CARL CASALE
EXECUTIVE VICE PRESIDENT,
NORTH AMERICA COMMERCIAL


JP MORGAN
FARMING TEACH-IN


May 15, 2007

              ...
Forward-Looking Statements

Certain statements contained in this presentation are quot;forward-looking statements,quot; su...
OVERVIEW


Market Forces Inspiring Changing Global Agricultural
Landscape into Next Decade


                             ...
OVERVIEW


Global Demand for Corn and Oilseeds Has Been Growing as Finite Acres
Compete to Meet Feed and Fuel Needs



   ...
OVERVIEW

     Opportunity in Renewable Fuels is Expected to Accelerate Demand for
     Corn And Oilseeds Beyond the End o...
OVERVIEW

Advent of New Technologies Has Helped Reduce Yield Volatility

                                                 ...
OVERVIEW


Because of Focus on Per-Acre Productivity, Seed Is Farmers’
Most Important Decision

                          ...
TRAINING MODULE


The Business of Farming Requires Sound Analysis of
Markets, Economics and Agronomics

            ENTERP...
TRAINING MODULE


Land Values Directly Correlated to Ability to Generate Crops
with Marketable Cash Value

               ...
TRAINING MODULE


Equipment Purchases Represent Significant Capital
Investment and Ebb and Flow with Commodity Prices

   ...
TRAINING MODULE

Decision on Crop to Plant Cascades to Multiple Decisions on
Seed, Fertilizer and Options for Weed and Ins...
TRAINING MODULE


Growers Hedge Risk on Farm by Purchasing Multiple
Hybrids/Varieties and Brands

        ENTERPRISE SIZE ...
TRAINING MODULE


Decision on Control of Bugs and Weeds Intertwined with
Seed Decision with Advent of Biotech Traits

    ...
TRAINING MODULE


Economic Indicators and Risk Profile of Grower Impacts Crop
Marketing Decisions

          ENTERPRISE SI...
TRAINING MODULE – SOYBEANS EXAMPLE


Year End Financial Statements and Yields Measure
Effectiveness of Decision Making for...
TRAINING MODULE – CORN EXAMPLE


Year End Financial Statements and Yields Measure
Effectiveness of Decision Making for the...
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monsanto 05-15-07

  1. 1. CARL CASALE EXECUTIVE VICE PRESIDENT, NORTH AMERICA COMMERCIAL JP MORGAN FARMING TEACH-IN May 15, 2007 1
  2. 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. 3. OVERVIEW Market Forces Inspiring Changing Global Agricultural Landscape into Next Decade UNITED STATES1 Expanding ethanol 5-YR AVG 2015F and export demands favor U.S. ARABLE ACREAGE 250M FLAT as low-cost corn CORN 79M producer SOYBEANS 74M U.S. ramps up production of corn; Soy crop becomes BRAZIL2 increasingly focused 5-YR AVG 2015F on higher-value ARABLE ACREAGE 900M segments over commodity CORN 33M SOYBEANS 53M Brazil and Argentina exploit land availability advantage to become ARGENTINA3 commodity soy producer; Also, reacted to market 5-YR AVG 2015F incentives to expand corn ARABLE ACREAGE 67M production for domestic CORN 7M use and export SOYBEANS 36M 1. USDA Agricultural Baseline Projections to 2015 2. Informa Economics Inc and MBA Associados 3. Encyclopedia of Nations 3
  4. 4. 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 WORLD CONSUMPTION OF CORN AND OILSEEDS U.S. CORN USE Fuel Alcohol = 25% CAGR OILSEEDS = 5.6% CAGR CORN = 4% CAGR 1200 METRIC TONS (IN MILLIONS) 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 Sources: USDA Foreign Agricultural Service and USDA Fuel Alcohol 4
  5. 5. 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 35 by 2010 is the base 20 30 case 25 • Incremental yield 15 20 gains through 10 15 technological innovations allow 10 5 further substitution 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 5 Source: Proexporter Network, Pro Mar And Monsanto Estimates
  6. 6. OVERVIEW Advent of New Technologies Has Helped Reduce Yield Volatility USDA U.S. CORN YIELD 160 AVERAGE YIELD (BU/AC) 140 120 100 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 6
  7. 7. OVERVIEW Because of Focus on Per-Acre Productivity, Seed Is Farmers’ Most Important Decision U.S. CORN PRODUCTION COSTS PER ACRE 1996 OPERATING COSTS1 2007F 17% SEED 20% (INCLUDING TRAITS) 17% CHEMICALS 14% 30% FERTILIZER 31% SEED (INCLUDING TRAITS) FERTILIZERS & SOIL AVERAGE YIELD AVERAGE YIELD 150+ bu/ac 130 bu/ac CONDITIONERS PRICE PER PRICE PER FUEL & POWER COSTS $3.75-$4.00 $2.82 BUSHEL BUSHEL AVERAGE AVERAGE CHEMICALS ENTERPRISE ENTERPRISE 443 acres 438 acres SIZE SIZE CUSTOM OPERATIONS & TECHNICAL SERVICE OTHER 1. Excludes “Overhead” costs, including hired labor and opportunity cost of land, etc. Source: USDA and CBOT 7
  8. 8. TRAINING MODULE The Business of Farming Requires Sound Analysis of Markets, Economics and Agronomics ENTERPRISE SIZE 1000 acres ANNUAL GROSS RECEIPTS $260K - $620K CRITICAL DECISIONS – FIXED INPUTS TYPE OF OPERATION Midwest Grain Farm • Own • Financing U.S. FARMING AS A BUSINESS • Cash Flows LAND: • Rent • Large farms have annual receipts >$500K • Cash Rent • Share Rent • Total value of farm assets > $1.6 trillion • Tractor/Combine/Planter FACILITIES & • Custom Applicators/Harvesters EQUIPMENT: • Average farm size is 443M acres • On Farm Storage CRITICAL DECISIONS – VARIABLE INPUTS • 94% of U.S. farms are individual or family • Seed run • Chemicals CROPS TO • Fertilizer PLANT: • Most college level experience • Crop Insurance • Government Programs • 2% of the American population feeds the • Cash Price nation and provides significant exports • Timing & Quantity MARKETING: – One in three U.S. acres is planted for • Forward Contract/Hedging export • Timing & Quantity Source: Agri Business Group, Inc., 2006 8
  9. 9. TRAINING MODULE Land Values Directly Correlated to Ability to Generate Crops with Marketable Cash Value ENTERPRISE SIZE 1000 acres ANNUAL GROSS RECEIPTS $280K - $620K VARIABLES TO CONSIDER - LAND: TYPE OF OPERATION Midwest Grain Farm ACREAGE PRICE: • $2000 - $5000/acre (Cornbelt) CRITICAL DECISIONS - LAND: • Availability and rate FINANCING: • Estimated cash flows from How many acres ? expanded operation RENTAL Rent or own ? • Cash Rent: $100-$190/acre ARRANGEMENTS: • Share Rent: 40-50% of crop Cash rent or share rent ? EQUIPMENT • Planter & combine upgrades REQUIREMENTS: • Precision Farming Technology Additional equipment requirements ? • Conservation Reserve Program GOVERNMENT Participation in government (CRP) PROGRAMS: programs ? • Long Term Outlook on Supply/Demand “In general, it is wise to rent as aggressively as labor and equipment allow and buy as conservatively as an average of the worst years would indicate.” Source: Agri Business Group, Inc., 2006 and ispfrmra.org 9
  10. 10. TRAINING MODULE Equipment Purchases Represent Significant Capital Investment and Ebb and Flow with Commodity Prices ENTERPRISE SIZE 1000 acres ANNUAL GROSS RECEIPTS $280K - $620K TYPE OF OPERATION Midwest Grain Farm VARIABLES TO CONSIDER - EQUIPMENT: CURRENT • Cash Flows to Finance New Equipment CRITICAL DECISIONS - COMMODITY • $2.80 to $4.00/bu corn adds $180K EQUIPMENT: PRICES: cash/yr for 1000 acres Cost vs. Benefit: Rent or own ? • Estimated reduction of inputs (fertilizer and seed) PRECISION EQUIPMENT: • Optimization of yield through targeted Upgrade to precision equipment ? application of inputs • Yield monitors for use in seed selection choices for next season Repair or purchase new ? • Critical with short windows for planting DEPENDABILITY: and harvest Custom application/harvesting ? • Tractor – 4 wheel drive 200-280 hp = $175K CURRENT • Combine – Self Propelled = $225K EQUIPMENT COSTS: • 16 row Planter = $75K • Plain Grain Drill = $25K Source: Agri Business Group, Inc., 2006 and IL Agrinews 10
  11. 11. TRAINING MODULE Decision on Crop to Plant Cascades to Multiple Decisions on Seed, Fertilizer and Options for Weed and Insect Control ENTERPRISE SIZE 1000 acres ANNUAL GROSS RECEIPTS $280K - $620K TYPE OF OPERATION Midwest Grain Farm CRITICAL DECISION – CROPS: VARIABLES TO CORN SOYBEANS CONSIDER - CROPS: What to plant ? CURRENT COMMODITY $3.70-$3.90 /bu $7.80 - $8.25 /bu PRICES: How many acres ? AVERAGE YIELDS: 115-175 bu/acre 35-55 bu/acre FERTILIZER $30-$85 /acre $0-$40 /acre REQUIREMENTS: Soil quality and rotation ? HERBICIDES: $18-$28 /acre $13-$26 /acre Government subsidies available ? INSECTICIDES: $12-$18 /acre $0 /acre Cost and availability of inputs FUNGICIDES: $0 /acre $0 /acre required for the crop ? GOVERNMENT Loan Rate - IL Loan Rate - IL PROGRAMS: ~$2.00/bu ~$5.10/bu History of production on this farm? Source: Agri Business Group, Inc., 2006, Univ of IL Farm Business Mgmt, CBOT, and Center for Agricultural and Rural Development 11
  12. 12. TRAINING MODULE Growers Hedge Risk on Farm by Purchasing Multiple Hybrids/Varieties and Brands ENTERPRISE SIZE 1000 acres ANNUAL GROSS PURCHASE PATTERNS $280K - $620K RECEIPTS TYPE OF OPERATION • Plant 3-4 brands and 5-8 different Midwest Grain Farm hybrids • 60% select germplasm first, then PURCHASE make a decision on biotech traits STRATEGY: • Decision-making actions: look at on-farm comparisons (68%), speak with another farmer (58%), speak with seed company (58%) • Purchase from average of 2-3 seed PURCHASE dealers FOCUS: SEED PURCHASES LOGISTICS: • 61% of purchases are made in Farmers manage risk through November and December diversification on farm PLANTING MIX Number of brands is the practical • 38% planted to latest “top- YIELD yielding” hybrids tool used to create genetic diversity STRATEGY: • 54% planted to consistent on-farm performing hybrids • 28% are first-year hybrids AGE-MIX • 30% are second-year hybrids STRATEGY: • 42% are third-year or older hybrids 12
  13. 13. TRAINING MODULE Decision on Control of Bugs and Weeds Intertwined with Seed Decision with Advent of Biotech Traits ENTERPRISE SIZE 1000 acres ANNUAL GROSS RECEIPTS $280K - $620K TYPE OF OPERATION Midwest Grain Farm FOCUS: COSTS PER ACRE: CENTRAL CORN BELT Conventional SEED/TRAIT1 $35.50 $49.00 $45.00 $57.00 $53.00 $58.50 $63.00 RESIDUAL $16.00 $12.00 $16.00 $16.00 $12.00 $12.00 $12.00 HERBICIDE POST $12.00 $6.00 $12.00 $12.00 $6.00 $6.00 $6.00 HERBICIDE TOTAL $63.50 $67.00 $82.50 $85.00 $71.00 $76.50 $81.00 SOIL $15.00 $15.00 -- -- $15.00 -- -- INSECTICIDE $78.50 $82.00 $82.50 $85.00 $86.00 $76.50 $81.00 TOTAL 1. Prices may vary by area. Based on a seed rate of 29,630 seeds/acre of 2.7acres/bag 13
  14. 14. TRAINING MODULE Economic Indicators and Risk Profile of Grower Impacts Crop Marketing Decisions ENTERPRISE SIZE 1000 acres ANNUAL GROSS $280K - $620K RECEIPTS TYPE OF OPERATION Midwest Grain Farm CASH MARKETS LOCAL REGIONAL NATIONAL FOR CORN HOW GRAIN FARMERS SELL WHAT THEY PRODUCE: RIVER SHIPPING TERMINAL YARD TYPE ELEVATOR Direct Cash Basis New Quad Orleans, Futures Market Cities, IA/IL Location Peoria, IL LA Contract with a Processor Price - $/bu $4.00 $4.05 $4.15 Consume on Farm to Feed Livestock FUTURES MARKETS FOR CORN MAY 07 DECEMBER 07 CBOT – 5000 BU = 1 CONTRACT FUTURES CONTRACTS – CBOT Sells 25 contracts for Buys 25 contracts for $4.00/bu $3.75/bu CASH MARKET – LOCAL N/A Sells 125K bu for $4.00/bu ELEVATOR ESTIMATED COST PER BU $3.25/bu $3.25/bu NET GAIN/(LOSS) PER BU $.50/bu ($.25) futures +$.75 elevator = $.50/bu Source: Agri Business Group, Inc., 2006 14
  15. 15. TRAINING MODULE – SOYBEANS EXAMPLE Year End Financial Statements and Yields Measure Effectiveness of Decision Making for the Crop Year ENTERPRISE SIZE 1000 acres ANNUAL GROSS RECEIPTS $280K - $620K Soybean Production in IL TYPE OF OPERATION Midwest Grain Farm Bushels Per Acre Item 35 45 55 Gross Receipts $ 280 $ 360 $ 440 $/bu $ 8.00 $ 8.00 $ 8.00 $45 - $63/acre Total Variable Costs Fertilizer 25 25 27 System Costs Herbicides 13 26 26 Insecticides 0 0 0 Seed & Trait 32 35 37 Drying and Storage 5 7 8 Machinary Repairs 30 30 30 Crop Insurance 4 4 4 Interest 4 4 4 Total Variable Costs $ 113 $ 131 $ 136 Fixed Costs FOCUS: SOYBEANS – 1000 ACRES Labor 16 16 16 Building Repair & Depreciation 8 8 8 Low input rotation favored when Marchinary Depreciation 18 18 18 Interest on Investment 22 22 22 fertilizer costs rise and export Overhead (farm insurance/utiliities) 15 15 15 Land (cash rent equivilant) 100 140 190 demand drives up commodity price Total Fixed Costs $ 179 $ 219 $ 269 Yield Drives Farm Profitability Total Costs $ 292 $ 350 $ 405 Net Return/Acre $ (12) $ 10 $ 35 Number of Acres 1000 1000 1000 Total Farm Return $ (12,000) $ 10,000 $ 35,000 Source: Agri Business Group, Inc., 2006 and Univ of IL Farm Business Mgmt 15
  16. 16. TRAINING MODULE – CORN EXAMPLE Year End Financial Statements and Yields Measure Effectiveness of Decision Making for the Crop Year ENTERPRISE SIZE 1000 acres ANNUAL GROSS RECEIPTS $280K - $620K Corn Production in IL (Corn Following Corn) TYPE OF OPERATION Midwest Grain Farm Bushels Per Acre Item 115 130 155 Gross Receipts $ 460 $ 520 $ 620 $/bu $ 4.00 $ 4.00 $ 4.00 $78-$82/acre Total Variable Costs Fertilizer 70 76 80 System Costs Herbicides 28 18 18 Insecticides 15 15 0 Seed & Trait 35 49 63 Drying and Storage 15 17 20 Machinary Repairs 36 36 36 FOCUS: CORN – 1000 ACRES Crop Insurance 6 6 6 Interest 6 7 7 Higher Input with Greater Fertilizer Total Variable Costs $ 211 $ 224 $ 230 Requirement and Insect Control Fixed Costs Labor 22 22 22 Corn favored with Rising Commodity Building Repair & Depreciation 8 8 8 Marchinary Depreciation 22 22 22 Prices Driven by Ethanol Demand Interest on Investment 24 24 24 Overhead (farm insurance/utiliities) 15 15 15 and Low Ending Stocks Land (cash rent equivilant) 100 140 190 Total Fixed Costs $ 191 $ 231 $ 281 Yield Drives Farm Profitability Total Costs $ 402 $ 455 $ 511 Net Return/Acre $ 58 $ 65 $ 109 Number of Acres 1000 1000 1000 Total Farm Return $ 58,000 $ 65,000 $ 109,000 Source: Agri Business Group, Inc., 2006 and Univ of IL Farm Business Mgmt 16

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