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monsanto 03-08-06 monsanto 03-08-06 Presentation Transcript

  • ROBB FRALEY, PH.D. CHIEF TECHNOLOGY OFFICER CREDIT SUISSE AGROCHEMICAL CONFERENCE 2006 March 10, 2006 1
  • Forward-Looking Statements Certain statements contained in this presentation are “forward-looking statements,” 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 release. The company disclaims any current intention or obligation to update any forward-looking statements or any of the factors that may affect actual results. Trademarks Roundup, Roundup Ready, Roundup Ready2Yield, Bollgard, Bollgard II, YieldGard, Monsanto, Imagine, Vine Design, Asgrow, DEKALB, Monsanto Choice Genetics, Posilac, Processor Preferred, and Vistive 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. 2
  • 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
  • OVERVIEW Farmers ‘Buy Yield,’ Opening Opportunity for Seeds and Traits Strategy YIELD = GENETIC GAIN X % OF GENETIC GAIN PRESERVED FARMERS’ DECISION EQUATION MONSANTO’S POSITION: CORN SEED Retail brands (GENETIC GAIN) The starting point of all agriculture; Regional brands farmers need to maximize ‘genetics’ in + TECHNOLOGY seed for yield Licensing ‘Above ground’ protection (% OF GENETIC GAIN PRESERVED) Technology is used to protect and ‘Below ground’ protection maximize the yield potential of the seed = Weed control system MAXIMUM YIELD The elegance of a seed and trait POTENTIAL approach is that the seed is the package and traits can be ‘stacked’ for maximum The basic equation represents the effect maximum yield potential multiplied by the percent of that yield preserved by In 2005, Monsanto introduced the first technology triple-stack of biotech traits 4
  • OVERVIEW Breeding and Biotech Provide Parallel R&D Paths to Commercial Products BREEDING and BIOTECHNOLOGY form two R&D pathways Separate, but parallel, the BREEDING and BIOTECHNOLOGY pathways are linked by shared tools. DISCOVERY PHASE I PHASE II R&D PHASE: PHASE III PHASE IV LAUNCH BREEDING COMMERCIAL IT PLATFORM GERMPLASM G ANALYTICS MARKERS GENOMICS SEED ELITE Germplasm SOLD TO FARMERS R BIOTECHNOLOGY 5
  • PIPELINE UPDATE Corn Germplasm Improvements Are Tightly Linked to Market Share Gains U.S. KEY MARKET ACRES BRAZIL ARGENTINA BRAND LICENSED ASI Corn breeding 80M 30M 6M AVAILABLE MARKET CREATING VALUE 16% 32% 3% 35% 49% PERCENT PENETRATED 2005 CORN YIELD (BU/A) PROJECT UPDATE MONSANTO BRANDS 200 COMPETITORS Corn Breeding 190 2005 PERFORMANCE 180 RESULTS • Average yield differential of Monsanto versus 170 competitors’ best material is better than one-third greater in 2005 compared with 2004 testing 160 • Strong yield advantages are consistent across maturity zones and outperform best competitive commercial 150 material sold in 2005 95 100 105 110 115 RELATIVE MATURITIES (DAYS) 2006 FOCUS U.S. CORN MARKET SHARE • Continue marker-based breeding approach 60% • Continue focus on broadening genetic base of 50% commercial products, including strengthening our 40% SUSTAINABLE international portfolio RESULTS 1-2 POINT 30% • On pace to gain market share in U.S. corn seed for fifth SHARE GAINS 20% consecutive year 10% 0% 2001 2002 2003 2004 2005 2006 2007 HOLDENS/CORN STATES LICENSEES AMERICAN SEEDS, INC. BRANDS DEKALB AND ASGROW BRANDS 6
  • COMMERCIAL OPPORTUNITY Corn Market Share Gains Still to Fully Reflect Power of Molecular Breeding Application 6% 20% MOLECULAR-BREEDING HYBRIDS AS A PERCENT OF BRANDED UNITS SOLD IN PERCENT OF BRANDED UNITS SOLD COMMERCIAL CORN PORTFOLIO IN COMMERCIAL CORN PORTFOLIO 5% 2005 BRANDED MARKET SHARE: 15% 16% 4% MARKET SHARE DEKALB AND ASGROW 3% 10% BRAND MARKET SHARE 2% 5% 1% 0% 0% 2001 2002 2003 2004 2005 2006F 2007F 2008F CYCLE 1: CYCLE 2: CYCLE 3: PROGRESSION INTEGRATION OF APPLICATION OF MOLECULAR SELECTION POWER OF OF BREEDING GLOBAL GERMPLASM BREEDING TO SELECTION MOLECULAR BREEDING TECHNOLOGY IN THE • MOLECULAR BREEDING • ASSEMBLED 36 MAJOR CORN • PREDICTIVE COMBINATIONS COMMERCIAL IMPROVES GENETIC GAIN BY BREEDING PROGRAMS IN 12 ALLOW MORE EFFICIENT PORTFOLIO 2X VERSUS CONVENTIONAL COUNTRIES BREEDING BREEDING • FIRST INTRA-COMPANY • MOLECULAR BREEDING • BY 2006, FIRST MOLECULAR CROSSES; BY CYCLE 3, >50% ACCELERATES TRAIT BREEDING HYBRIDS ENTER OF HYBRIDS IN THE U.S. INTEGRATION BY COMMERCIAL PORTFOLIO PORTFOLIO MADE THROUGH SHORTENING ‘BACKCROSSING’ INTRA-COMPANY CROSSES CYCLES 7
  • PIPELINE UPDATE Cotton Breeding Program Provides Rich Source of Germplasm to Branded and Licensed Businesses U.S. COTTON STONEVILLE KEY MARKET ACRES STATES Cotton breeding 14M AVAILABLE MARKET CREATING VALUE 14% 0% PERCENT PENETRATED PROJECT UPDATE 2005 COTTON GERMPLASM PERFORMANCE (19 LOCATIONS) Cotton Breeding 1600 1400 2005 PERFORMANCE 1200 • Monsanto varieties competitive with current market LBS LINT/ACRE 1000 leaders and include Roundup Ready Flex stacked with Bollgard II 800 • Stoneville will offer 9 varieties either with the Roundup 600 RESULTS Ready Flex trait or with Roundup Ready Flex stacked 400 with Bollgard II 200 • Cotton States will have 5 licensees in 2006 0 2005 MONSANTO 2006 FOCUS COMPETITIVE VARIETIES LEADERS • Introduce 4-6 new, improved varieties with latest trait offerings • Continue marker-based breeding approach • Expand breeding program and evaluations of additional varieties 8
  • COMMERCIAL OPPORTUNITY Seminis Addition to Monsanto Quickly Contributes to Growth And Opens New Business and Research Opportunities EUROPE-AFRICA 2005 Market Share 19% Market Position 1 ASIA-PACIFIC NORTH AMERICA 2005 SEMINIS 2005 Market Share 7% OPPORTUNITY Market Share 34% Market Position 3 Market Position 1 Fruit & vegetable seeds only represent approximately 3.6% of farmgate value (corn: 13.2%; soybeans: 11.4%) Significant growth opportunities in hybrid creation Seminis has the largest SOUTH AMERICA global vegetable germplasm 2005 library; molecular breeding Market Share 37% tools honed in row crops Market Position 1 will be applied to vegetables 9
  • DISCOVERY PHASE I PHASE II PHASE III PHASE IV OVERVIEW 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 10
  • 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 IT RA T G STIN D TE FIEL MONSANTO DISCOVERY + REGULATORY DATA GENERATION COLLABORATIVE REG U LATO PARTNERS RY S UBM IS 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. 11
  • 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 12
  • COMMERCIAL OPPORTUNITY 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 cotton ROUNDUP READY FLEX COTTON (2006) seed suppliers • Pricing at a Roundup Ready Flex will be only stacked with Bollgard II at approximately premium of $6-$11 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 filing cotton 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 13
  • LEADERSHIP Within Discovery Platforms, Products Are Maturing into Families TECHNOLOGY UPGRADES IN THE PIPELINE FIRST- DISCOVERY PHASE I PHASE II PHASE III PHASE IV COMMERCIALIZED GENERATION SECOND- Proof Of Concept Early Development Advanced Pre-launch Gene/Trait Development TECHNOLOGY Identification GENERATION ROUNDUP READY DICAMBA- ROUNDUP SOYBEANS TOLERANT RREADY2YIELD 2 1 3 2 (1996) SOYBEANS SOYBEANS HERBICIDE ROUNDUP READY DICAMBA- ROUNDUP READY FLEX COTTON TOLERANCE TOLERANT 3 2 1 COTTON 2 (2006) COTTON (1997) ROUNDUP READY ROUNDUP READY CORN 2 CORN 2 1 (2001) (1998) 2nd GEN DROUGHT- 2 1 DROUGHT- TOLERANT CORN TOLERANT CORN STRESS DROUGHT- 1 TOLERANT TOLERANCE SOYBEANS DROUGHT- 1 TOLERANT COTTON MAVERATM HIGH- 2nd GEN HIGH- PROCESSOR 2 1 VALUE CORN VALUE CORN BENEFITS: WITH LYSINE WITH LYSINE PROTEIN ENHANCE- MAVERATM I HIGH- MAVERATM II HIGH- 1 2 VALUE SOYBEANS MENTS VALUE SOYBEANS VISTIVE III LOW VISTIVE LOW LIN VISTIVE II LOW LIN - MID OLEIC – SOYBEANS/ 1 LIN - MID OLEIC 2 2 3 LOW SAT RAPE SEED SOYBEANS SOYBEANS HEALTHIER OMEGA-3 FOODS SOYBEANS IMPROVED-PROTEIN SOYBEANS 14
  • LEADERSHIP Weed Control Family Is Progressing Fastest on Multi- Generational, Multi-Crop Offerings TECHNOLOGY UPGRADES IN THE PIPELINE FIRST- DISCOVERY PHASE I PHASE II PHASE III PHASE IV COMMERCIALIZED GENERATION SECOND- Proof Of Concept Early Development Advanced Pre-launch Gene/Trait Development TECHNOLOGY Identification GENERATION ROUNDUP READY DICAMBA- ROUNDUP SOYBEANS TOLERANT RREADY2YIELD 2 1 3 2 (1996) SOYBEANS SOYBEANS HERBICIDE ROUNDUP READY DICAMBA- ROUNDUP READY FLEX COTTON TOLERANCE TOLERANT 3 2 1 COTTON 2 (2006) COTTON (1997) ROUNDUP READY ROUNDUP READY CORN 2 CORN 2 1 (2001) (1998) Herbicide Tolerance Family • First-mover advantage has enabled development of family of products and extension into multiple crops • Expansion possible because of strength of internal discovery program and licensing relationships • Pricing on next-generation traits reflects flexibility in weed control, yield gains and other benefits that accrue to the farmer 15
  • PIPELINE UPDATE Second-Generation Platform Expands Soybean Weed Control Window, Benefits for Growers KEY MARKET ACRES U.S. BRAZIL ARGENTINA Roundup RReady2Yield 70M 50M 35M AVAILABLE MARKET soybeans CREATING VALUE 0% 0% 0% PERCENT PENETRATED PROJECT UPDATE Roundup RReady2Yield soybeans DISCOVERY PHASE I PHASE II PHASE III PHASE IV PERFORMANCE UPDATE • Lead event confirmed in April of 2005 RESULTS • 2003-2005 U.S. field trials confirmed target yield and wider window of application benefits • Trait integration efforts started • Implementation of marker-assisted selection 2006 FOCUS • Continued field testing to build data for regulatory submissions • Continued field testing to confirm glyphosate activity in 2005 U.S. field tests confirmed yield targets; suppressing Asian rust in soybeans The use of marker-assisted selection helped teams working on trait selection DISCOVERY PHASE I PHASE II PHASE IV LAUNCH PHASE III Proof of Concept Early Development Pre-Launch Adv. Development 16
  • PIPELINE UPDATE Third-Generation of Soy Weed Control Encouraging in 2005 Field Trials KEY MARKET ACRES U.S. BRAZIL ARGENTINA Dicamba-tolerant 70M 50M 35M AVAILABLE MARKET soybeans CREATING VALUE 0% 0% 0% PERCENT PENETRATED PROJECT UPDATE WITH TRAIT Dicamba-tolerant soybeans DISCOVERY PHASE I PHASE II PHASE III PHASE IV 2005 PERFORMANCE • Third-generation project enters pipeline in Phase II as a result of University of Nebraska collaboration RESULTS announced in 2005 • Predicted value added in the range of $2.50-$12/acre, depending on the weed spectrum WITHOUT 2006 FOCUS TRAIT • Continue to screen events in field conditions, screening for leads with commercial potential Tolerance demonstrated at both pre-emergence and post-emergence application timing, with no visual crop injury at rates of 1.5lb/acre, which is three times the labeled use rate (above) DISCOVERY PHASE I PHASE II PHASE IV LAUNCH PHASE III Proof of Concept Early Development Pre-Launch Adv. Development 17
  • LEADERSHIP Stress Family Has Already Entered Second-Generation Discovery, Expanded Into New Crops TECHNOLOGY UPGRADES IN THE PIPELINE FIRST- DISCOVERY PHASE I PHASE II PHASE III PHASE IV COMMERCIALIZED GENERATION SECOND- Proof Of Concept Early Development Advanced Pre-launch Gene/Trait Development TECHNOLOGY Identification GENERATION 2nd GEN DROUGHT- 2 1 DROUGHT- TOLERANT CORN TOLERANT CORN STRESS DROUGHT- 1 TOLERANT TOLERANCE SOYBEANS DROUGHT- 1 TOLERANT COTTON Stress Tolerance Family • Initial discovery focus on drought tolerance • Rapid pace of discovery has led to second-generation corn trait entering Phase I as first-generation advances to Phase II • Expansion already made into multiple crops 18
  • PIPELINE UPDATE 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 8 DURING DROUGHT STRESS Drought Drought-tolerant corn tolerance % IMPROVED GROWTH 6 established DISCOVERY PHASE I PHASE II PHASE III PHASE IV RESULTS through plant physiology 4 (performance) 2005 PERFORMANCE over three 2 • Moved into Phase II years 2003 2004 2005 • In second year, lead genes tested in drought conditions in 7 locations, broad-acre application in 10 locations • Physiological drought tolerance repeated over past 3 40 In multiple years locations of % YIELD ADVANTAGE drought- 20 2006 FOCUS condition field RESULTS trials, best- • Continue to screen lead events for performance 0 performing • Continue commercial transformations for second events show 60 80 100 120 generation of drought tolerance; Second set of genes significant yield -20 are being evaluated in Discovery and Phase I advantage over conventional • Select optimal germplasm for drought genes checks -40 LOCATIONS WITH INCREASING DROUGHT SEVERITY DISCOVERY PHASE I PHASE II PHASE IV LAUNCH PHASE III Proof of Concept Early Development Pre-Launch Adv. Development 19
  • LEADERSHIP Processor Benefits Family Creates New Opportunity in Animal Feed Market TECHNOLOGY UPGRADES IN THE PIPELINE FIRST- DISCOVERY PHASE I PHASE II PHASE III PHASE IV COMMERCIALIZED GENERATION SECOND- Proof Of Concept Early Development Advanced Pre-launch Gene/Trait Development TECHNOLOGY Identification GENERATION MAVERATM HIGH- 2nd GEN HIGH- PROCESSOR 2 1 VALUE CORN VALUE CORN BENEFITS: WITH LYSINE WITH LYSINE PROTEIN ENHANCE- MAVERATM I HIGH- MAVERATM II HIGH- 1 2 VALUE SOYBEANS MENTS VALUE SOYBEANS Processor Benefits Family • Renessen joint venture includes both biotech and breeding approaches to adding value in the feed industry MaveraTM family branded in last year • to establish the new high-value seed- and-trait approach to the feed market 20
  • PIPELINE UPDATE High-Lysine Is First Biotechnology Quality Trait for Animal Feed Industry KEY MARKET ACRES U.S. BRAZIL ARGENTINA MaveraTM High-Value Corn 5M 2M 1M AVAILABLE MARKET with Lysine CREATING VALUE 0% 0% 0% PERCENT PENETRATED PROJECT UPDATE FIELD DATA VALIDATES MaveraTM High-Value Corn with Lysine LYSINE TARGETS DISCOVERY PHASE I PHASE II PHASE III PHASE IV 5000 4000 2005 PERFORMANCE • Final U.S. regulatory clearance received in February 3000 • Initially, high-lysine trait will be offered in stacked 1ST GENERATION combination with YieldGard Corn Borer, with the 2000 opportunity to move to additional combinations with YieldGard Rootworm and Roundup Ready Corn 2 MINIMUM 1000 TARGET 2006 FOCUS 0 SOUTH U.S. RESULT CONTROL AMERICA • Final commercial evaluation under an experimental (2004) RESULT field program in 2006, with limited commercial acreage (2005) in 2007 • Finalize regulatory approvals in key export markets • High-lysine trait is also key component of new high- value ethanol production process being tested by Renessen DISCOVERY PHASE I PHASE III PHASE II PHASE IV LAUNCH Proof of Concept Adv. Development Early Development Pre-Launch 21
  • LEADERSHIP Pipeline and Commercial Prospects Are Strong, Diverse Across Food-Trait Platforms TECHNOLOGY UPGRADES IN THE PIPELINE FIRST- DISCOVERY PHASE I PHASE II PHASE III PHASE IV COMMERCIALIZED GENERATION SECOND- Proof Of Concept Early Development Advanced Pre-launch Gene/Trait Development TECHNOLOGY Identification GENERATION VISTIVE III LOW VISTIVE LOW LIN VISTIVE II LOW LIN - MID OLEIC – SOYBEANS/ 1 LIN - MID OLEIC 2 2 3 LOW SAT RAPE SEED SOYBEANS SOYBEANS HEALTHIER OMEGA-3 FOODS SOYBEANS IMPROVED-PROTEIN SOYBEANS Healthier Foods Family • Vistive low-linolenic soybeans to expand to 500,000 acres in 2006 • Agreement signed with Solae Company to use improved-protein soybeans in a new product line • Positive progress made across the family, including Omega-3 soybeans advancing phases 22
  • COMMERCIAL OPPORTUNITY Vistive Family of Improved Oils Meets Multiple Needs in Food Industry TARGET: LOW LINOLENIC TARGET: LOW LINOLENIC TARGET: LOW SAT VISTIVE SOYBEANS VISTIVE RAPESEED +INCREASED OLEIC + LOW LINOLENIC 2005 LAUNCH 2005 LAUNCH 500K ACRES IN US 40K ACRES IN EUROPE VISTIVE III LOW LIN – MID OLEIC – LOW SAT TARGET: INCREASED OLEIC SOYBEANS + LOW LINOLENIC VISTIVE PHASE II FAMILY VISTIVE II LOW LIN – MID OLEIC SOYBEANS CONSUMER PHASE III MARKET OIL FOR FRYING AND IMPROVED SOYBEAN SPRAYING QUALITY FOR LIQUID OILS Crackers Snack chips 23
  • PIPELINE UPDATE 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 24
  • 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 25
  • COMMERCIAL OPPORTUNITY 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 26
  • OVERVIEW Drivers of Growth in Mid-Term and Long-Term Horizons Are On Track FY2006 AND FY2007 TARGETS FY2008 - FY2010 2006 2007 2006 LEADERSHIP TARGET FORECAST TARGET $2.35-$2.50 $2.82-$3.00 $2.35-$2.50 Accelerate Current EARNINGS UP TO 20% 20% GROWTH TOWARD UPPER Commercial Platform PER SHARE GROWTH FROM FROM 2006 END OF RANGE 2005 PROJECTION Expanded long–term opportunity for corn traits, reflecting FREE CASH opportunity in licensing, $825M - $900M $825M - $900M $875-$950M FLOW stacking and price-to-value strategies KEY COMMERCIAL COMMITMENTS Expand in New Markets US CORN 1 – 2 pts 1 – 2pts SHARE Penetration of new markets in Asia, Europe and South America US RR CORN 30M ACRES 34M ACRES with existing traits New opportunity in the high- US YGRW 8M ACRES 10M ACRES margin Seminis business Discover New Opportunities US COTTON 1 – 2 POINTS 1 – 2 POINTS Through Research SHARE Refreshing of first-generation US RR FLEX 2 – 3M ACRES 2 – 3M ACRES trait portfolio AUSTRALIA Breeding programs expand our 80-85% 90% penetration COTTON genetic footprint penetration TRAITS Translate Growth to Value BRAZIL RR 5 – 10 cents per 5 – 10 cents per Gross profit mix reflects higher- EPS share share margin seeds and traits 27
  • 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 28