- margin Seminis business US YGRW 8M ACRES 10M ACRES Discover New Opportunities US COTTON Through Research 1 – 2 POINTS 1 – 2 POINTS SHARE Refreshing of first-generation US RR FLEX 2 – 3M ACRES 2 – 3M ACRES trait portfolio Breeding programs expand our AUSTRALIA 80-85% 90% genetic footprint COTTON TRAITS penetration penetration Translate Growth to Value BRAZIL RR 5 – 10 cents per 5 – 10 cents Gross profit mix reflects higher- EARNINGS share per share margin seeds and traits CONTRIBUTION 21
  • 22. Reconciliation of Non-GAAP Financial Measures Reconciliation of Free Cash Flow Fiscal Year Fiscal Year 2006 2007 $ Millions Target Target Net Cash Provided by Operations $1,300 - $1,375 $1,375 - $1,450 Net Cash Provided (Required) by Investing Activities $(475) $(500) Free Cash Flow $825 - $900 $875-$950 Net Cash Provided (Required) by Financing Activities N/A N/A Net Increase in Cash and Cash Equivalents N/A N/A 22