monsanto 12-04-07

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  • 1. BRETT BEGEMANN EXECUTIVE VICE PRESIDENT, GLOBAL COMMERCIAL CITI 2007 BASIC MATERIALS SYMPOSIUM DECEMBER 4, 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 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. © 2007 Monsanto Company 2
  • 3. OVERVIEW Given Growth Opportunities, Monsanto Has Potential to More Than Double Gross Profit Over the Next Five Years 2012 GROWTH RANGE MONSANTO GROSS PROFIT Gross profit targeted to GROWTH TARGET 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) $6,000 U.S. Corn International Corn $5,000 Soybeans Cotton $4,000 Seminis $3,000 R&D Pipeline TRAIT PLATFORMS $2,000 CORN: SmartStax $1,000 SOYBEANS: Roundup $0 RReady2Yield 2004 2007 2012 MILESTONES COTTON: Bollgard II/ 2010 2007 Roundup Gross margin Base Gross Profit: Ready Flex target: 52-54% $4,286M ONGOING EPS GROWTH: MID-TO-HIGH TEENS 3
  • 4. U.S. AND INTERNATIONAL CORN International Market Share Gains Create Footprint for Expansion GENETIC FOOTPRINT: GLOBAL CORN PRODUCTION GEOGRAPHY: International Average OBJECTIVE: Grow footprint 2007 Value Of DEKALB 2007 Hybrid Average Corn DEKALB 2008 STATUS Retail Share Market Yield Per Seed Brand Value Point Size1 Acre1 Share2 Market • Target of 1 to 2 share Per Acre Change (Acres) (U.S. $B) (U.S. $) point gains in all regions except Brazil, where plan 153 $44 $3.2B 23% 4 U.S. 92M is to stabilize share bu/ac 2012 OUTLOOK 99 $65 $1.9B 13% 1 EU27 27M • Outside the U.S., 70M bu/ac3 acres of hybrids in 57 higher-value markets $29 $0.7B 30% 4 Brazil 23M • Targeted 1-2 share point bu/ac gains annually in all key 120 $28 $0.2B 40% 5 Argentina 8M countries through 2012 bu/ac • Brazil targeted to grow 29 after share trait stabilizes $20 $0.1B 39% 4 India 7M in 2008 bu/ac TOTAL 157M 1. Corn acreage and production; USDA FAS 2007/08 projections report and internal estimates 2. Reflects share performance for 2007 planting season; for Brazil and Argentina, reflects 2006-2007 planting season 3. Average yield; from 55 bu/acre in Romania to 150 bu/acre in France, Italy 4
  • 5. U.S. CORN DEKALB’s Performance Accelerated Share Gains Ahead of Schedule; Fundamentals Remain Viable Through 2012 DEKALB U.S. CORN SHARE EVOLUTION: 2001-2012F 32% 30% 2012 TARGET RANGE GEOGRAPHY: U.S. 28% OBJECTIVE: Grow footprint 2008 STATUS 26% • DEKALB earned 4 points 24% in 2007 for total share of ORIGINAL 2010 TARGET RANGE 22% 23%, doubling its share in 5 years 23% 20% 2012 OUTLOOK 18% • Grow share through 2012 19% 16% DEKALB expected to by up to 10 points continue share gains, cumulatively 16% 14% with cumulative target 14% of as much as 10 12% 13% points in 5 years 10% 12% 10% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2007 2005 DEKALB ends 2007 with Monsanto projects 1-2 point 23% share, achieving 2010 share gains for DEKALB from target 3 years early 2005 through 2010 5
  • 6. U.S. CORN Final Yield Trial Results Reinforce Yield Advantage of DEKALB Seed in U.S. 2007 FINAL U.S. COMPETITIVE CORN YIELD FINAL: COMPARISON: DEKALB DEKALB GEOGRAPHY: 210 U.S. (APPROXIMATE DIFFERENCES) COMPETITORS 205 OBJECTIVE: Grow footprint 205 2007 PERFORMANCE UPDATE 200 BUSHELS/ACRE • In > 14,000 comparisons, 195 197 195 Monsanto out-yields 190 193 191 competitive best by 190 189 185 188 8.4 bu/ac 186 180 • In 110-day RM, 179 Monsanto’s lead remains 175 a strong 12 bu/ac 170 advantage 165 Source: 2007 Monsanto 160 and third party trials 163 through November 15, 155 2007. Weighted 155 average, calculated to 150 15% moisture. DEKALB products are compared 95 RM 100 RM 105 RM 110 RM 115 RM Overall with national competitive RELATIVE MATURITIES (DAYS)► products that contain COMPARISONS: similar crop protection >480 >1,220 >1,820 >5,220 >5,270 >14,000 traits. APPROXIMATE BU/AC 7.8 10.4 5.1 12.0 5.5 8.4 ADVANTAGE: 6
  • 7. U.S. CORN Like National Brands, New ASI Hybrids Have Substantial Yield Advantage Over Competitive Offerings 2007 PRELIMINARY U.S. COMPETITIVE CORN YIELD COMPARISON: ASI 210 (APPROXIMATE DIFFERENCES) GEOGRAPHY: U.S. ASI 205 OBJECTIVE: Grow footprint COMPETITORS 2007 PERFORMANCE UPDATE 203 203 200 BUSHELS/ACRE • Overall, 2007 yield 195 197 comparisons showing 7.5 bu/ac advantage for 190 193 192 190 ASI over competitive best 185 184 Source: 2007 Monsanto 183 trials through October 180 24, 2007. 175 170 165 166 163 160 95RM 100 RM 105 RM 110 RM 115 RM RELATIVE MATURITIES (DAYS)► LOCATIONS: 54 128 87 147 158 APPROXIMATE BU/AC 3.5 1 6.5 11.5 10.5 ADVANTAGE: 7
  • 8. U.S. CORN Opportunity Exists to Nearly Triple Penetration of Triple- Stack Traits in U.S. By End of Decade U.S. CORN TRAIT OPPORTUNITY: 2007-2010F 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 0 0 CATALYSTS OF 2010 2005 2006 2007 2010F TRIPLE STACK 2007 Opportunity GROWTH Rootworm Control 45-55M 20.8M Channel Triple Corn Borer Control Penetration 60-70M 42.4M Glyphosate Tolerance DEKALB Supply 80M 57.9M Guarantee Triple Stack 17.7M 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/ 8
  • 9. U.S. CORN SmartStax Becomes Corn Platform of Choice After 2010, Boosting Performance, Creating New Value for Farmers SmartStax SmartStax is in proof-of- concept testing, establishing: Anatomy of first-ever eight-way gene platform Feasibility of full trait integration TRAIT GENES FUNCTION STATUS Viability of enhanced YieldGard VT Triple PRO Pending Regulatory Review performance for insect and weed control COMPONENTS Below-Ground Insect YieldGard VT Rootworm/RR2 2ND-GENERATION ROOTWORM 1 Commercial Control CONTROL PRIMARY: ROOTWORM Roundup Ready 2 Technology Weed Control VIA YIELDGARD VT ROOTWORM/RR2 1 Commercial MODE: GLYPHOSATE YieldGard VT PRO Above-Ground Insect PHASE IV 2ND-GENERATION YIELDGARD CORN 2 BORER Control Pending Regulatory Review PRIMARY: CORN BORER SMARTSTAX CORN PLANTED Herculex® XTRA IN WESTERN IOWA, SHOWING FULL, HEALTHY EARS AND COMPONENTS STRONG, HEALTHY ROOTS Above-Ground Insect Herculex® I 1 Commercial Control PRIMARY: CORN BORER Below-Ground Insect Herculex® RW 2 Commercial Control PRIMARY: ROOTWORM Weed Control Liberty Link® 1 Commercial MODE: GLUFOSINATE • Application for EPA Multiple modes of SmartStax registration to be submitted action for above- and Industry-Standard Trait • On track for end-of-decade below-ground insect Platform1 commercialization in U.S., and weed control with global roll-out following 9 1. This product has not been registered by the U.S. Environmental Protection Agency. It is a violation of federal law to promote or sell an unregistered pesticide.
  • 10. U.S. AND INTERNATIONAL CORN Trait Expansion Opportunity Still Early Globally; SmartStax Resets the Deck in 2010 and Beyond COMMERCIAL PLATFORM: 2007-20101 TRAIT PLATFORM: 2010+ GLOBAL MARKET OPPORTUNITY: • SmartStax resets trait • Reflects technology fit; actual opportunities penetration determined by CORN TRAITS regulatory approvals and • Competition, penetration 2010 VS 2012 competitive share and technology fit being • Competitors continue to license evaluated further for Monsanto traits in key markets each geography 2007 HYBRID SmartStax MARKET SIZE2 (ACRES) U.S. 92M 80M 60-70M 45-55M 60-65M Europe (EU27) 27M 24M 8M 5M 15-20M Brazil 23M 15-20M 15-20M 5M 15-20M Argentina 8M 9M 7M 5M 5-7M India 7M 6M 6M -- 5-6M Total Markets 157M 134-139M 96-111M 60-70M 100-118M 43-45% 46-53% 30-35% 2007 Penetration 1. Market Opportunity reflects total acres where technology is applicable, not necessarily acres Targets marked in green representing countries currently planting projected for penetration by 2010. 80M or with primary regulatory approval secured for respective trait 2. Corn acreage and production; USDA FAS 2007/08 projections report and internal estimates 10
  • 11. U.S. AND INTERNATIONAL CORN By 2012, Sustained Momentum in U.S. Corn Combined With International Growth Expands Corn Gross Profit Contribution GLOBAL CORN SEED AND TRAITS GROSS PROFIT INDEX=2004 2004 2012F 2007 >6X OVER 2004 INDEX • In 2007, international markets generated more than 25% of gross profit • By 2012, total gross profit expected to U.S. Corn Seeds & Traits Gross Profit expand significantly with continued penetration of traits globally, conversion International Corn Seeds & to SmartStax and greater seed brand Traits Gross Profit share worldwide 11
  • 12. SOYBEANS U.S. Soybean Seed Share to Continue to Grow Organically 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
  • 13. SOYBEANS Coming Off 2007 Share Gain, Initial Soybean Yield Performance Continues to Reinforce Breeding Leadership 2007 PRELIMINARY U.S. COMPETITIVE SOYBEAN YIELD COMPARISON: ASGROW (APPROXIMATE DIFFERENCES) 60 GEOGRAPHY: ASGROW U.S. 58 COMPETITORS OBJECTIVE: Grow footprint 58 57 56 BUSHELS/ACRE 2007 PERFORMANCE UPDATE 56 54 55 • Yield data from 2007 indicates continued yield 52 52 advantage for national 51 50 51 brands versus best-in- 49 class competitors 48 49 46 47 44 44 43 42 40 O 1 2 3 4 5 RELATIVE MATURITIES► Source: 2007 Monsanto and COMPARISONS: third party trials through >300 >400 >3,500 >3,400 >1,000 >30 October 30, 2007. Asgrow APPROXIMATE BU/AC products are compared to 1 1.5 1 1.5 2 (1) competitive products. ADVANTAGE: 13
  • 14. SOYBEANS Preparations Under Way for Large Scale U.S. Launch of Roundup RReady2Yield ROUNDUP RREADY2YIELD SOYBEANS: CROP: Soybeans LAUNCH PLANS Launch OBJECTIVE: Roundup U.S. Full-Scale RReady2Yield Launch Target: P R O JE CT 5- 6M Acres 2008 STATUS U.S. Controlled • Consistent 7-11% yield Commercial advantage with Roundup Release Target: RReady2Yield 1- 2M Acres • USDA, EPA and FDA Grower level marketing, awareness and trial approvals received; awaiting key export Licensee breeding approvals • Pre-launch activities Industry coordination and communications under way • American Soybean Association and key agri-food PRICING stakeholders • Yield improvement shared Pursuit of export approvals in Japan, China, with grower; average Europe and Mexico 5-year soybean Branded and licensed seed production commodity price 2007 2008 2009 2010 approximately $6.40 per bushel1 14 1. Source: NASS, USDA data 2003 to August 2007
  • 15. SOYBEANS Soybean Value Upgraded with Roundup RReady2Yield, Modified Oil Traits and Insect Protection SOYBEAN UPGRADE UNDER WAY; CROP: Soybeans MARKET SEGMENTATION BY MID NEXT DECADE Growth via OBJECTIVE: new traits MODIFIED OIL U.S. SOYBEAN VALUE MARKET TRAITS 2008 STATUS • Roundup • $13+/acre for COMPETITIVE • Roundup Ready PLATFORM RReady2Yield Roundup soybeans at 95% in market for tolerance ROUNDUP penetration in U.S., 2+ years plus 7-11% RREADY2YIELD 50% in Brazil yield • Vistive III and • Roundup • Oil premium other modified oil traits being RReady2Yield U.S. SOYBEANS: launched approved by USDA, 60-70M ACRE MARKET ROUNDUP EPA and FDA; key RREADY2YIELD AND export approvals INSECT PROTECTED pending BRAZIL SOYBEAN VALUE MARKET 2012 OUTLOOK • Insect-protected •$2.50-$3.00+ • Five trait stacks in ROUNDUP READY Roundup per acre for soybeans feasible, RReady2Yield Roundup with Roundup being launched tolerance plus RReady2Yield as base 7-11% yield BRAZIL SOYBEANS: trait for all •Insecticide 50-60M ACRE MARKET replacement 15
  • 16. SOYBEANS Relative Contribution of U.S. and Ex-U.S. Should Be Consistent in Growing Soybean Seed and Trait Business GLOBAL SOYBEAN SEED AND TRAITS GROSS PROFIT BY GEOGRAPHY INDEX=2004 2004 2007 2012F >2X OVER 2004 INDEX BRAZIL BRAZIL ROUNDUP ROUNDUP ROUNDUP READY READY SOYBEAN RREADY2YIELD SOYBEAN AT 50% LAUNCHED IN PLANTED 2009/2010 IN PENETRATION IN 2004 U.S.; BRAZIL 2007 ROUNDUP READY U.S. SOYBEAN FULLY PENETRATED INTERNATIONAL 16
  • 17. COTTON Delta and Pine Land’s Global Breeding Strategy Focused on Yield and Fiber Improvement Breeding Programs Testing Programs Greece U.S. (9) Winter Nurseries India Costa Rica (3) Brazil Australia South Africa GLOBAL COTTON BREEDING STRATEGY RESOURCES CAPABILITIES OUTLOOK • ‘Jumpstart’ of up to 3 years over • World’s largest private cotton • Focus on drought, fiber corn in 1990s with established breeding program quality, lint yield and disease infrastructure resistance • Strategically located in • Labs, IT and markers are ready • Novel targets: Diverse pivotal cotton areas to go; “plug-and-play” germplasm base can lead to • All lines feed into global opportunity new genetic pairings that testing and introgression • Largest marker collection in the greatly benefit farmers program world 17
  • 18. COTTON Planned Upgrade to Second-Generation Cotton Technology in U.S. Focused on Southern Markets 46% ROUNDUP READY CROP: Cotton FLEX Second- 15% BOLLGARD II / OBJECTIVE: generation ROUNDUP READY FLEX technology 48% BOLLGARD II / 2008 STATUS ROUNDUP READY FLEX • Southern Delta region lags at 15% average penetration for second- generation traits 2012 OUTLOOK FOCUS ON SHIFTING SOUTHERN • Aggressive breeding DELTA TRAITED ACRES FROM 15% strategy to fully convert SECOND-GENERATION TO 100% BY to Bollgard II by start of 2012 2010 growing season; fully converted to U.S. COTTON SEED BRAND SHARE - 20071 Roundup Ready Flex TOTAL by 2012 46% 17% 45% 86% DELTA AND PINE LAND 18 1. Source: dmrkynetec – cotton seed study – planted acre basis for new certified seed
  • 19. COTTON U.S. Cotton Trait Acres Shift with Total Planted Cotton Acres; Opportunity to Upgrade to Second-Generation U.S. COTTON TRAIT ACRES (PERCENT OF TOTAL PLANTED ACRES) CROP: Cotton 25 100% Second- ABSOLUTE2 TRAIT ACRES OBJECTIVE: generation 20 technology 75% 2008 STATUS M ACRES 15 • Nearly 80% of the U.S. 50% planted cotton acres contained at least one 10 Monsanto trait in 2007 • Delta and Pine Land’s 25% 5 portfolio was only 17% second-generation1 traits 0 compared with industry 0% average of 41% 2003 2004 2005 2006 2007 2012 OUTLOOK ROUNDUP READY BOLLGARD • Delta and Pine Land’s portfolio fully converted ROUNDUP READY FLEX BOLLGARD II to second-generation traits in all U.S. 1. Second-generation trait penetration reflects percent of commercial portfolio containing either Roundup Ready Flex, Bollgard II or both traits. segments 2. Absolute trait acres represents the total number of acres with at least one trait; two traits on one acre one absolute acre 19
  • 20. COTTON Bollgard Cotton Penetration in India Nearly Doubles in 2007; Creates Platform for Second-Generation Traits BOLLGARD & BOLLGARD II COTTON IN INDIA CROP: Cotton ROUNDUP READY FLEX OPPORTUNITY Second- OBJECTIVE: generation technology M ACRES 2008 STATUS 25 • Hybrid market now 15-20M estimated to be 15-20 20 BOLLGARD II BOLLGARD million acres in India BOLLGARD II WITH ROUNDUP READY FLEX 2012 OUTLOOK 15 M ACRES • Expect market in India to be fully converted to 10 Bollgard II by 2012 • Potential to launch Bollgard II stacked with 5 Roundup Ready Flex prior to 2012 0 2007 RETAIL PRICE/ACRE 2004 2005 2007 2006 2012 SEED & TRAIT OPPORTUNITY BOLLGARD BOLLGARD II $ 18 $22 20
  • 21. COTTON Second-Generation Trait Conversion Accelerates Globally to Expand Gross Profit Contribution of Cotton GLOBAL COTTON SEED AND TRAITS GROSS PROFIT INDEX=2007 2012F 2007 1.8X OVER 2007 INDEX • In five years, Delta and Pine Land fully contributing with U.S. market share and second-generation trait growth • India becomes a larger player with conversion to second INTERNATIONAL generation traits • Australia and Brazil are small acre, but important markets 21
  • 22. R&D PIPELINE Strong Pipeline Value Reflects Commercial Opportunity in Latter-Stage Projects and Emerging Value in Yield and Stress DISCOVERY PHASE 1 PHASE 2 PHASE 3 PHASE 4 Drought- HIGH Tolerant FAMILY TRAITS► Family COLLABORATION CORN: YIELD & STRESS Nitrogen- BROAD-ACRE HIGH Utilization FAMILY TRAITS► YIELD Family Broad-Acre, MEGA Higher-Yielding FAMILY TRAITS► Family SOYBEANS: Broad-Acre, BROAD-ACRE HIGH Higher-Yielding FAMILY TRAITS► YIELD Family Insect- 2020 VALUE RANGES: protected Roundup Omega-3 Roundup RReady2Yield RReady2Yield soybeans soybeans MEGA HIGH soybeans Bollgard III $300M-$500M >$1BM High-oil Dicamba- YieldGard soybeans tolerant VT PRO soybeans MID LOW corn Vistive III <$150M $150M-$300M Roundup Improved- RReady2Yield protein Corn Soybeans Cotton Canola canola soybeans 22
  • 23. SUMMARY Given Growth Opportunities, Monsanto Has Potential to More Than Double Gross Profit Over the Next Five Years 2012 GROWTH RANGE MONSANTO GROSS PROFIT Gross profit targeted to GROWTH TARGET 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) $6,000 U.S. Corn International Corn $5,000 Soybeans Cotton $4,000 Seminis $3,000 R&D Pipeline TRAIT PLATFORMS $2,000 CORN: SmartStax $1,000 SOYBEANS: Roundup $0 RReady2Yield 2004 2007 2012 MILESTONES COTTON: Bollgard II/ 2010 2007 Roundup Gross margin Base Gross Profit: Ready Flex target: 52-54% $4,286M ONGOING EPS GROWTH: MID-TO-HIGH TEENS 23