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monsanto 03-10-08

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  • 1. BRETT BEGEMANN EXECUTIVE VICE PRESIDENT, GLOBAL COMMERCIAL CREDIT SUISSE CONFERENCE MARCH 10, 2008 1
  • 2. Forward-Looking Statements Certain statements contained in this presentation 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 operation of recent 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 most recent periodic report to 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. Trademarks Trademarks owned by Monsanto Company and its wholly-owned subsidiaries are italicized in this presentation. All other trademarks are the property of their respective owners. © 2008 Monsanto Company
  • 3. OVERVIEW Market Forces Are Changing Supply-Demand Patterns Globally, Creating a New Dynamic Across Agriculture EMERGENCE OF DEMAND-DRIVEN AGRICULTURE: STATE OF AGRICULTURE: NEW DEMAND AND PRODUCTION TRENDS The New Demand Environment FACTORS: Growing wealth Expanding ethanol ► INCREASING PROTEIN and population in and export DEMAND Asia creates new demands favor U.S. demand for as low-cost corn Wealth drives meat imported grain producer consumption – changing feed demand ► ASCENSION OF CHINA China’s growth is reaching limits of domestic production, driving huge changes in export environment Brazil exploits land Argentina ► ESTABLISHMENT OF availability advantage leverages to become BIOFUELS geographic commodity soy proximity to Assuming only base-case producer to meet supply corn to demand from China adoption of biofuels, more Latin America corn and soy needed in next decade 3
  • 4. OVERVIEW Feed and Fuel Demand Is Increasing; Only Time-Effective Solution Is Increasing Productivity Per Acre STATE OF AGRICULTURE: STRETCHING SUPPLY – ENDING STOCKS: Monsanto’s Advantages WORLD SUPPLY AND USE FOR TOTAL GRAINS1 Demand Requires Yield 600 30% MARKET CUSTOMER METRIC TONS (IN MILLIONS) 25% 500 Farmers Buy Yield 400 20% Monsanto is a technology 15% 300 company in an industry historically starved for 200 10% breakthrough innovation 5% 100 Innovation: ► Creates new value through 0 0% breakthrough products 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 ► Creates new markets that ENDING STOCKS AS A ENDING STOCKS didn’t exist before our PERCENT OF TOTAL USE products Annual grain carryover is Monsanto grows because of declining – even at a period of what we do, not what the historic production levels commodity cycles do 1. USDA World Agricultural Supply and Demand Estimates 4
  • 5. OVERVIEW On Track to Double Gross Profit by 2012, Growth Drivers Roll Out In Balanced, Additive Progression GROSS PROFIT DRIVERS: • Yield & stress platform R&D Pipeline DRIVERS: TIMELINE OF INCREMENTAL IMPACT • Breakthrough platforms Progression of significant new gross- • Protected culture Seminis DRIVERS: • Molecular markers profit generation from each strategic driver • 2nd-gen trait acceleration Cotton DRIVERS: • Breeding inroads • Roundup Ready 2 Yield platform Soybean DRIVERS: • Seed share growth • Seed share growth International Corn DRIVERS: • Unlocking trait approvals in LA • Trait penetration and seed share growth U.S. Corn DRIVERS: • SmartStax platform 2008 2009 2010 2011 2012 2012+ 2011-2012 2009 2010 U.S. drought- Delta and Pine U.S. SmartStax Roundup Ready 2 MILESTONES tolerant corn launch Land U.S. Yield soybeans corn launch portfolio controlled 2012+ Large-scale converted to commercial release Stacked trait second- Roundup Ready 2 soybean launches, First major selling Yield soybean generation stack including dedicated season for LA corn launch product for Brazil traits Projected branded corn share gains globally 2008 to 2012
  • 6. U.S. CORN DEKALB Expected to Gain Two-to-Three Share Points and ASI One-to-Two Share Points in U.S. Corn Seed in 2008 DEKALB AND ASI U.S. CORN SHARE EVOLUTION: 2001-2008F 35% DEKALB 2012 TARGET RANGE: 28% - 33% 30% U.S. GEOGRAPHY: 23% 25% - 26% Grow footprint 25% OBJECTIVE: 20% 2008 STATUS 20% 16% • DEKALB expected to gain 14% 13% 2- 3 points in 2008 for total 15% 12% 10% - share of 25-to-26 percent in 10% 11% 9% U.S. market 10% • ASI expected to gain 1-to-2 5% 4% share points organically in 5% 2008 season 0% 2012 OUTLOOK 2001 2002 2003 2004 2005 2006 2007 2008F • DEKALB to grow share 2007 through 2012 by up to 10 2005 DEKALB ends points cumulatively from Monsanto projects 1-2 2007 with 23% 2007 share of 23 percent point share gains for share, DEKALB from 2005 through • Continued organic share achieving 2010 2010 target 3 growth in ASI years early
  • 7. U.S. CORN With Added Trait Protection, Strong Growth Opportunity Remains For U.S. Corn U.S. CORN TRAIT OPPORTUNITY: 2005-2010F 220 60 U.S. TRIPLE-STACK ACRES 200 U.S. TRAIT ACRES 50 180 (IN MILLIONS) (IN MILLIONS) 160 40 140 120 30 100 80 20 60 40 10 20 CATALYSTS OF 0 0 2010 TRIPLE STACK 2007 2008F 2005 2006 2007 2008 2010F Opportunity GROWTH Rootworm Control 45-55M 20.8M 26-28M Channel Triple Corn Borer Control Penetration 60-70M 42.4M 40-42M Glyphosate Tolerance DEKALB Supply 80M 57.9M 63-65M Guarantee Triple Stack 17.6M 25-27M 45-55M Yield Insurance Trait acres reflect the total acres planted with each individual trait. In the case of stacked traits, each absolute acre will be reflected by two or more trait acres. Program Source: “Monsanto Biotechnology Trait Acreage” available through: monsanto.com/investors/ 7
  • 8. INTERNATIONAL CORN DEKALB Expected to Gain Corn Share in Argentina and Hold Share in Brazil; Retaining Leadership in Both Markets ARGENTINA BRAZIL Argentina & GEOGRAPHY: Brazil 2007 2008F 2007 2008F Expand (06/07 (07/08 (06/07 (07/08 international OBJECTIVE: SEASON) SEASON) SEASON) SEASON) footprint HYBRID 2008 STATUS MARKET 8M1 10M1 23M 26M • Expected to grow 5 share SIZE points in a market that is 25 percent larger than in 2007 in Argentina DEKALB 40% 45% 40% 40% • DEKALB and Agroeste SHARE combined are forecasted to be flat with 2007 in AVG. Brazil, delivering on our RETAIL goal to stabilize share PRICE FOR 2012 OUTLOOK $23/AC $29/AC $29/AC $34/AC DEKALB HYBRID • Target 1-to-2 share points CORN of growth annually SEED through 2012 1. Source: KLEFFMANN Marketing Services
  • 9. INTERNATIONAL CORN Approval of Stacked Corn in Argentina to Accelerate Roundup Ready Adoption; 30-to-40 Percent Availability Planned for 2009 TRAITED CORN ACRES PLANTED VS. OPPORTUNITY IN ARGENTINA ROUNDUP READY CORN 2 SMARTSTAX 10 YIELDGARD CORN BORER 9M Argentina GEOGRAPHY: 8M Set the table for 8 7M M ACRES DOUBLE AND TRIPLE OPPORTUNITY biotech trait 6M OBJECTIVE: ramp outside 6 the U.S. 2008 STATUS 4 • 86 percent of corn borer control opportunity 2 .8M penetrated in 2008 season; Roundup Ready Corn 2 0 relatively untapped • Approximately 150K acres of OPPORTUNITY 2007 2008F double stack planted in first year of launch • Seed production for 30-to-40 ROUNDUP READY CORN 2 YIELDGARD CORN BORER - ARGENTINA percent double-stack traits in • Growers forced to trade off between insect and weed control prior to approval 2009 of double stack; penetration expected to accelerate much faster than with 2012 OUTLOOK single traits. • 100 percent of corn acres in Argentina infested with sugarcane corn borer and • Continue penetration of corn earworm, making SmartStax an excellent fit for this market double-stack to create footprint for SmartStax
  • 10. INTERNATIONAL CORN Approval Received in Brazil for YieldGard Corn Borer; Limited Launch Planned for 2009 TRAITED CORN OPPORTUNITY IN BRAZIL Brazil GEOGRAPHY: Set the table for biotech trait 20 15-20M OBJECTIVE: ramp outside SMARTSTAX the U.S. 15 M ACRES 2008 STATUS ROUNDUP READY CORN 2 • Awaiting final hybrid 10 registrations after YIELDGARD CORN BORER receiving approvals from both CTNbio and CNBS 5 2012 OUTLOOK 0 • First-generation corn traits launched to create OPPORTUNITY 2008 footprint for SmartStax REGULATORY APPROVAL PROCESS IN BRAZIL • First step consists of approval from CTNBio, Brazil’s biosafety commission, which is managed by the Ministry of Science and Technology to make science-based technical assessments • CTNBio approval may be followed by a review from the National Biosafety Council (CNBS) to examine social and economic factors • Hybrid registrations required before commercial launch
  • 11. SOYBEANS Asgrow Soybean Share Expected to Increase in Expanded Market in 2008 U.S. SOYBEAN BRANDED AND LICENSED SEED SHARE 100% U.S. SOYBEAN SEED MARKET SHARE 90% CORN STATES ASI ASGROW LICENSEES 80% 70% (PERCENTAGE) 60% 50% 40% 30% 20% 10% 0% 2004 2005 2006 2007 2012 TARGET
  • 12. SOYBEANS Roundup Ready Soybeans in Brazil Mirroring U.S. Penetration Curve, Creating Future Footprint for Growth Soybeans CROP: ROUNDUP READY SOYBEANS: Grow Roundup PENETRATION AS PERCENT OF OPPORTUNITY Ready penetration in Brazil to create 120% OBJECTIVE: platform for 100% Roundup Ready 2 Yield soybeans 80% 2008 STATUS 60% 55% penetration in Brazil consistent with • Brazil Roundup Ready U.S. trend in year five 40% soybean penetration expected to be 55 percent 20% of opportunity 0% 2012 OUTLOOK • Potential to penetrate 95 6 7 8 9 0 1 2 3 4 5 6 7 8F '9 '9 '9 '9 '0 '0 '0 '0 '0 '0 '0 '0 '0 percent of Brazilian acres U.S. Roundup Ready soybeans U.S. Roundup Ready soybeans at peak, establishing Brazil Roundup Ready soybeans Brazil Roundup Ready soybeans footprint for transition to insect-protected Roundup Ready 2 Yield soybeans
  • 13. COTTON U.S. Cotton in Transition in 2008; Plans in Place to Deliver Gross Profit Growth Toward the End of the Decade Cotton CROP: DELTA AND PINE LAND VALUE CREATION Increase STAGED OPPORTUNITIES FOR INCREASING BUSINESS VALUE penetration of second OBJECTIVE: generation New double stack Traits 2008 STATUS Molecular • U.S. cotton acres Breeding VALUE CREATION OPPORTUNITY expected to decline to less than 9.5M1 acres Trait Increased production of second-generation double stack • Availability of second Acceleration generation traits in the International Opportunity to grow international cotton seed and U.S. established prior to trait business with complementary geographies Markets acquisition, limiting 2008 growth Initial Expanded global seed market share 2012 OUTLOOK Germplasm Value • Delta and Pine Land’s Trait Royalty D&PL traits previously split 70/30 to Monsanto; portfolio fully converted now accrue 100 percent to Monsanto Conversion to second-generation FY2009 FY2010+ traits in all U.S. segments FY2007 FY2008 JUNE 2007 D&PL acquisition 1. U.S. acres planted estimated per the National Cotton Council
  • 14. R & D PIPELINE Entire Monsanto Pipeline Is Targeted Toward Meeting Emerging Trends Over Next Decade BIOTECH TRAIT PIPELINE: JANUARY 2008 UPDATE PHASE PHASE PHASE PHASE PHASE PHASE PHASE PHASE D D 1 2 3 4 1 2 3 4 AGRONOMIC TRAITS YIELD AND STRESS PIPELINE ROUNDUP READY 2 YIELD SOYBEANS DROUGHT-TOLERANT CORN FAMILY YIELDGARD VT PRO 2ND-GEN YIELDGARD CORN BORER DROUGHT-TOLERANT CORN SMARTSTAX CORN 2ND-GEN DROUGHT-TOLERANT CORN DICAMBA-TOLERANT SOYBEANS NITROGEN-UTILIZATION CORN FAMILY INSECT-PROTECTED + ROUNDUP READY 2 YIELD SOYBEANS NITROGEN-UTILIZATION CORN BOLLGARD III BROAD-ACRE HIGHER-YIELDING CORN FAMILY SOYBEAN NEMATODE-RESISTANCE HIGHER-YIELDING CORN SOYBEAN DISEASE BROAD-ACRE HIGHER-YIELDING DICAMBA-TOLERANT COTTON SOYBEAN FAMILY COTTON LYGUS CONTROL HIGHER-YIELDING SOYBEANS YIELDGARD ROOTWORM III 2ND-GEN HIGHER-YIELDING SOYBEANS VALUE-ADDED TRAITS DROUGHT-TOLERANT COTTON FAMILY DROUGHT-TOLERANT COTTON EXTRAX™ CORN PROCESSING SYSTEM + MAVERA™ HIGH-VALUE CORN WITH LYSINE2 BROAD-ACRE HIGHER-YIELDING CANOLA FAMILY HIGH-OIL SOYBEANS HIGHER-YIELDING + ROUNDUP READY 2 YIELD CANOLA1 2ND-GEN HIGH-OIL SOYBEANS OMEGA-3 ENRICHED SOYBEANS VISTIVE III SOYBEANS High Impact Technologies (HIT) project HIGH-STEARATE SOYBEANS Jan. 3, 2008 Advancements/Additions (VIA BIOTECH) The colored bar associated with each project indicates which phase that project is in. It is HIGH-OIL CORN not intended to represent the relative status of the project within a particular stage. 1. For higher-yielding + Roundup Ready 2 Yield canola, only the value of the higher-yielding trait is incorporated into the Yield and Stress collaboration with BASF 2. Value of licensing the EXTRAX™ technology is shared with Cargill as a part of Renessen joint venture
  • 15. R & D PIPELINE Japan Export Approval for Roundup Ready 2 Yield Received; On Track for 2009 Controlled Commercial Release ROUNDUP READY 2 YIELD SOYBEANS: Soybeans CROP: LAUNCH PLANS Launch OBJECTIVE: U.S. Full-Scale Roundup Launch Target: Ready 2 Yield P R O JE CT 5- 6M Acres 2008 STATUS U.S. Controlled • Consistent 7-to-11percent Commercial yield advantage with Release Target: Roundup Ready 2 Yield 1- 2M Acres • U.S., Canadian and Grower level marketing, awareness and trial Japanese approvals received; awaiting key Licensee breeding export approvals from China, Mexico and Europe Industry coordination and communications • Pre-launch activities • American Soybean Association and key agri-food under way stakeholders PRICING Pursuit of export approvals in China, Europe and • Yield improvement shared Mexico – JAPAN RECEIVED with grower; average 5- Branded and licensed seed production year soybean commodity 2007 2008 2009 2010 price approximately $6.40 per bushel1 1. Source: NASS, USDA data 2003 to August 2007
  • 16. R & D PIPELINE With Roundup Ready 2 Yield Soybeans, Yield Also Becomes Focus of Next Wave of Commercial Products ROUNDUP READY 2 YIELD SOYBEANS: STATE OF AGRICULTURE: SECOND-GENERATION WEED CONTROL FIELD RESULTS A New Soybean Platform Near-Isoline Comparisons: Roundup Ready 2 Yield vs. Roundup Ready % Yield Increase over Roundup Ready 12% HIGHER-YIELDING DICAMBA-TOLERANT 11% 10% 9% VISTIVE III ROUNDUP READY 2 YIELD 9% 8% 7% 7% 6% ► Roundup Ready 2 Yield becomes the platform for 4% soybean traits ► Three soybean pipeline 2% traits advanced to Phase 3 commercial development in 0% recent R&D update 4 YEAR 2004 2005 2006 2007 AVERAGE ► Insect-protected Roundup Ready 2 Yield soybeans first Roundup Ready 2 Yield soybeans yield 7 to 11 percent platform developed solely higher than Roundup Ready soybeans based on 73 for an international market Monsanto field trials from 2004-2007 16
  • 17. R & D PIPELINE Like Roundup Ready 2 Yield Soybeans, SmartStax Corn Resets Trait Platform for Corn SmartStax Value: On-Farm Commercial Preparation: Field Data Generation + Increased Yield (per-acre and on-farm) YEAR 1 YEAR 2 YEAR 3 FORWARD YIELD YIELD COMPONENT 2006 2008+ BENEFIT1 Focus: Focus: SmartStax PER-ACRE Feasibility of full bred into elite Improved consistency: 1-2% trait integration germplasm; yield Primary pests data generation Improved protection: 1-2% Secondary pests Field Testing: 2007 ON-FARM Testing focused on trait performance, such as Reduced refuge 3-6% consistency of control of Flexibility to move to one technology targeted pests + platform on-farm Initial 2007 Results + Durability • Indicates superior Flexibility to increase planting rootworm consistency + populations versus triple-stack + Platform for future traits standard TRIALS: 56 • Good control of + Access to superior seed STATES: 12 secondary pests Total SmartStax Value = 1. Yield benefit reflects expected yield benefit above triple-stack standard, on a per-acre and whole-farm basis as noted. Ranges may overlap 17
  • 18. R & D PIPELINE Projects Like Nitrogen-Utilization Corn Are Positioned to Drive Yield and Meet Demand In New Environment PER-ACRE NITROGEN COST STATE OF AGRICULTURE: FOR CORN PRODUCTION, IN ILLINOIS: 1990-20071 Breakthroughs in Nitrogen-Use Research Under normal nitrogen conditions, lead Nitrogen- $80 Utilization trait has demonstrated yield advantages $75 in multiple backgrounds over multiple years $70 12 * Yield Increase (bu/Ac) $65 ** *** * 10 $60 8 6 $55 4 2 $50 0 $45 -2 TRIALS IN TRIALS IN 1990 1992 1994 1996 1998 2000 2002 2004 2006 MULTIPLE MULTIPLE HYBRID HYBRID Nitrogen accounts for approximately one-fifth of BACKGROUNDS BACKGROUNDS the operating costs for a corn producer2 (15 LOC) (16 LOC) Nitrogen-Utilization corn offers the potential to bring the value of nitrogen into the seed: 2005 2006 2007 • Reducing farmers’ exposure to nitrogen * price volatility Statistically significant @ p≤0.10 • Boosting yield Bar color correlates with the specific hybrid background tested. • Improving ease of use, flexibility Same bar color in different tests and different years indicates same hybrid was used. All trials conducted under sufficient nitrogen application levels. 1. Illinois Farm Business Farm Management 2. USDA 18
  • 19. SUMMARY Given Growth Opportunities, Monsanto Has Potential to Double Gross Profit Over the Next Five Years 2012 GROWTH RANGE MONSANTO GROSS PROFIT GROWTH TARGET Gross profit targeted to double from 2007 through 2012 $9,000 STRATEGIC PLAYBOOK $8,000 All growth is organic, from $7,000 base business and pipeline GROSS PROFIT (IN MILLIONS) U.S. Corn $6,000 International Corn $5,000 Soybeans Cotton $4,000 Seminis R&D Pipeline $3,000 Acquisitions to be pursued, $2,000 but are not included in this $1,000 growth projection $0 Earnings continue to translate into operating cash, and value 2004 2007 2012 MILESTONES created for shareowners 2010 2007 through combination of Gross margin Base Gross Profit: acquisitions, share target: 52-54% $4,286M repurchases and dividends ONGOING EPS GROWTH: MID-TO-HIGH TEENS