monsanto 08-27-07


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monsanto 08-27-07

  2. 2. FORWARD-LOOKING STATEMENTS Certain statements contained in this field guide 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 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 event. 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 guide. All other trademarks are the property of their respective owners. © 2007 Monsanto Company 2
  3. 3. EVENT SCHEDULE TIMING AND CONTENT FOR TOURS, PRESENTATIONS AND MEALS MONDAY, AUGUST 27 1:00PM Arrive at the Farm Progress Show Welcome and Opening Comments Hosted by Hugh Grant, Monsanto Chairman, President and Chief Executive Officer 1:15PM VIP Plot Tour: Farm Progress Field Four-Station Walking Tour of Monsanto’s Special Demonstration Field Plot at the Farm Progress Show Break and Refreshments – Travel to Richland Community College 2:45PM Auditorium 3:15PM Q&A Roundtable with Monsanto’s Technology Leadership Team Robb Fraley – Chief Technology Officer Ted Crosbie – Breeding Technology Lead Marlin Edwards – Chief Technology Officer, Seminis David Fischhoff – Technology Strategy & Development Steve Padgette – Vice President, Biotechnology Fred Perlak – Cotton Technology Lead Bob Reiter – Breeding Technology Lead 3:45PM Q&A Roundtable with Monsanto’s Business and Strategy Leads Hugh Grant – Chief Executive Officer Terry Crews – Chief Financial Officer Carl Casale – Executive Vice President, North America Commercial Brett Begemann – Executive Vice President, International Commercial 4:00PM Buses Depart for Crowne Plaza Hotel, Springfield, IL 4:45PM Check-in at the Crowne Plaza Hotel 6:00PM Cocktails, Ruby Ballroom 6:45PM Dinner, Ruby Ballroom Presentation 7:30PM Future Trends in Agriculture – Carl Casale, Executive Vice President, North America Commercial 3
  4. 4. EVENT SCHEDULE TIMING AND CONTENT FOR TOURS, PRESENTATIONS AND MEALS TUESDAY, AUGUST 28 Buses Depart Crowne Plaza Hotel for Richland Community College 7:00AM 8:00AM Breakfast, Salon I 8:30AM Presentation Future Trends in Agriculture: A Grower’s Perspective – Kip Tom, President and Chief Executive Officer, Tom Farms 9:00AM Q&A Roundtable Kip Tom – President and Chief Executive Officer, Tom Farms John Rice – Executive Vice President, Marketing and Risk Management, ADM Carl Casale – Executive Vice President, North America Commercial Robb Fraley – Chief Technology Officer 9:30AM Closing Comments Hugh Grant – Chief Executive Officer 10:00AM Open Access to Farm Progress Show Buses Depart Farm Progress Show for St. Louis Lambert Airport 12:00PM Lunch Served on the Buses 4
  6. 6. PROJECT ORGANIZATION BACKGROUND ON INFORMATION AND METRICS PROVIDED IN THIS GUIDE This field guide is intended to be a reference book, highlighting many of Monsanto’s key products and research projects. For each project, information has been provided in major categories, including: product description, project update and value considerations. This approach is intended to provide the most comprehensive view of each project and its current status. Within the category devoted to value consideration, projects are divided into two major categories: PRODUCT Product upgrades are successive-generation UPGRADE biotech trait products that increase the functionality of an earlier generation trait product. In terms of value, these products usually will replace the acres planted to the first-generation product. NEW New solutions reflect projects and products that are SOLUTION being addressed for the first time through a seed- and-trait approach, and generally are not iterations of any previously developed product. These products typically create new value captured for the first time in the seed. Additionally, for pipeline projects, a value range has been provided characterizing the general expected retail value per acre, which represents the per-acre average value for the individual trait during a three-year span of peak penetration. For this retail value per acre, there are three categories: HIGH >$30/acre MEDIUM >$10/acre to <$30/acre SMALL <$10/acre Complementing the retail-value-per-acre categories are the key regions where each project is applicable and the number of acres in each market where the technology is a fit, including acres that may use competitive technologies. 6
  7. 7. CORN GENETICS 2006 U.S. COMPETITIVE CORN YIELD PROJECT CONCEPT: 200 195 Monsanto is using the most advanced tools of BUSHELS/ACRE 190 genomics, molecular 185 markers and IT resources to more efficiently select for 180 the best base germplasm 175 for corn 170 110 95 100 105 115 RELATIVE MATURITIES (DAYS) COMPETITORS DEKALB PROJECT UPDATE: Currently projecting DEKALB brand will earn 4-to-5 share points in • 2007, moving share gain to 9-to-10 points in last three years Yield data from 2006 indicates continued yield advantage for national • brands versus best-in-class competitors; 2007 yield data will be available in the fall In 2006, across the 110-day maturity zone that covers one-third of U.S. • corn production, DEKALB hybrids outperformed the competition by 11.7 bushels per acre on average VALUE CONSIDERATIONS: According to market research, 65 percent of farmers planting a higher • percentage of their 2007 acres in DEKALB hybrids cited “good yield” as their primary consideration1 In market research, farmers estimate that – according to their • experience – DEKALB hybrids averaged a yield improvement of 22.5 bushels per acre over the last two or more years1 Only 6 percent of farmers surveyed say they would switch away from • DEKALB if another seed brand offered the same set of biotech traits1 PRODUCT UPGRADE VALUE OPPORTUNITY: RETAIL VALUE/ACRE: $40-$45 (U.S.) DEKALB AMERICAN SEEDS, INC. (ASI) U.S. SHARE: 23-24% 9% 1. Market research: based on a sample of 500 corn growers completed in March 2007 7
  8. 8. SOYBEAN GENETICS 2006 U.S. COMPETITIVE SOYBEAN YIELD PROJECT CONCEPT: 60 58 Monsanto is using the most 56 BUSHELS/ACRE advanced tools of 54 genomics, molecular 52 50 markers and IT resources to 48 more efficiently select for 46 the best base germplasm 44 for soybeans 42 40 0 1 2 3 4 5 RELATIVE MATURITIES COMPETITORS ASGROW PROJECT UPDATE: Currently projecting share growth in both Asgrow and ASI brands, • with growth of more than 1 share point in Asgrow in 2007, even with reduction in total U.S. soybean planted acres Monsanto has a clear strategy in soybeans that combines already • strong soy-breeding capabilities with breakthrough applications of molecular breeding In 2006, Monsanto demonstrated a yield advantage compared with the • best-in-class competitors in all of the major U.S. maturity zones; 2007 yield data will be available in the fall VALUE CONSIDERATIONS: Like corn, at “tip-of-the-iceberg” stage in soybeans – first products of • molecular breeding are just starting to enter the commercial portfolio Breeding capability will create the backbone and expand footprint for • launch of Roundup RReady2Yield and platform of new agronomic and quality traits in soybeans PRODUCT UPGRADE VALUE OPPORTUNITY: RETAIL VALUE/ACRE: $20-$22 (U.S.) ASGROW AMERICAN SEEDS, INC. (ASI) U.S. SHARE: ~20% 6.5% 8
  9. 9. ROUNDUP RREADY2YIELD SOYBEANS DISCOVERY PHASE I PHASE II PHASE III PHASE IV PROJECT CONCEPT: Second-generation of Monsanto’s popular herbicide-tolerant platform in soybeans that will provide farmers with soybeans that have enhanced yield, with a target of 7-to-11 percent yield increase compared with Roundup Ready soybeans PROJECT UPDATE: Roundup RReady2Yield soybeans have completed regulatory process • in the United States and Canada Three years of field comparisons have demonstrated that the • technology can deliver a yield advantage of 7-to-11 percent compared with its first-generation Roundup Ready counterpart Monsanto has been conducting field tests in South Africa and • Argentina on Roundup Ready soybeans treated with Roundup herbicide to continue investigating the potential for protection against Asian Soybean Rust Compared with non-treated soybean controls, soybeans treated with • Roundup agricultural herbicide at application timings not currently labeled commercially for use appear to demonstrate a reduction of Asian Soybean Rust severity VALUE CONSIDERATIONS: Value is additive compared with Roundup Ready soybeans • Value created through yield gains will be shared with farmer as has • been Monsanto’s historical practice Additionally, Roundup Ready2Yield will become the preferred platform • for a host of new soybean traits designed to change the landscape on soybean production in terms of yield, quality and ease of farming PRODUCT UPGRADE VALUE OPPORTUNITY: RETAIL VALUE/ACRE: Medium (>$10/acre to <$30/acre) KEY REGIONS: U.S. BRAZIL ARGENTINA ACREAGE OPPORTUNITY: 70M 50-60M 35M 9
  10. 10. DICAMBA-TOLERANT SOYBEANS DISCOVERY PHASE I PHASE II PHASE III PHASE IV PROJECT CONCEPT: Dicamba-tolerant soybeans provide a new, unique mode of action, designed to provide soybean growers with the most effective weed management system available when stacked with Monsanto’s Roundup RReady2Yield trait PROJECT UPDATE: First year of South American research just completed, with second • season of U.S. testing under way South American research indicates that dicamba-tolerant soybeans • have demonstrated tolerance at both pre-emergent and post-emergent application timing, indicating that the trait is conveying the desired level of herbicide tolerance in the Phase II commercial-track events There are only three weed species – or about 20 weeds – resistant to • dicamba in 60 years of use; there are only eight weeds resistant to glyphosate in more than 30 years, with no resistant weeds in common between the two herbicides VALUE CONSIDERATIONS: Dicamba-tolerant soybeans are the third-generation of herbicide • tolerance in soybeans. Stacking dicamba tolerance with Roundup Ready2Yield will greatly expand weed control options by use of either glyphosate or dicamba, or combinations of both herbicides PRODUCT UPGRADE VALUE OPPORTUNITY: RETAIL VALUE/ACRE: Medium (>$10/acre to <$30/acre) KEY REGIONS: U.S. BRAZIL ARGENTINA ACREAGE OPPORTUNITY: 70M 50-60M 35M 10
  11. 11. VISTIVE SOYBEANS COMMERCIAL PROJECT CONCEPT: Launched in 2005, Vistive soybeans were produced using marker-assisted breeding, and have low levels of linolenic acid that reduce or eliminate the amount of trans fats in processed foods PROJECT UPDATE: Vistive soybeans were planted on approximately 1.5 million U.S. acres • in 2007 Vistive soybeans provide potential opportunity to claim zero trans fat • Vistive was developed by screening Monsanto’s germplasm and using • advanced tools in breeding, launching in 36 months from concept VISTIVE SOYBEANS: CURRENT ADOPTION 2005 2006 2007F 0.1M 0.5 1.5M VALUE CONSIDERATIONS: Value created by Vistive is captured on the back-end through • partnerships with processing companies, which provide higher-value oils to food companies Vistive soybeans are stacked with the Roundup Ready trait • Premium paid to farmers is $0.50 to $0.65 per bushel • NEW SOLUTION VALUE OPPORTUNITY: RETAIL VALUE/ACRE: Small (<$10/acre) KEY REGIONS: U.S. ACREAGE OPPORTUNITY: 5M 11
  12. 12. VISTIVE III SOYBEANS DISCOVERY PHASE I PHASE II PHASE III PHASE IV IMPROVING THE NUTRITIONAL PROJECT CONCEPT: PROFILE OF SOYBEAN OIL LINOLENIC LINOLEIC OLEIC SATS Combining both 18:3 18:2 18:1 18:0 / 16:0 breeding and biotechnology, the Vistive III trait is designed to lower linolenic and saturate Major market segments for U.S. soybean oil content while NON- HYDROGENATED- HYDROGENATED- boosting oleic HYDROGENATED FRYING BAKING content for a profile For salad oils, For various frying For various baking similar to olive oil household use applications applications with processing and Uses 50% of total Uses 25% of total Uses 25% of total economic crushing (~20M crushing (~10M crushing (~10M advantages acres) acres) acres) Source: Soyatech, USDA PROJECT UPDATE: Phase II testing for oil traits focuses on replicating oil-profile targets • Recent results from off-season testing in Argentina showed that lead • event continues to meet the product composition targets for an oil profile of 55-75% oleic acid content and <7% saturate content Additional Argentine testing confirmed the agronomic yield targets for • the product concept 2006 U.S. testing allowed for lead selection with multiple events • hitting oil-profile targets VALUE CONSIDERATIONS: Approximately 40 million acres of U.S. soybean crop is crushed for • oil; Vistive III is optimal for non-hydrogenated and hydrogenated- frying segments, but not baking (see table above) Vistive III has replacement value; to be priced at a premium to • conventional soybean oil Acreage opportunity assumes competition from other sources for • different needs of different food applications PRODUCT UPGRADE VALUE OPPORTUNITY: RETAIL VALUE/ACRE: Medium (>$10/acre to <$30/acre) KEY REGIONS: U.S. ACREAGE OPPORTUNITY: 5-30M 12
  13. 13. OMEGA-3 SOYBEANS DISCOVERY PHASE I PHASE II PHASE III PHASE IV PROJECT CONCEPT: Omega-3 soybeans represent a land- based supply of essential Omega-3 fatty acids. With soybean oil that would contain 20% stearidonic acid (SDA), the intent is for taste, shelf-life and oil stability to be as close to soybean oil as possible with an improved profile when compared with fish oil PROJECT UPDATE: In March 2007, Monsanto and The Solae Company announced an • agreement to develop and market Omega-3 products Extensive field testing for lead events in U.S. under way: The • companies are working to develop new soybeans, manage seed production, formulate Omega-3 products into food ingredients and market the ingredients to food companies In taste-testing, Omega-3 oil containing stearidonic acid (SDA) oil • compares favorably versus fish oil and commodity soy oil Testing also focused on field performance, demonstrating Omega-3 • soybean yield on par with commodity soybeans – an important factor to farmers growing specialty crops VALUE CONSIDERATIONS: Value created through a product with similar profile to soybean oil in • taste, shelf-life and oil stability but with a superior nutritional and taste profile to fish oil NEW SOLUTION VALUE OPPORTUNITY: RETAIL VALUE/ACRE: High (>$30/acre) KEY REGIONS: U.S. ACREAGE OPPORTUNITY: < 1M 13
  14. 14. HIGH-OIL SOYBEANS DISCOVERY PHASE I PHASE II PHASE III PHASE IV 2006 TESTING: MULTI-YEAR TESTING FOR HIGHER OIL CONTENT PROJECT CONCEPT: Percent oil difference vs. control 23 1.4% 1.6% 1.5% 1.7% High-oil soybeans 22 OIL PERCENTAGE are targeted to improve oil 21 crushing yield 20 19 18 U.S. 2004 ARGENTINA 2004 U.S. 2005 U.S. 2006 (6 LOCATIONS) (11 LOCATIONS) (14 LOCATIONS) (19 LOCATIONS) WITH GENE WITHOUT GENE PROJECT UPDATE: 2006 testing demonstrated consistent, significant oil advantage, • advancing to Phase III for further commercial development In four seasons of testing, significant oil yield advantage has been • shown with high-oil gene VALUE CONSIDERATIONS: High-oil soybeans also have the potential to boost oil for food • production, with a potential use for biodiesel A consistent 1.5 percentage point increase in oil has been • demonstrated with high-oil soybeans in four seasons of testing NEW SOLUTION VALUE OPPORTUNITY: RETAIL VALUE/ACRE: Small (<$10/acre) KEY REGIONS: U.S. ACREAGE OPPORTUNITY: 15-40M 14
  15. 15. INSECT-PROTECTED SOYBEANS DISCOVERY PHASE I PHASE II PHASE III PHASE IV PROJECT CONCEPT: INITIAL PERFORMANCE OF INSECT-PROTECTED SOYBEANS Insect-protected soybeans 6% OVER NO-INSECTICIDE use the Bt technology 5% AVERAGE YIELD INCREASE (%) widely adopted in corn and 4% CONTROL cotton to control insect 3% pests especially 2% economically important for 1% South American farmers 0% INSECTICIDE-TREATED INSECT-PROTECTED SOYBEANS PROJECT UPDATE: Initial field trials of insect-protected soybeans in Argentina • demonstrated significant yield protection versus insecticides even in mild-to-moderate insect infestations Intended as a stacked offering with the Roundup Ready2Yield • soybeans for effective control of both insects and weeds Insect-protected soybeans are the first Monsanto trait product to be • developed exclusively for a non-U.S. market, notably Brazil and Argentina, where insect pressure is a significant issue in soybean production VALUE CONSIDERATIONS: Like the Bt products in other U.S. crops, the value proposition will be • set by the insecticide sprays that are displaced and the enhanced yield that accrues to farmers Insect-protected soybeans are targeted to be introduced as a stack • with Roundup RReady2Yield soybeans NEW SOLUTION VALUE OPPORTUNITY: RETAIL VALUE/ACRE: Medium (>$10/acre to <$30/acre) KEY REGIONS: BRAZIL ARGENTINA1 ACREAGE OPPORTUNITY: 50-60M 35M 1Reflects potential applicable acres in Argentina; Commercial introduction is contingent on Monsanto confidence in established value-capture system respecting intellectual property rights 15
  16. 16. HIGHER-YIELDING SOYBEANS DISCOVERY PHASE I PHASE II PHASE III PHASE IV HIGHER-YIELDING SOYBEAN PERFORMANCE VERSUS PROJECT CONCEPT: CONVENTIONAL CONTROLS 8 11.1% AVERAGE YIELD ADVANTAGE 7 Higher-yielding 8.5% 6 soybeans are aimed at 6.8% (% OF CONTROL) 5 boosting the intrinsic 4 yield potential of the 3 soybean through 2 insertion of key genes 1 0 2005: U.S., 19 LOCATIONS 2006: ARGENTINA, 2006: U.S., 16 LOCATIONS 14 LOCATIONS PROJECT UPDATE: Three seasons of testing in 53 environments has demonstrated • consistent yield enhancement, with increased yield improvement from 2005 to 2006 The consistency of performance has been strong across locations • and across seasons – with performance as high as an 11 percent increase versus elite conventional soybean varieties First set of Phase II events demonstrated yield enhancement in • 10 environments in Argentina VALUE CONSIDERATIONS: Higher-yielding soybeans create additional harvestable yield for • farmers, increasing their productivity NEW SOLUTION VALUE OPPORTUNITY: RETAIL VALUE/ACRE: Medium (>$10/acre to <$30/acre) KEY REGIONS: U.S. BRAZIL ARGENTINA ACREAGE OPPORTUNITY: 70M 50-60M 35M PART OF THE MONSANTO-BASF YIELD AND STRESS R&D COLLABORATION 16
  17. 17. BOLLGARD II WITH ROUNDUP READY FLEX COTTON COMMERCIAL PROJECT CONCEPT: Bollgard II with Roundup Ready Flex cotton is the ‘double-double’ – double stack of both second- generation insect control and weed control traits in cotton PROJECT UPDATE: Roundup Ready Flex cotton was first introduced in 2006 in the United • States, and approximately 14 percent of cotton acreage was planted to it in its first commercial year In 2007, even with reduced cotton acreage, Roundup Ready Flex was • planted on almost 30 percent of cotton acres; Bollgard II with Roundup Ready Flex as a stack was planted on roughly 2-to-3 million acres In June 2007, U.S. Environmental Protection Agency approved a • “Natural Refuge” – no structured refuge requirement for insect resistance management – for Bollgard II cotton planted in significant portions of the cotton belt 2007 was the second year of commercial scale planting of Bollgard II in • India, with approximately 1 million acres planted VALUE CONSIDERATIONS: Both traits in the stack are upgrades – improved efficacy and • performance for insect control and weed control The retail value of a ‘double-double’ is approximately 50 percent more • than that of either first-generation, single trait PRODUCT UPGRADE VALUE OPPORTUNITY: RETAIL VALUE/ACRE: High (>$30/acre)1 KEY REGIONS: U.S. BRAZIL INDIA AUSTRALIA BOLLGARD II: 6-8M 2M 18M 0.5-0.8M ROUNDUP READY FLEX: 10-15M 3M 15-20M 0.5-0.8M 1Value is for stacked Bollgard II with Roundup Ready Flex product 17
  18. 18. ROUNDUP RREADY2YIELD WITH HIGHER-YIELDING CANOLA DISCOVERY PHASE I PHASE II PHASE III PHASE IV PROJECT CONCEPT: Second-generation weed- control trait in canola stacked with an intrinsic- yield trait, aimed at increasing weed control and boosting the yield potential of canola by 15-to-20 percent PROJECT UPDATE: More than three years of field testing demonstrated consistent yield • benefit for the lead gene in the United States and Canada 60 events advanced for 2007 summer field trials in the United States • and Canada VALUE CONSIDERATIONS: When commercialized, Monsanto plans to offer the higher-yielding • canola trait in a stacked combination with its second-generation weed-control trait for canola, Roundup RReady2Yield canola NEW SOLUTION VALUE OPPORTUNITY: RETAIL VALUE/ACRE: Medium (>$10/acre to <$30/acre) KEY REGIONS: U.S. CANADA ACREAGE OPPORTUNITY: 2M 12M PART OF THE MONSANTO-BASF YIELD AND STRESS R&D COLLABORATION 18
  19. 19. PROCESSOR PREFERRED CORN COMMERCIAL PROJECT CONCEPT: Processor Preferred corn hybrids yield more of the valuable traits that processors want and can mill more economically. These hybrids include High Extractable Starch and High Fermentable Corn (HFC) and are available in a wide range of relative maturities and trait categories PROJECT UPDATE: Average yield for a conventional dry mill is 2.8 gallons of ethanol for • every 1 bushel of corn Processor Preferred HFC corn provided a 2.7 percent average increase • in ethanol yields in large scale commercial trials across seven states and Canada in 2003-2004 A 2.7 percent increase in fermentation is equal to 11 gallons of ethanol • per acre VALUE CONSIDERATIONS: Some ethanol plants are paying a premium of $0.05-$0.10 per bushel • for Processor Preferred HFC grain Monsanto will offer more than 45 hybrids in DEKALB portfolio that are • Processor Preferred for 2008, creating additional value in the hybrids from which farmers can choose PRODUCT UPGRADE VALUE OPPORTUNITY: RETAIL VALUE/ACRE: $40-$45 (U.S.)1 U.S. SHARE: DEKALB AMERICAN SEEDS, INC. (ASI) ACREAGE OPPORTUNITY: 23-24%2 9%2 1Value is reflected in the overall seed bag price 2 Reflects total share, not just share of hybrids under Processor Preferred designation 19
  20. 20. MAVERA™ HIGH-VALUE CORN WITH LYSINE DISCOVERY PHASE I PHASE II PHASE III PHASE IV PROJECT CONCEPT: High-value corn with lysine enhances the level of limiting essential amino acids and corn oil content in feed, and lowers cost of animal rations PROJECT UPDATE: High-Value Corn with Lysine received U.S. regulatory approval in 2006; • International approvals for stacked uses still pending Currently, agronomic testing under way in the field to select best • hybrids High-Value Corn with Lysine is targeted for use with Renessen’s new • processing system – called EXTRAX™ – which bolts on to a conventional dry milling process and makes more efficient use of corn in ethanol production The EXTRAX™ processing system is being tested in 2007 at a new • pilot plant operating at Cargill’s BioProcessing Center campus in Eddyville, Iowa. VALUE CONSIDERATIONS: Value for feed-grade lysine supplements is roughly $1 billion annually • industry-wide; Mavera would replace a portion of it Value of licensing the EXTRAX technology is shared with Cargill as a • part of the Renessen joint venture; the value of the Mavera High-Value Corn with Lysine is not shared with Cargill In combination with the EXTRAX processing system, ethanol plants • can deliver four value streams: increased ethanol yield, higher-protein lower-oil DDG, high-value swine and poultry feed, and corn oil for food High-Value Corn with Lysine increases corn oil volume and the • nutritional value of the swine and poultry feed NEW SOLUTION VALUE OPPORTUNITY: RETAIL VALUE/ACRE: Medium (>$10/acre to <$30/acre) KEY REGION: U.S. ACREAGE OPPORTUNITY: 5-10M 1Value and acres are for direct feed piece only and do not include value for processing component shared with Cargill 20
  21. 21. YIELDGARD VT PRO SECOND-GENERATION YIELDGARD CORN BORER DISCOVERY PHASE I PHASE II PHASE III PHASE IV PROJECT CONCEPT: YieldGard VT PRO is the second-generation of YieldGard Corn Borer, which broadens the spectrum of insect control and increases the durability of the YieldGard corn borer trait PROJECT UPDATE: Lead event selected and regulatory review in process • YieldGard VT PRO offers unparalleled combination of insect control • and resistance management Excellent control of target pests has been proven with increased • control of corn earworm and fall armyworm Outstanding yields, including stacks for rootworm control • Reduced aflatoxin concentrations, which are toxic fungus that can • contaminate grain under certain conditions VALUE CONSIDERATIONS: Upgrade to both insect spectrum and durability, creating new value • for the second-generation trait Trait adoption should replace acres currently using first-generation • technology Added benefit of a dual mode of action in the insect control helps to • ensure that the value of the trait continues well into the future PRODUCT UPGRADE VALUE OPPORTUNITY: RETAIL VALUE/ACRE: Medium (>$10/acre to <$30/acre) KEY REGIONS: U.S. BRAZIL ARGENTINA ACREAGE OPPORTUNITY: 60-70M 15M 4M 21
  22. 22. NITROGEN-UTILIZATION CORN DISCOVERY PHASE I PHASE II PHASE III PHASE IV LEAD NITROGEN UTILIZATION GENE PROJECT CONCEPT: (ACROSS 3 LOCATIONS: ILLINOIS AND IOWA, 2006) 175 Nitrogen-utilization corn 170 YIELD PER ACRE targets ways that corn 165 plants can use nitrogen 160 more efficiently, exploring 155 the potential to boost yield Reduction in 150 Applied Nitrogen under normal nitrogen 145 conditions or to stabilize 140 yield in low nitrogen 0 40 80 180 NITROGEN INPUT: LBS/ACRE environments EVENT 2 EVENT 1 CONTROL PROJECT UPDATE: During 2006, expanded testing to approximately 100 genes in limited • nitrogen trials; able to identify six lead candidates that are demonstrating a 5-to-15 percent yield increase across limited nitrogen environments In 2006 data, reading the graph right to left, the two events of the • confirmed lead gene show no yield drop off as the nitrogen application levels decrease from 180 pounds per acre to 40 pounds per acre VALUE CONSIDERATIONS: Nitrogen is one of the most important farm inputs and is the most • price sensitive to petroleum-input costs – an average farmer in Iowa might use in the range of 140 pounds of nitrogen per acre, at a cost of roughly 30 cents per pound Research is currently investigating different value propositions - if • trait can replace nitrogen applications or if it can help the farmer get more yield out of the nitrogen already applied NEW SOLUTION VALUE OPPORTUNITY: RETAIL VALUE/ACRE: Medium (>$10/acre to <$30/acre) KEY REGIONS: U.S. BRAZIL ARGENTINA ACREAGE OPPORTUNITY: 90M 30M 8M PART OF THE MONSANTO-BASF YIELD AND STRESS R&D COLLABORATION 22
  23. 23. DROUGHT-TOLERANT CORN DISCOVERY PHASE I PHASE II PHASE III PHASE IV PROJECT CONCEPT: First-generation drought tolerance is targeted to minimize uncertainty in farming by buffering against the effects of water limitation, primarily in areas of annual water stress PROJECT UPDATE: Yield enhancement demonstrated again in 2006 and 2007 under water- • stress conditions in the United States and South America In second year of South American testing, lead corn drought gene was • tested in variable environmental conditions across three locations Lead events consistently delivered yield improvements compared with • controls under water-stressed conditions, with yield advantages of up to 12 bushels per acre in the Chilean locations Currently in fifth season of U.S. field testing; represents significant • expansion in the number of locations, different test environments, and germplasm backgrounds VALUE CONSIDERATIONS: Farmers value water-use in “acre-inches of water” needed to support • yield potential – farmers need 18-to-20 inches of moisture from natural or irrigated sources during growing season Value of the trait is in better yields under moisture-stressed • conditions; varies by region The value will be specific to the variable costs of water used by • farmers, not fixed costs of irrigation First value models are based on potential U.S. fit; international • markets follow similar value proposition NEW SOLUTION VALUE OPPORTUNITY: RETAIL VALUE/ACRE: Medium (>$10/acre to <$30/acre) KEY REGIONS: U.S. BRAZIL ARGENTINA ACREAGE OPPORTUNITY: 90M 30M 8M PART OF THE MONSANTO-BASF YIELD AND STRESS R&D COLLABORATION 23
  24. 24. ROUNDUP READY CORN 2 COMMERCIAL PRODUCT CONCEPT: Roundup Ready Corn 2 provides farmers the ability to use Roundup agricultural herbicides over the top of their crops, simplifying production and offering the broadest spectrum weed control on the market PROJECT UPDATE: Projected end-of-decade acre opportunity for glyphosate-tolerant corn • increased from 60 million acres to 80 million acres for U.S. market, reflecting wider adoption of biotech solution, notably in “pre- emergent” weed control market ROUNDUP READY CORN 2: CURRENT ADOPTION AND FUTURE OPPORTUNITY 2010 END-OF- 2004 2005 2006 2007F DECADE ACRE OPPORTUNITY 17.0M 24.8M 32.7M 55-56M 80M VALUE CONSIDERATIONS: Grower on-farm trials have shown that using Roundup agricultural • herbicides with built-in crop safety on Roundup Ready Corn 2 can yield an average of 6 bushels per acre more than other herbicide programs Proven crop safety and better yield can add a five-year average of $13 • per acre more profit to a farmer’s bottom line2 NEW SOLUTION VALUE OPPORTUNITY: RETAIL VALUE/ACRE: Medium (>$10/acre to <$30/acre)1 KEY REGIONS: U.S. ARGENTINA END-OF-DECADE ACRE 80M 8M OPPORTUNITY: 1Value is for single-trait only 2Source: 373 field-trial comparisons, same Roundup Ready hybrid. On-farm grower, university, and Monsanto trials, 2001-2005 24
  25. 25. YIELDGARD CORN BORER COMMERCIAL PRODUCT CONCEPT: Introduced in 1997, YieldGard corn borer protects against European and southwestern corn borer, reducing the amount of pesticide applications farmers must use to control pest pressure PROJECT UPDATE: Because the control is in the seed, YieldGard corn borer provides • whole-season, in-plant protection more consistently and effectively than any traditionally applied insecticide With stalks that can better transport moisture and nutrients to the ears, • YieldGard corn borer maximizes yield potential. And because YieldGard corn borer reduces lodging and ear drop, it protects that potential all the way to harvest Projected end-of-decade acre opportunity for corn-borer control • increased from 50-to-60 million acres to 60-to-70 million acres for U.S. market YIELDGARD CORN BORER: CURRENT ADOPTION AND FUTURE OPPORTUNITY 2010 END-OF- 2004 2005 2006 2007F DECADE ACRE OPPORTUNITY 32.2M 32.1M 32.3M 41-42M 60-70M VALUE CONSIDERATIONS: Three years of Monsanto, seed partner and university field trials • indicate that YieldGard Corn Borer offers an average six bushels per acre advantage compared with conventional checks2 NEW SOLUTION VALUE OPPORTUNITY: RETAIL VALUE/ACRE: Medium (>$10/acre to <$30/acre)1 KEY REGIONS: U.S. ARGENTINA END-OF-DECADE ACRE 60-70M 4M OPPORTUNITY: 1Value is for single-trait only 2Source: 25
  26. 26. YIELDGARD ROOTWORM COMMERCIAL PRODUCT CONCEPT: Commercialized in 2003, YieldGard Rootworm delivers effective and consistent in-plant protection against western, northern and Mexican corn rootworms, for a zone of protection around the roots PROJECT UPDATE: Projected end-of-decade acre opportunity for rootworm control • increased from 25-to-30 million acres to 45-to-55 million acres for U.S. market, reflecting the increased need for rootworm control with increased corn-on-corn rotations and the expansion of the corn rootworm pest in the Corn Belt YIELDGARD ROOTWORM: CURRENT ADOPTION AND FUTURE OPPORTUNITY 2010 END-OF- 2004 2005 2006 2007F DECADE ACRE OPPORTUNITY 1.8M 4.1M 10.0M 21-22M 45-55M VALUE CONSIDERATIONS: Based on more than 500 comparisons in 2006, YieldGard rootworm • and YieldGard Plus corn hybrids averaged 14.6 bushels per acre in yield advantage compared with soil insecticide-protected hybrids NEW SOLUTION VALUE OPPORTUNITY: RETAIL VALUE/ACRE: Medium (>$10/acre to <$30/acre)1 KEY REGION: U.S. END-OF-DECADE ACRE 45-55M OPPORTUNITY: 1Value is for single-trait only 26
  27. 27. YIELDGARD VT TRIPLE CORN COMMERCIAL PRODUCT CONCEPT: DEKALB’s most prevalent triple stack SKU in 2008 is expected to be YieldGard VT TM Triple, which is a new product that uses a unique way of stacking three traits and provides the best efficacy and consistency of control, coupled with the DEKALB yield advantage PROJECT UPDATE: The DEKALB brand portfolio was more than 40 percent penetrated with • triple stacked traits in 2007 YieldGard VT Triple contains a highly active and more consistent • promoter of the rootworm gene that turns on the gene to produce the insect-control protein and more effectively distributes it through the root system. This improved protein expression gives a more consistent level of insecticidal protein and a better barrier to control corn rootworm larvae. TRIPLE PENETRATION BY CHANNEL: 2007 and 2008 PRODUCTION 2007F 2008F DEKALB: 42% 50%+ ASI: 34% 50%+ LEADING LICENCEES: 29% 50%+ ALL LICENSEES: 24% 35% VALUE CONSIDERATIONS: Triple-stack ramp up continues for 2008, with leading brands targeting • 50 percent of portfolio mix PRODUCT UPGRADE VALUE OPPORTUNITY: RETAIL VALUE/ACRE: High (>$30/acre)1 KEY REGION: U.S. END-OF-DECADE ACRE 45-55M OPPORTUNITY: 1Value is for triple-stack combination 27
  28. 28. KEY TERMS Biotechnology Biotechnology is the application of scientific knowledge to transfer beneficial genetic traits to enhance plants’ growth or to provide nutritional or other benefits to farmers, food and feed processors, or consumers. Conventional Breeding Conventional breeding is the process of cross-pollinating plants with desirable qualities to develop improved plants in successive generations. Crop Analytics Crop analytics involves the application of advanced analytical methods and technologies to identify the composition of food and feed traits. Genomics Genomics involves the mapping of the genes of plants to understand their structure and the role they play in how the plant functions. Germplasm Germplasm is the genetic raw material contained in all the plants of a species. Within the germplasm are the basic characteristics that make plants what they are. Breeding is based on using germplasm to find the best combinations of characteristics that can make plants perform better. Molecular Breeding Molecular breeding involves the use of DNA markers for genes in combination with physical measurement of traits to manage plant breeding programs. Molecular breeding significantly accelerates the efficiency in bringing new varieties to market. Pre-emergent herbicide A pre-emergent herbicide that controls weeds before they emerge from the ground. Post-emergent herbicide A post-emergent herbicide that controls weeds after they emerge from the ground. - MORE - 28
  29. 29. KEY TERMS Stacked Traits Stacked traits refers to combining traits which allow the farmer to have the value of multiple traits instead of having to choose between them. Combining traits provides tangible cost and yield advantages to farmers. Within each respective crop, farmers can choose to combine different traits in a single seed, including insect-protection and herbicide tolerance. Trait A trait is an important characteristic of a crop that is determined by a specific gene or set of genes. Vector Stack A vector stack is when two traits are already combined together before the genetic material is inserted into the plant. This approach enables the simultaneous introduction of both traits into the germplasm, thereby reducing breeding costs and increasing the speed at which elite seed can be provided to growers. For example, YieldGard VT is a vector stack of Monsanto's YieldGard rootworm and Roundup Ready 2 technology. 29