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monsanto 07-12-05b

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  • 1. KERRY PREETE Vice President, U.S. Crop Production Banc of America Field of Dreams Tour Monmouth, IL July 12-13, 2005 1
  • 2. Forward-Looking Statements Certain statements contained in this presentation, such as statements concerning the company's anticipated financial results, current and future product performance, regulatory approvals, currency impact, business and financial plans, the outcome of contingencies and other non-historical facts are quot;forward-looking statements.quot; 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: the company's exposure to various contingencies, including those related to Solutia Inc., litigation, intellectual property, regulatory compliance (including seed quality), environmental contamination and antitrust; successful completion and operation of recent and proposed acquisitions; fluctuations in exchange rates and other developments related to foreign currencies and economies; increased generic and branded competition for the company's Roundup herbicide; the accuracy of the company’s estimates and projections, for example, those with respect to product returns and grower use of our products and related distribution inventory levels; the effect of weather conditions and commodity markets on the agriculture business; the success of the company’s research and development activities and the speed with which regulatory authorizations and product launches may be achieved; domestic and foreign social, legal and political developments, especially those relating to agricultural products developed through biotechnology; the company’s ability to successfully market new and existing products in new and existing domestic and international markets; the company’s ability to obtain payment for the products that it sells; the company's ability to achieve and maintain protection for its intellectual property; the company's ability to fund its short-term financing needs; and other risks and factors detailed in the company's filings with the U.S. Securities and Exchange Commission. 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 revise or update any forward-looking statements or any of the factors that may affect actual results, whether as a result of new information, future events or otherwise. 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, Bollgard, Bollgard II, YieldGard, Monsanto, Monsanto Imagine, Vine Design, Asgrow, DEKALB, Monsanto Choice Genetics, Posilac, Processor Preferred, Vistive, Channel Bio, Channel Bio Design, NC+, NC+ Design, Seminis and Seminis Design are trademarks owned by Monsanto Company and its wholly-owned subsidiaries and are italicized the first time they appear in this presentation. 3
  • 4. OVERVIEW Biotechnology Adoption Reflects Trait Value, Independent of Commodity Prices MONSANTO U.S. BIOTECH ACRES VS. AVERAGE MARKET PRICE $8.00 45 $3.00 80 $0.60 11.5 40 $7.00 70 $2.50 $0.50 11 35 $6.00 60 30 $2.00 $0.40 10.5 $5.00 50 25 $4.00 $1.50 40 $0.30 10 20 $3.00 30 15 $1.00 $0.20 9.5 $2.00 20 10 $0.50 $0.10 9 $1.00 10 5 $0.00 0 $0.00 0 $0.00 8.5 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004 CORN BIOTECH SOYBEAN COTTON CORN PRICES SOYBEAN COTTON ACRES BIOTECH ACRES BIOTECH ACRES PRICES PRICES LEFT AXIS: ACRES (MILLIONS) RIGHT AXIS: $ PER ACRE Source: USDA and Monsanto estimates 4
  • 5. MARKET LEADERSHIP Biotech Acreage Grows 11 Percent Globally, 4 Percent in United States in 2005 GLOBAL MONSANTO PLANTED BIOTECH ACRES 200 CANOLA 180 COTTON 160 SOYBEANS ACRES IN MILLIONS 140 120 CORN 100 80 60 40 20 0 F 96 97 98 99 00 01 02 03 04 05 19 19 19 19 20 20 20 20 20 20 5
  • 6. MARKET LEADERSHIP Growth Remains for Biotech Traits in United States, Particularly in Corn KEY MARKET: UNITED STATES SOYBEANS COTTON CORN Roundup Roundup Bollgard Roundup YieldGard YieldGard Ready Ready I and II Ready Corn Root- Borer worm AVAILABLE 70M 10-15M 6-8M 50M 30M-40M 15-20M MARKET TRAIT 96% 70% 93% 46% 87% 25% PENETRATION BIOTECH ACRES PLANTED 2005F REMAINING AVAILABLE MARKET 6
  • 7. MARKET LEADERSHIP Monsanto Now Services Corn Seed Market Through Three Channels CORN American Seeds Licensed Branded Inc. INDEPENDENT SEED CO. 7
  • 8. MARKET LEADERSHIP Monsanto’s Germplasm Reach Has Grown Significantly Through Branded and Licensed Seeds U.S. CORN MARKET SHARE – BRANDS AND LICENSEES HOLDENS/CORN STATES LICENSEES AMERICAN SEEDS BRANDS 60% DEKALB AND ASGROW BRANDS 51% 49% 46% 50% 44% 43% 40% 30% 20% 5+ Branded 10% Share Point Growth in 4 Years 0% 2001 2002 2003 2004 2005 * Syngenta pro forma for acquisition of Advanta and Golden Harvest 8
  • 9. MARKET LEADERSHIP Roundup Ready Corn Acreage Expected to Grow 35-40 Percent in 2005 KEY MARKET AREAS U.S. ARGENTINA Roundup Ready TARGET MARKET 50M 5M Corn CREATING VALUE PERCENT PENETRATED 48% <1% Current forecast of 23-24M acres of Roundup Ready corn in • 2005 U.S. trait 2005 U.S. season fee of $8-$10 per 30M acres targeted in U.S. for 2006 acre in Monsanto With European import approval for single trait, U.S. market branded seed for potential is now 50M acres single trait U.S. ROUNDUP READY CORN ACREAGE GROWTH • Grower profits average of $12 35 per acre on yield gains alone; 30 additional cost MILLIONS OF ACRES savings on labor, 25 fuel and 20 equipment 15 • Provides grower greater 10 flexibility in 5 weed control 0 1998 1999 2000 2001 2002 2003 2004 2005F 2006F DISCOVERY PHASE III PHASE I PHASE II PHASE IV LAUNCH Adv. Development Proof of Concept Early Development Pre-Launch 9
  • 10. MARKET LEADERSHIP Stacked Trait Growth Is Driving Corn Acceleration U.S. CORN TRAIT ACRES WITH ROUNDUP READY 25 Roundup Ready / YieldGard Plus Roundup Ready / YieldGard Corn Rootworm 20 Roundup Ready / YieldGard Corn Borer ACRES IN MILLIONS Roundup Ready 15 10 5 0 1998 1999 2000 2001 2002 2003 2004 2005 10
  • 11. MARKET LEADERSHIP Triple-Stacked Corn Traits Fill a “Sweet Spot” in U.S. Corn Market Needs YIELDGARD ROOTWORM YIELDGARD CORN BORER ROUNDUP READY CORE ACRES INSURANCE ACRES INSURANCE ACRES INSURANCE VALUE WITH PRICE VALUE REFLECTS BROAD INSURANCE VALUE WITH PRICE ELASTICITY TECHNOLOGY FIT ELASTICITY 11
  • 12. INNOVATION Current Commercial Success Will Continue Through Valuable Pipeline Offerings PRICING VALUE MATRIX 4 3 2 HIGH PER-ACRE ($11-$100+) OMEGA-3 SOYBEANS BOLLGARD II COTTON (AUSTRALIA) IMPROVED-PROTEIN SOYBEANS FOR FOOD PROCESSOR PREFERRED ELITE GERMPLASM BOLLGARD II COTTON BOLLGARD II COTTON (INDIA) ROUNDUP ROUNDUP READY + FLEX COTTON YIELDGARD READY ROUNDUP READY 2ND GENERATION ROOTWORM SOYBEANS + FLEX COTTON HIGH-LYSINE CORN (AUSTRALIA) 2ND GENERATION ROUNDUP IMPROVED-ENERGY CORN III READY SOYBEANS HIGHER-YIELDING CORN SMALL-ACRE (0-10 MILLION)1 LARGE-ACRE (11-100 MILLION+)1 DROUGHT ROUNDUP READY CORN TOLERANT COTTON LOW PER-ACRE ($0-$10)2 VISTIVE ZERO SATURATED FAT + MID- IMPROVED-PROTEIN OLEIC + LOW-LINOLENIC SOYBEANS HIGHER- SOYBEANS FOR FEED YIELDING YIELDGARD CORN BORER VISTIVE MID-OLEIC + LOW- SOYBEANS LINOLENIC SOYBEANS VISTIVE LOW-LINOLENIC SOYBEANS DROUGHT TOLERANT IMPROVED-OIL CORN SOYBEANS FOR PROCESSING HIGH-LYSINE CORN DROUGHT TOLERANT 1 2 SOYBEANS Pipeline projects denoted in white text and represent global value; Commercial products denoted in gold and are U.S.-only, unless otherwise indicated. 1. “Acre Potential” represents the maximum acre penetration by the trait individually and as a stacked trait in the three-year span during its peak. 2. “Per-Acre” premium represents the per-acre average value in the three-year span during the trait penetration peak. 12
  • 13. INNOVATION Roundup Ready Flex Launch To Be Largest in 10-Year History of Biotech Traits KEY MARKET ACRES U.S. AUSTRALIA Roundup Ready AVAILABLE MARKET 10-15M 0.5-0.8M Flex Cotton CREATING VALUE 0% 0% PERCENT PENETRATED Anticipated largest trait launch of 2-3 million acres, • Value reflects pending final approvals greater convenience and 80-90% of Roundup Ready Flex to be stacked with enhanced weed Bollgard II control; lifts the 8 cotton seed companies currently breeding trait into value of the Roundup Ready varieties trait • Roundup Ready Flex Cotton will be available predominately stacked with Bollgard II, which also should boost Bollgard II adoption DISCOVERY PHASE III PHASE I PHASE II PHASE IV LAUNCH Adv. Development Proof of Concept Early Development Pre-Launch 13
  • 14. INNOVATION Vistive Is First of Family of Improved Oils for Food Uses KEY MARKET ACRES U.S. BRAZIL ARGENTINA Vistive 5M TBD TBD AVAILABLE MARKET Low Linolenic Soy CREATING VALUE 2% 0% 0% PERCENT PENETRATED First of a three-product step-change in oil profiles • Contract grown, value shared. 2005 launch sold-out with 100K acres planted Monsanto sells Oil to be in on-the-shelf consumer products in late 2005 to growers, processors pay grower premium OIL PROFILES ALONG THE THREE-STEP CHANGE IMPROVEMENT and royalty to Monsanto after LINOLENIC LINOLEIC OLEIC SATS harvest and 18:3 18:2 18:1 18:0 / 16:0 STANDARD crushing SOYBEAN • To be stacked with Mid-Oleic LOW LIN before full market penetration is MID OLEIC + LOW LIN achieved • 1 acre = ZERO SAT + approximately MID OLEIC + 500 lbs. of oil LOW LIN DISCOVERY PHASE III PHASE I PHASE II PHASE IV LAUNCH Adv. Development Proof of Concept Early Development Pre-Launch 14
  • 15. INNOVATION Testing of Second-Generation Roundup Ready Soybeans Indicates Extended Control KEY MARKET ACRES U.S. BRAZIL ARGENTINA Second-Generation 70M 50M 30M AVAILABLE MARKET Roundup Ready Soybeans CREATING VALUE 0% 0% 0% PERCENT PENETRATED Identified lead event during agronomic and tolerance trials • Expanded during the 2004 U.S. field season. window of application Second-generation testing indicates improved tolerance under provides greater extended spray conditions grower flexibility 2005 field trials planted in the U.S. and preparation of • Yield regulatory submission under way improvement of 5+ bushels per acre in 2004 FIELD TRIAL YIELD field trials 65 60 BU/ACRE ROUNDUP READY SOYBEANS 55 2ND GENERATION ROUNDUP READY SOYBEANS 50 CONTROL SPRAY SPRAY SPRAY NO ROUNDUP TIME 1 TIME 2 TIME 1&2 DISCOVERY PHASE III PHASE I PHASE II PHASE IV LAUNCH Adv. Development Proof of Concept Early Development Pre-Launch 15
  • 16. INNOVATION Drought Stress Tolerance To Be Family of High-Value Traits in Multiple Crops KEY MARKET ACRES U.S. BRAZIL ARGENTINA Drought-Tolerant TBD TBD TBD AVAILABLE MARKET Corn CREATING VALUE 0% 0% 0% PERCENT PENETRATED Yield protection on all acres against water deficits • Pricing will Yield enhancement through improved water use on drought- reflect yield prone acres and cost savings on irrigated acres gains in all three markets; value Two gene leads obtained positive results with more than one of higher yields transformed event shared with farmer YIELD INCREASE IN TWO GENE TRIALS • Stacking with weed and insect 3 EVENTS: GENE 1 3 EVENTS: GENE 2 18 control 30 16 enhances the 14 25 margin YIELD INCREASE 12 opportunity 20 10 • Irrigation 15 8 currently costs 6 (BU/AC) 10 $50 to $100 per 4 acre 5 2 0 0 EVENT 3 EVENT 1 EVENT 2 EVENT 3 EVENT 1 EVENT 2 GERMPLASM 1 GERMPLASM 2 DISCOVERY PHASE III PHASE I PHASE II PHASE IV LAUNCH Adv. Development Proof of Concept Early Development Pre-Launch 16