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monsanto 05-17-07
monsanto 05-17-07
monsanto 05-17-07
monsanto 05-17-07
monsanto 05-17-07
monsanto 05-17-07
monsanto 05-17-07
monsanto 05-17-07
monsanto 05-17-07
monsanto 05-17-07
monsanto 05-17-07
monsanto 05-17-07
monsanto 05-17-07
monsanto 05-17-07
monsanto 05-17-07
monsanto 05-17-07
monsanto 05-17-07
monsanto 05-17-07
monsanto 05-17-07
monsanto 05-17-07
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monsanto 05-17-07

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  • 1. ROBB FRALEY CHIEF TECHNOLOGY OFFICER BMO Capital Markets Agriculture and Protein Conference May 17, 2007 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 completion and operation of recent and proposed acquisitions, including Delta and Pine Land Company; 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. Mavera™ is a trademark of Renessen. All other trademarks are the property of their respective owners. © 2007 Monsanto Company 2
  • 3. OVERVIEW Global Demand for Corn and Oilseeds Has Been Growing as Finite Acres Compete to Meet Feed and Fuel Needs FOCUS: DEMAND Consumption is increasing reflecting greater global demand for bio-fuels and for feed for increased protein requirements in markets such as China U.S. Corn Use WORLD CONSUMPTION OF CORN AND OILSEEDS Fuel Alcohol = 25% CAGR METRIC TONS (IN MILLIONS) OILSEEDS = 5.6% CAGR CORN = 4% CAGR 1200 1000 7% 19% 18% 800 19% 600 12% 14% 400 60% 51% 200 0 2006 = 11.6B bu 2001 = 9.8B bu 2003-04 2004-05 2005-06 2006-07 Feed WORLD CORN CONSUMPTION Food & Industrial WORLD OILSEEDS CONSUMPTION Exports Fuel Alcohol Sources: USDA Foreign Agricultural Service and USDA 3
  • 4. OVERVIEW Opportunity in Renewable Fuels is Expected to Accelerate Demand for Corn And Oilseeds Beyond the End of the Decade U.S. & BRAZIL ETHANOL OUTLOOK ETHANOL 30 45 ASSUMPTION BILLIONS OF GALLONS 40 MILLIONS OF ACRES 25 • MTBE replacement by 35 2010 is the base case 20 30 • Incremental yield 25 gains through 15 20 technological 10 15 innovations allow further substitution 10 5 5 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 CORN U.S. SUGARCANE BRAZIL BIODIESEL 4 20 GLOBAL BIODIESEL OUTLOOK ASSUMPTION 18 BILLIONS OF GALLONS MILLIONS OF ACRES 3.5 16 • In EU, biodiesel to 3 14 represent 5.75% of 2.5 12 transport fuels by 2 10 2010 with the US 8 1.5 growing up to 2% 6 1 4 0.5 2 0 0 2005 2006 2007 2008 2009 2010 2011 2012 BIODIESEL PALM SOYBEAN RAPESEED & CANOLA 4 Source: Proexporter Network, Pro Mar And Monsanto Estimates
  • 5. OVERVIEW Advent of New Technologies Has Helped Reduce Yield Volatility USDA U.S. CORN YIELD 160 140 AVERAGE YIELD (BU/AC) 120 100 80 60 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 1995-2006: YIELD STABILITY 1975-1995: SIGNIFICANT YIELD VARIABILITY • With the advent of improved • High variability in per-acre yield genetics and biotech traits, • Yield deviation as high as 25 percent from average yield there is greater consistency in trend yield because traits insulate • Variability largely a result of influence of discrete annual farmers from extremes of events, including weather patterns and insect infestations weather and insect infestations 5
  • 6. OVERVIEW Farmers Buy Yield; Our R&D Approach Oriented Around Meeting That Customer Need R&D APPROACH PERCENT OF GENETIC YIELD GENETIC POTENTIAL FARM APPROACH GAIN PRESERVED = X Farmer’s Purchase Inherent yield possible from the seed Amount of yield potential Decision BREEDING GERMPLASM protected = SEED • Starting point of all agriculture; farmers maximize genetics in seed for yield • 60% of farmers select • Germplasm library • >2,000 genetic seed first, then • Monsanto is the first assembled from markers used by decide on biotech company to develop 36 programs in 12 traits breeders for corn and commercialize countries X today complete above- • >100 breeding • 50% of breeding ground, below-ground research centers population comes insect-control and worldwide from inter-company, TECHNOLOGY weed-control traits inter-country crosses • Technology is used to protect and maximize • Molecular breeding yield potential of seed improves genetic potential by 2X versus conventional breeding 6
  • 7. COMMERCIAL PORTFOLIO Corn Market Share Gains Yet To Fully Reflect Power of Molecular Breeding Application MOLECULAR-BREEDING HYBRIDS AS A PERCENT OF BRANDED Corn UNITS SOLD IN COMMERCIAL 25% CORN PORTFOLIO SITUATION: 12% 2007 BRANDED U.S. MARKET IN COMMERCIAL CORN PORTFOLIO PERCENT OF BRANDED UNITS SOLD SHARE: > 22% • Conventional breeding 20% improves genetic gain 10% U.S. MARKET SHARE on average by 1.5% per DEKALB AND ASGROW U.S. BRAND MARKET year SHARE 8% 15% OUTLOOK: 6% • Molecular breeding 10% improves genetic potential by 2X versus 4% conventional breeding 5% • By 2010, over 12% of 2% commercial portfolio will be derived from molecular breeding 0% 0% 2001 2002 2003 2004 2005 2006 2007F 2008F 2009F 2010F CYCLE 1: CYCLE 2: CYCLE 3: INTEGRATION OF APPLICATION OF MAB SELECTION POWER OF GLOBAL GERMPLASM TO SELECTION MOLECULAR BREEDING • BY 2006, FIRST MOLECULAR • ASSEMBLED 36 MAJOR • PREDICTIVE BREEDING HYBRIDS ENTER CORN BREEDING COMBINATIONS ALLOW U.S. COMMERCIAL PROGRAMS IN 12 MORE EFFICIENT PROGRESSION PORTFOLIO COUNTRIES BREEDING OF BREEDING TECHNOLOGY • EU IS ROUGHLY 2 YEARS • FIRST INTRA-COMPANY • APPLY MOLECULAR IN THE BEHIND THE U.S. FOLLOWED CROSSES BREEDING TO TROPICAL COMMERCIAL BY LATIN AMERICA AND ASIA MARKETS, SUCH AS PORTFOLIO PACIFIC BRAZIL AND ASIA 7
  • 8. COMMERCIAL PORTFOLIO By Delivering Better Yielding Products, DEKALB on Track to Gain More Than 12 Share Points in Six Years DEKALB SHARE EVOLUTION: 2001-2007F YIELD CREATION CREATION + PRESERVATION Combining germplasm library and breeding capability, Availability of stacked biotech focus is on boosting the inherent genetic potential in traits now preserves a greater the seed percentage genetic potential 25% +6 share points +6 share 20% 22+% points 19% U.S. SHARE 15% 16% 14% 13% 10% 12% 10% 5% 0% 2001 2002 2003 2004 2005 2006 2007F TOTAL U.S. PLANTED TRIPLE-STACK ACRES -- -- -- -- 1.3 6.0 16.0 (ACRES IN MILLIONS) DEKALB TRIPLE-STACK -- -- -- -- 8% 20% 40% TRAIT PENETRATION 8
  • 9. COMMERCIAL PORTFOLIO Reflecting Farmers’ Yield Orientation, Performance Loyalty Is Replacing Historical Notions of Brand Loyalty TOP PURCHASE DRIVER FOR FARMERS PLANTING NEW DEKALB ACRES IS BETTER YIELD1 65% of farmers planting a higher percentage of their 2007 DEKALB 65% CUSTOMER 2007 acres in DEKALB cited BASE “good yield” as their primary consideration 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% NEW DEKALB CUSTOMERS ARE COMING FROM OTHER NATIONAL BRANDS1 Almost 60% of increasing or 2007 DEKALB 59% new DEKALB users reported CUSTOMER that their additional DEKALB BASE acres replaced other national 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% brands From other brands Not replacing other brands From national brands FARMERS BUY PERFORMANCE AND ARE NOT WILLING TO SWITCH AWAY FROM SUPERIOR YIELD POTENTIAL1 More than 80% of farmers 2007 DEKALB surveyed indicated they 83% CUSTOMER would not switch away from BASE DEKALB if another seed brand offered the same set 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% of biotech traits Don’t know Would switch Would not switch 1. Market research: based on a sample of 500 corn growers completed in March 2007 9
  • 10. COMMERCIAL PORTFOLIO Trait Stacking is Optimal Choice to Protect the Yield Inherent in Seed from Stress, Bugs and Weeds Rain Shelter Trial Corn Plot at A Monsanto Research Site Yield = 198.1 Yield = Yield = 113.7 bu/ac bu/ac Yield = 150 bu/ac 94 bu/ac YieldGard Corn Borer Roundup YieldGard Corn Borer with YieldGard Plus with with Roundup Ready Ready Roundup Ready Corn 2 Roundup Ready Corn 2 Corn 2 Corn 2 + Force insecticide 10 *Yields representative of similar trial. All yield corrected to No. 2 yellow corn.
  • 11. COMMERCIAL PORTFOLIO Power of Trait Stacking is Accelerating Adoption Rates for All Corn Traits 160 2007 FRONTLINE 140 UPDATE: 120 TRAIT ACRES IN MILLIONS With triple-stacks in strong demand, 100 trait sales have exceeded early- 80 season estimates 60 40 20 0 2005 2006 2007F 2010F 2007 FORECAST END-OF-DECADE U.S. CORN TRAIT ACRES1 2005 ACTUAL 2006 ACTUAL MARKET INITIAL (IN MILLIONS) Q2 UPDATE OPPORTUNITY ESTIMATE U.S. YIELDGARD 4.1 10 >15 ~19 25-30 ROOTWORM ACRES U.S.YIELDGARD CORN 32.1 32.3 >32 ~40 50-60 BORER ACRES U.S. ROUNDUP READY 24.8 32.7 >40 ~50 60 CORN ACRES 1.3 6.0 >10 ~16 25-30 U.S. TRIPLE-STACK ACRES 1. 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. 11
  • 12. R & D PIPELINE Roundup RReady2Yield Soybeans Provide Yield Benefit Coupled With Unsurpassed Weed Control KEY REGIONS U.S. BRAZIL ARGENTINA Roundup RReady2Yield AVAILABLE ACRES 70M 60M 35M Soybeans PERCENT PENETRATED 0% 0% 0% P R O JE CT GROWER PERSPECTIVE: ROUNDUP RREADY2YIELD UPGRADE WEED Satisfaction levels of 95%, noting “unsurpassed” ++ ++ CONTROL weed control Yield target for Roundup RReady2Yield soybeans ++ + YIELD BENEFIT is up to 5 bushel-per-acre improvement over comparable Roundup Ready soybeans With no residual issues, Roundup weed control + + FLEXIBILITY system allows for flexibility in annual corn- soybean rotation Monsanto has filed for patent protection and DISEASE licensed other third-party patents relating to Researching Researching CONTROL disease control. Testing is continuing to evaluate potential for control of Asian soybean rust. Roundup RReady2Yield is a yield trait – up to 5 bu/acre + Additive Performance to a yield improvement translates to roughly an average Farmer’s Operation boost of 10% in farmers’ revenue per acre 12
  • 13. R & D PIPELINE Future Innovation in Breeding and Biotech Can Change the Yield Curve MONSANTO’S HISTORY AND PROJECTED EVOLUTION OF U.S. CORN YIELD OPPORTUNITY (MULTIPLE REGRESSION MODEL ANALYSIS) The delta between what is predicted and what is possible 200 is where opportunity lies AVERAGE YIELD (BU/AC) Molecular breeding boosts 180 the genetic potential of the seed 160 Biotech traits protect that genetic potential for more 140 practical yield 120 Breeding and Biotech come together to change the 100 curve of yield potential 80 60 1975 1980 1985 1990 1995 2000 2005 2010F 2015F “ USDA TREND LINE PROJECTED YIELDS WITH MOLECULAR BREEDING AND BIOTECHNOLOGY The corn yield curve is increasing at an accelerated rate due to advances in Biotechnology … Increased yields allow growers to harvest considerably more corn without significantly increasing acreage. -- National Corn Growers Association (NCGA) 13
  • 14. R & D PIPELINE Yield and Stress Biotech Collaboration with BASF Creates Enhanced Opportunity in Key Growth Area for Next Decade LICENSEE BRANDS MONSANTO DISOVERY REGIONAL BRANDS PROGRAM INTENSIFIED YIELD & STRESS BASF PIPELINE DISCOVERY NATIONAL BRANDS Collaboration creates PROGRAM DEVELOPMENT OF a new joint pipeline SUCCESSIVE UPGRADES focused on stepping TO CREATE A “FAMILY” up the volume of OF PRODUCTS leads and certainty of commercial success DISCOVERY DEVELOPMENT COMMERCIALIZATION in the emerging category of “yield” • Pairs two separate, but • Greater volume of leads • Broad-licensing approach traits for corn, complementary discovery and cost sharing reduce allows for products to soybeans, cotton and engines risk of failure, increasing reach broadest market canola probability of possible, allowing farmers • Increased rate of commercial success to choose traits in the discovery, unlocking more KEY seed brands they prefer sources of genes than • Successive upgrades ADVANTAGES for the greatest ever before emerge sooner, creating performance steady stream of traits in • With combined effort, a “product family” in products should advance each crop at faster-than-average development timelines, esp. in early-phase research 14
  • 15. R & D PIPELINE Eight Projects Already Have Been Contributed for Joint Development in the Area of Yield and Stress PHASE III DISCOVERY PHASE I PHASE II PHASE IV Advanced Gene/Trait Identification Proof of Concept Early Development Pre-Launch Development 12 TO 36 24 TO 48 MONTHS 12 TO 24 MONTHS 12 TO 24 MONTHS 12 TO 24 MONTHS MONTHS INDEPENDENT DISCOVERY JOINT-FUNDED DEVELOPMENT 2nd- Generation Drought-tolerant corn Monsanto Independent Discovery Program Drought-tolerant Higher-yielding Grain yield corn canola Environmental stress Water-use Higher-yielding tolerance efficiency soybeans BASF Independent Discovery soybeans Higher-yielding corn Program Drought-tolerant Yield increase cotton Environmental stress Nitrogen- tolerance utilization corn In addition to 8 projects already contributed to the newly created pipeline, the combined discovery efforts would create new products and upgrades, which could add six or more new product opportunities over the lifetime of the collaboration 15
  • 16. R & D PIPELINE Drought-Tolerant Corn Targeted to Decrease Water Use and Improve Yields in Drought Conditions KEY REGIONS U.S. BRAZIL EUROPE AVAILABLE ACRES 80M 30M 24M Drought-tolerant corn PERCENT PENETRATED 0% 0% 0% P R O JE CT DROUGHT TOLERANT CORN IN THE FIELD R&D Pipeline FIELD TRIAL PHOTOS FROM 2006 Drought-tolerant corn PROJECT CONCEPT: First-generation drought tolerance is targeted to minimize uncertainty in farming LOCATION: by buffering against the effects of water Vacaville, California limitation, primarily in areas of annual water ACTIVITY: stress Monsanto 2006 PERFORMANCE UPDATE: researcher checks performance Phase 2 2006 STATUS: indicators in the field such as • Yield enhancement demonstrated chlorophyl content, again in 2006 under water-stress ear size, and plant conditions in U.S. height • Lead gene chosen OBSERVATIONS: • 2007 trials expected to demonstrate Confirming third yield enhancement in multiple year of field trial hybrids under dryland conditions data in U.S. VALUE CATEGORIES: RETAIL $10 - $30/acre VALUE/ACRE: 16
  • 17. R & D PIPELINE Drought-Tolerant Corn Targeted to Decrease Water Use and Improve Yields in Drought Conditions KEY REGIONS U.S. BRAZIL ARGENTINA AVAILABLE ACRES 80M 30M 6M Drought-tolerant corn PERCENT PENETRATED 0% 0% 0% P R O JE CT 2006 TESTING: YIELD IMPROVEMENT OF LEAD EVENT UNDER DROUGHT STRESS R&D Pipeline Percent yield difference vs. control 14 7.3% 10.5% 10.9% 23.2% 9.0% In third year field Drought-tolerant corn 12 VS. CONTROL (BU/ACRE) testing in U.S., PROJECT CONCEPT: KEY RESULTS YIELD DIFFERENCE 10 drought-tolerant leads are First-generation drought tolerance is 8 NOT TESTED consistently targeted to minimize uncertainty in farming 6 delivering higher by buffering against the effects of water 4 limitation, primarily in areas of annual water yields compared stress with controls 2 2006 PERFORMANCE UPDATE: under drought- 0 stressed 2004 2005 2006 Phase 2 2006 STATUS: conditions Hybrid 1: 2004, 4 locations; 2005 5 locs; 2006, 1 loc (20 reps) Hybrid 2: 2004, not tested; 2005, 5 locs, 2006, 3 locs • Yield enhancement demonstrated again in 2006 under water-stress SEGMENTED VALUE OPPORTUNITY ACROSS MARKETS conditions in U.S. First leads show KEY OPPORTUINITY • Lead gene chosen benefit under water- IRRIGATED • 2007 trials expected to demonstrate stress conditions yield enhancement in multiple WESTERN First product hybrids under dryland conditions DRYLAND targeted at western VALUE CATEGORIES: dryland market STABILITY RETAIL $10 - $30/acre VALUE/ACRE: Low annual High annual precipitation precipitation Source: Spatial Climate Analysis Service, Oregon State University 17
  • 18. R & D PIPELINE Early Field Testing Indicates Nitrogen Utilization Corn Offers Yield Benefits in Both Limited and Normal Nitrogen Conditions KEY REGIONS U.S. BRAZIL EUROPE Nitrogen utilization corn AVAILABLE ACRES 80M 30M 24M PERCENT PENETRATED 0% 0% 0% NITROGEN CONTROL TESTING R&D Pipeline Nitrogen Utilization Corn PROJECT CONCEPT: LOCATION: Targets ways that corn plants can use Morrisonville, nitrogen more efficiently, exploring Illinois and the potential to boost yield under Jerseyville, Illinois normal nitrogen conditions or ACTIVITY: stabilize yield in low nitrogen Field control environments testing to measure 2006 PERFORMANCE UPDATE: nitrogen uptake and to screen Phase 1 2006 STATUS: genes for nitrogen utilization • Second year proof-of-concept testing confirmed 2005 lead OBSERVATIONS: genes across multiple Under normal nitrogen, corn has locations and nitrogen rates good chlorophyll and added new gene content, normal candidates for further testing ear development VALUE CATEGORIES: and higher yield RETAIL $10 - $30/acre VALUE/ACRE: Limited Nitrogen Normal Nitrogen 18
  • 19. R & D PIPELINE Early Field Testing Indicates Nitrogen Utilization Corn Offers Yield Benefits in Both Limited and Normal Nitrogen Conditions KEY REGIONS U.S. BRAZIL EUROPE AVAILABLE ACRES 80M 30M 24M Nitrogen Utilization PERCENT PENETRATED 0% 0% 0% Corn 2006 TESTING: 2006 FIELD RESULTS CONFIRM CONTINUED R&D Pipeline PERFORMANCE OF LEADS IDENTIFIED IN 2005 Nitrogen Utilization Corn LEAD NITROGEN UTILIZATION GENE (ACROSS 3 LOCATIONS: IL AND IA) PROJECT CONCEPT: 175 Targets ways that corn plants can use nitrogen more efficiently, exploring the 170 potential to boost yield under normal nitrogen conditions or stabilize yield in low 165 EVENT 1 YIELD PER ACRE nitrogen environments EVENT 2 160 2006 PERFORMANCE UPDATE: KEY RESULTS CONTROL 155 Phase 1 2006 STATUS: 150 Reduction in • Second year proof-of-concept Applied Nitrogen 145 testing confirmed 2005 lead genes 140 across multiple locations and 0 40 80 180 nitrogen rates and added new gene candidates for further testing NITROGEN INPUT: LBS/ACRE VALUE CATEGORIES: RETAIL Reading right to left, what scientists will look for to $10 - $30/acre VALUE/ACRE: establish proof of concept is when Nitrogen application is decreased, the total yield per acre remains stable. In 2006 data, the 2 events show no yield drop off as the Nitrogen application levels decrease from 180 lbs/ac to 40 lbs/ac 19
  • 20. DEMONSTRATED PERFORMANCE Monsanto’s Seeds-and-Traits Growth Reflects Leadership and Innovation MONSANTO PERFORMANCE VS. COMMODITY CYCLES: 2001-2007F 2 $3,000 CAGR for Monsanto’s 1.8 $2,500 INDEXED COMMODITY PRICE1 Seeds & SEEDS & GENOMICS GROSS PROFIT Genomics 1.6 $2,000 segment for 2001- (IN MILLIONS) 2007F is 26% 1.4 $1,500 1.2 During the same $1,000 1 time period, actual commodity $500 0.8 prices deviated by as much as 0.6 $0 30% below the 2001 2002 2003 2004 2005 2006 2007F price trend line and 50%+ above CORN SOYBEANS COTTON SEEDS & GENOMICS GP the price trend line 1. Commodity price per unit, indexed – base year: 2000; Corn and soybeans: price per bushel; Cotton: dollars per pound (Source: USDA) 2. 2007F: Reflects commodity prices as of March 2007; Reflects forecasted gross profit contribution 20

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