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monsanto 05-18-06

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monsanto 05-18-06

  1. 1. CARL CASALE EXECUTIVE VICE PRESIDENT, NORTH AMERICA COMMERCIAL HARRIS NESBITT, AGRICULTURE & PROTEIN CONFERENCE MAY 18, 2006 1
  2. 2. Forward-Looking Statements Certain statements contained in this release 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; 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 filings with the SEC. 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 update any forward-looking statements or any of the factors that may affect actual results. 2
  3. 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. Trademarks Roundup, Roundup Ready, Roundup RReady2Yield, Bollgard, Bollgard II, YieldGard, Monsanto, Imagine, Vine Design, Asgrow, DEKALB, Monsanto Choice Genetics, Posilac, Processor Preferred, Vistive, Stoneville and Seminis are trademarks owned by Monsanto Company and its wholly-owned subsidiaries and are italicized the first time they appear in this presentation. Mavera™ is a trademark of Renessen. © 2006 Monsanto Company 3
  4. 4. OVERVIEW Global Demand for Corn and Soybeans Is Growing and the Americas Will Supply the World WORLD AREA GRAIN PRODUCTION EUROPE THE THREE LEADING UNITED STATES 2005 2010 ASIA SOYBEAN EXPORTERS – U.S., BRAZIL, AND 2005 2010 CORN 52M MT 55M MT 2005 2010 ARGENTINA ACCOUNT CORN 278M MT 297M MT FOR > 90% OF WORLD SOY 1M MT 3M MT CORN 122M MT 132M MT TRADE SOY 86M MT 81M MT E.U. REMAINS SOY 22M MT 23M MT WORLD’S PRINCIPAL DESTINATION FOR SOYBEAN MEAL IN BRAZIL, PLANTED ACRES INCREASE TO SUPPLY GROWING DOMESTIC FEED BUSINESS AND CHINA DEMAND CHINA: NET IMPORTS 40 ARGENTINA METRIC TONS (M) 30 2005 2010 20 CORN 23M MT 27M MT 10 SOY 38M MT 40M MT 0 2005 2010 -10 CORN SOY BRAZIL 2005 2010 CORN 44M MT 53M MT SOY 60M MT 81M MT PRODUCTION = CONSUMPTION NET EXPORTER NET IMPORTER Source: U.S.D.A. Foreign Agricultural Service, ABIOVE, Independent Economists & Monsanto Estimates 4
  5. 5. OVERVIEW Ethanol Production Will Drive Incremental Corn Demand MARKET DISTRIBUTION FOR U.S. CORN U.S. ETHANOL MARKET OUTLOOK 2006 2012 48% 51% FEED 9 5 4.5 8 FUEL 20% 31% ALCOHOL 4 BILLIONS OF GALLONS BILLIONS OF BUSHELS 7 3.5 6 18% 9% EXPORTS 3 5 2.5 ENDING 4 16% 6% STOCK 2 3 1.5 OTHER 3% 3% INCLUDING 2 1 FOOD 1 0.5 0 0 A NEAR DOUBLING IN THE 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 DEMAND FOR CORN USED ETHANOL PRODUCED CORN USED FOR ETHANOL IN ETHANOL IN THE COMING YEARS WILL SQUEEZE CURRENT CORN SUPPLIES Source: USDA, ProExporter and Monsanto Estimates 5
  6. 6. OVERVIEW Finite Number of Acres Exist, So Yields Must Increase to Meet Demand U.S. PLANTING DECISIONS CORN, WHEAT AND U.S. PLANTED ACRES SOYBEANS ACCOUNT FOR ABOUT 87 PERCENT OF TOTAL PLANTED ACRES PLANTABLE ACREAGE OF CORN, WHEAT, SOY 90 FOR MAJOR FIELD 220 CROPS. PLANTINGS OF 210 85 DIFFERENT CROPS ARE INFLUENCED BY ACRES (IN MILLIONS) 200 EXPECTED NET ACRES (IN MILLIONS) CORN RETURNS AMONG 80 TOTAL PLANTED 190 COMPETING CROPS. NET RETURNS ARE AFFECTED BY 180 75 MARKET PRICES, YIELDS AND 170 SOY PRODUCTION COSTS 70 WHEAT PLANTINGS 160 HAVE REDUCED BY APPROXIMATELY 10 WHEAT 150 MILLION ACRES OVER 65 THE TIME PERIOD AS 140 FARMERS SWITCHED TO SOYBEANS AND 60 CORN. 130 120 55 110 50 100 1997 1998 1999 2000 2001 2002 2003 2004 2005 WHEAT SOY CORN TOTAL PLANTED ACRES Source: USDA 6
  7. 7. OVERVIEW Biotechnology Adoption Reflects Trait Value, Independent of Commodity Prices MONSANTO U.S. BIOTECH ACRES VS. AVERAGE MARKET PRICE CORN SOYBEANS ACRES ACRES $/BU (IN MILLIONS) $/BU (IN MILLIONS) 70 50 $8.00 $3.00 R2 = .58 R2 = .38 45 60 $7.00 $2.50 40 $6.00 50 35 $2.00 $5.00 30 40 25 $4.00 $1.50 30 20 $3.00 $1.00 15 20 $2.00 10 $0.50 10 $1.00 5 0 0 $0.00 $0.00 2000 2001 2002 2003 2004 2005 2000 2001 2002 2003 2004 2005 SOYBEAN SOYBEAN COMMODITY CORN BIOTECH CORN COMMODITY BITOECH ACRES PRICES ACRES PRICES Source: USDA and Monsanto estimates 7
  8. 8. OVERVIEW Corn and Soy Acreage Is Resistant to Change and Monsanto Benefits from Either Crop PLANTED CORN ACRES PLANTED SOYBEAN ACRES 3M ACRES 3.2M ACRES LARGEST ONE- 85 LARGEST ONE- 78 YEAR CHANGE YEAR CHANGE 83 IN FIVE-YEAR IN FIVE-YEAR 76 PERIOD PERIOD 81 ACRES (IN MILLIONS) ACRES (IN MILLIONS) 74 79 77 72 75 70 73 71 68 69 66 67 65 64 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 2006 AVERAGE GROSS PROFIT DIFFERENTIAL PER ACRE Corn vs. Soy = $0.33 Source: USDA and Monsanto estimates 8
  9. 9. COMMERCIAL Farmers ‘Buy Yield,’ Creating Opportunity for Seeds and Traits Growth FARMERS’ DECISION EQUATION MONSANTO’S POSITION: CORN SEED Retail brands (GENETIC GAIN) The starting point of all agriculture; farmers Regional brands need to maximize ‘genetics’ in seed for yield Licensing TECHNOLOGY + ‘Above ground’ protection (% OF GENETIC GAIN PRESERVED) Technology is used to protect and maximize ‘Below ground’ protection the yield potential of the seed Weed control system = MAXIMUM YIELD The elegance of a seed and trait approach POTENTIAL is that the seed is the package and traits can be ‘stacked’ for maximum effect The basic equation represents the In 2005, Monsanto introduced the first maximum yield potential multiplied by the triple-stack of biotech traits percent of that yield preserved by technology 9
  10. 10. COMMERCIAL Changing Dynamics In Ag Industry Are Reflected Most Prominently in Farmers’ Expectations YIELD = GENETIC GAIN X % OF GENETIC GAIN PRESERVED SUPERIOR- BETTER- YIELDING YIELDING GERMPLASM GERMPLASM ABOVE- GOOD- GROUND ABOVE- YIELDING INSECT GROUND GERMPLASM PROTECTION INSECT PROTECTION BELOW- GROUND BELOW- INSECT GROUND PROTECTION YIELD INSECT WEED-CONTROL PROTECTION PROTECTION SYSTEM WITH 1-2 TRAITS WEED-CONTROL VALUE-ADDED SYSTEM FEED TRAITS STRESS- TOLERANCE TRAITS EARLY DECADE MID-DECADE END OF DECADE 2009 - 2012 2000 - 2004 2005 - 2008 10
  11. 11. COMMERCIAL Global Breeding Capabilities Create Full Product Pipeline for Three Channels U.S. Corn Channel Strategy 1 2005 COMPETITIVE CORN Channel: Owned YIELD COMPARISON Outlet: Retail 200 Target reach: National 190 BUSHELS/ACRE 180 2 Channel: Owned Outlet: Regional, high-touch 170 Target reach: Local 160 150 95 100 105 110 115 3 Channel: Licensed, non-exclusive RELATIVE MATURITIES (DAYS) Outlet: Regional, high-touch COMPETITORS MONSANTO BRANDS Target reach: Local 11
  12. 12. COMMERCIAL Strong Germplasm and Technology Position Are Expected To Lead Market Share for Monsanto Brands U.S. CORN MARKET SHARE 60% 2006 50% FRONTLINE UPDATE: ASGROW AND 40% DEKALB AND ASI BRANDS 30% ARE EXPECTED TO GROW MARKET 20% SHARE IN 2006 10% 0% 2001 2002 2003 2004 2005 2006F TRAIT PENETRATION STACKED PENETRATION CHANNEL TO MARKET 2005 2006F 2005 2006F DEKALB AND ASGROW 87% 90% 60% 69% BRANDS 66% 76% 36% 54% AMERICAN SEEDS, INC. (ASI) HOLDEN’S/CORN STATES 44% 60% 27% 43% LICENSEES 12
  13. 13. COMMERCIAL Monsanto’s Branded Seed Is Growing Despite a Market with Readily Available Free Seed QUESTION AREA: INCIDENCE OF RECEIVING FREE BAGS OF 2006 FRONTLINE UPDATE: SEED CORN IN 2006 RECENTLY COMMISSIONED MARKET RESEARCH OF BASED ON A SAMPLE OF 1,909 RESPONDENTS REPRESENTING FARMERS FARMERS IN THE U.S. CORN WHO USE SEED FROM THE MAJOR PLAYERS IN THE U.S. CORN SEED BELT INDICATED THAT: MARKET ONE IN 3 CORN FARMERS RECEIVED PERCENT OF FARMERS SOME FREE SEED IN 2006 DESPITE FREE SEED OFFERS, DEKALB AND 36% ASGROW BRANDED SEED IS EXPECTED TO GROW 2 MARKET SHARE POINTS IN 2006 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% RECEIVED FREE SEED DID NOT RECEIVE FREE SEED 13
  14. 14. COMMERCIAL Corn Market Share Gains Still To Fully Reflect Power of Molecular Breeding Application MOLECULAR-BREEDING HYBRIDS 20% 6% AS A PERCENT OF BRANDED UNITS SOLD IN COMMERCIAL CORN PORTFOLIO 2005 BRANDED U.S. 5% MARKET SHARE: 16% IN COMMERCIAL CORN PORTFOLIO PERCENT OF BRANDED UNITS SOLD 15% DEKALB AND ASGROW 4% U.S. MARKET SHARE U.S. BRAND MARKET SHARE 3% 10% 2% 5% 1% 0% 0% 2001 2002 2003 2004 2005 2006F 2007F 2008F CYCLE 1: CYCLE 2: CYCLE 3: PROGRESSION INTEGRATION OF APPLICATION OF MOLECULAR SELECTION POWER OF OF BREEDING GLOBAL GERMPLASM BREEDING TO SELECTION MOLECULAR BREEDING TECHNOLOGY IN THE • MOLECULAR BREEDING • ASSEMBLED 36 MAJOR CORN • PREDICTIVE COMBINATIONS COMMERCIAL IMPROVES GENETIC POTENTIAL BREEDING PROGRAMS IN 12 ALLOW MORE EFFICIENT PORTFOLIO BY 2X VERSUS CONVENTIONAL COUNTRIES BREEDING BREEDING • FIRST INTRA-COMPANY • MOLECULAR BREEDING • BY 2006, FIRST MOLECULAR CROSSES; BY CYCLE 3, >50% ACCELERATES TRAIT BREEDING HYBRIDS ENTER OF HYBRIDS IN THE U.S. INTEGRATION BY COMMERCIAL PORTFOLIO PORTFOLIO MADE THROUGH SHORTENING ‘BACKCROSSING’ INTRA-COMPANY CROSSES CYCLES 14
  15. 15. COMMERCIAL Existing Biotech Traits Set Up Three Pathways for Mid-Term Growth EXAMPLE: ROUNDUP READY CORN 2 IN THE UNITED STATES Monsanto projects a market OPPORTUNITY: opportunity of 60M acres in PENETRATION AND the United States by 2010 EXPANSION In 2006, we expect farmers CURRENT will plant 34M acres – up STATUS: from 24M in 2005 EXAMPLE: STACKED U.S. CORN TRAITS Of the 80M acres of U.S. OPPORTUNITY: corn, in 2005, approximately STACKING 14M included stacked traits Stacked traits will soon CURRENT overtake the number of STATUS: single-trait acres in our brands EXAMPLE: SECOND-GENERATION U.S. CORN TRAITS In 2005, more than 32M acres were planted with MULTI- OPPORTUNITY: insect-protection traits that have upgrades in GENERATION development TRAITS In 2006, 2nd-Gen YieldGard Rootworm earned CURRENT regulatory approval; 2nd-Gen STATUS: YieldGard Corn Borer is in Phase 3 in pipeline 15
  16. 16. COMMERCIAL Increasing Demand for Stacked Traits Leads Overall Acreage Gains for Each Individual Corn Trait 60 2006 FRONTLINE 50 UPDATE: STACKED TRAIT COMBINATIONS ACRES IN MILLIONS 40 ARE RAPIDLY BECOMING THE PREFERRED 30 CHOICE OF THE FARMER AND WILL SOON OVERTAKE THE NUMBER OF 20 SINGLE TRAIT ACRES 10 0 2001 2002 2003 2004 2005 2006F ABSOLUTE U.S. CORN ACRES1 (IN MILLIONS) 17.7 23.8 27.3 33.6 30.6 ~24 U.S. SINGLE TRAIT ACRES 1.2 2.2 5.1 8.7 13.0 ~20 U.S. DOUBLE TRAIT ACRES 0 0 0 0 1.3 ~5 U.S. TRIPLE TRAIT ACRES 1. Absolute acres represent the total number of acres with at least one trait. 16
  17. 17. COMMERCIAL Variable-Based Pricing Strengthens Roundup Ready Corn 2 Base and Expands Market for Stacked Traits TRAIT MIX IN ASGROW AND DEKALB BRANDS SINGLE TRAIT STACKED - DOUBLE TRAIT 2 1 STACKED - TRIPLE TRAIT TRAIT BAGS OF SEED Indexed 2005 = 1 1.5 22% 9% 1 47% 40% 0.5 51% 31% 0 2005 2006F STATES WITH WEED CONTROL NEEDS, SPORADIC CORN BORER AND ROOTWORM 2006 FRONTLINE UPDATE: STATES WITH CONSISTENT NEED FOR ACROSS OUR ASGROW AND DEKALB BRANDS, WEED CONTROL, CORN-BORER VARIABLE-BASED PRICING HAS TRANSLATED CONTROL AND ROOTWORM CONTROL TO SIGNIFICANT INCREMENTAL DEMAND FOR STACKED COMBINATIONS OF ROUNDUP STATES WITH CONSISTENT NEED READY CORN 2 AND THE YIELDGARD TRAITS FOR WEED CONTROL, ROOTWORM CONTROL AND SPORADIC CORN- BORER CONTROL 1 Seed includes one or more traits 17
  18. 18. COMMERCIAL Opportunity for Breeding and Biotechnology Is to Continue to Deliver Yield for Farmers FOCUS: YIELD WHAT MATTERS TO FARMERS IS THE YIELD HE SEES AT HARVEST, WHICH IS A FUNCTION OF HOW MUCH POTENTIAL A SEED HAS AND HOW GENETIC POTENTIAL (FUTURE) IT’S PROTECTED: GENETIC POTENTIAL NET REALIZED YIELD WITH PERCENT OF GENETIC GAIN FUTURE PROTECTION X PRESERVED OPPORTUNITIES PROTECTION AND ENHANCEMENT IMPROVED NITROGEN ADVANCES BREEDING UTILIZATION NET REALIZED YIELD DROUGHT TOLERANCE SECOND-GENERATION INSECT CONTROL GENETIC POTENTIAL (CURRENT) INSECT PRESSURE NET REALIZED YIELD WITH CURRENT WEED PRESSURE PROTECTION NATURAL YIELD NUTRIENT DEFICIENCY SUPPRESSION BELOW-GROUND CURRENT YIELD WATER DEFICIENCY INSECT CONTROL PROTECTION GENETIC POTENTIAL ABOVE-GROUND IS PRESERVED INSECT CONTROL THROUGH BIOTECH TRAITS AND PRODUCTION WEED-CONTROL ADVANCES TRAITS SEED NET REALIZED YIELD MANUFACTURING WITH NO PROTECTION 18
  19. 19. TECHNOLOGY DISCOVERY PHASE I PHASE II PHASE III PHASE IV Proof Of Concept Early Advanced Pre-launch Gene/Trait 2006 Pipeline Development Development Identification AS OF JANUARY 1, 2006 Roundup Ready Flex cotton Roundup RReady2Yield soybeans Roundup RReady2Yield canola Dicamba-tolerant soybeans Dicamba-tolerant cotton 2nd-Gen YieldGard Rootworm 2nd-Gen YieldGard Corn Borer Insect-protected soybeans YieldGard Rootworm II FARMER Soybean nematode-resistance Bollgard III Drought-tolerant corn 2nd-Gen Drought-tolerant corn Higher-yielding canola Drought-tolerant soybeans Drought-tolerant cotton Higher-yielding corn Nitrogen utilization corn Higher-yielding soybeans Mavera™ High-value corn with lysine1 PROCESSOR Mavera™ I High-value soybeans1 Mavera™ II High-value soybeans1 2nd-Gen High-value corn with lysine1 Feed Corn with balanced proteins1 High oil soybeans for processing1 CONSUMER Improved-protein soybeans Vistive II Low Lin – Mid Oleic soybeans Vistive III Low Lin – Mid Oleic – Low Sat soybeans Omega-3 soybeans 19 1. These product candidates are in the Renessen pipeline. Renessen is a Monsanto/Cargill joint venture
  20. 20. TECHNOLOGY Second-Generation YieldGard Corn Borer Expands Insect Spectrum and Acreage Potential KEY MARKET ACRES U.S. BRAZIL ARG Second-Generation 15M 4M AVAILABLE MARKET 50 - 60M YieldGard Corn Borer CREATING VALUE 0% 0% 0% PERCENT PENETRATED NEW BENEFIT TO CORN FARMERS 2nd GENERATION YIELDGARD CORN BORER Second-generation YieldGard Corn Borer offers unparalleled • Excellent control of combination of insect control and resistance management targeted pests – raises the bar for corn earworm and FALL ARMYWORM fall armyworm control • Outstanding yields, including stacks for rootworm control • Insect resistance management benefit unique to market 2ND GEN YGCB CONVENTIONAL DISCOVERY PHASE I PHASE II PHASE IV LAUNCH PHASE III Proof of Concept Early Development Pre-Launch Adv. Development 20
  21. 21. TECHNOLOGY Multi-Generational Drought-Tolerant Corn Is Advancing Closer to Commercial Reality KEY MARKET ACRES U.S. BRAZIL ARGENTINA 80M 30M 6M AVAILABLE MARKET 0% 0% 0% PERCENT PENETRATED SEGMENTED VALUE OPPORTUNITY WITH TRAIT WITHOUT TRAIT WITH TRAIT WITHOUT TRAIT RESULTS o C 32 34 40 BROAD ACRE STATES WITH STATES WITH Drought tolerance established through plant WATER USE INCONSISTENT CONSISTENT physiology (performance) over three years EFFICIENCY DROUGHT DROUGHT STRESS STRESS AND IRRIGATION REQUIREMENTS DISCOVERY PHASE I PHASE II PHASE IV LAUNCH PHASE III Proof of Concept Early Development Pre-Launch Adv. Development 21
  22. 22. TECHNOLOGY High-Lysine Is First Biotechnology Quality Trait for Animal Feed Industry KEY MARKET ACRES U.S. BRAZIL ARGENTINA MaveraTM High-Value Corn 5M 2M 1M AVAILABLE MARKET with Lysine CREATING VALUE 0% 0% 0% PERCENT PENETRATED PROJECT OVERVIEW FIELD DATA VALIDATES MaveraTM High-Value Corn with Lysine LYSINE TARGETS DISCOVERY PHASE I PHASE II PHASE III PHASE IV 5000 4000 CONCEPT • High-Value Corn with Lysine enhances level of limiting 3000 essential amino acids and corn oil content in feed and 1ST GENERATION lowers cost of animal feed ration 2000 MILESTONES MINIMUM 1000 TARGET • Final U.S. regulatory clearance received in February • Initially, high-lysine trait will be offered in stacked 0 SOUTH U.S. RESULT CONTROL AMERICA (2004) combination with YieldGard Corn Borer, with the RESULT opportunity to move to additional combinations with (2005) YieldGard Rootworm and Roundup Ready Corn 2 • Final commercial evaluation under an experimental field program in 2006, with limited commercial acreage in 2007 DISCOVERY PHASE I PHASE III PHASE II PHASE IV LAUNCH Proof of Concept Adv. Development Early Development Pre-Launch 22
  23. 23. TECHNOLOGY Most Significant Opportunity in Production of Ethanol Is Corn Yield OPPORTUNITY: OPPORTUNITY: COST COMPOSITION: ONE GALLON OF ETHANOL INCREASE THE IMPROVE THE VALUE OF THE NET REALIZED AVERAGE COST: $1.09/GAL AT 40M GAL FACILITY CO-PRODUCT YIELD ON THE FARM INCREASING THE NUTRIENT 0.70 KEY TOOLS: VALUE OF THE MOLECULAR CO-PRODUCT – BREEDING 0.50 OR ‘WASTE INCREASES THE STREAM’ – OF $ / GAL RATE OF YIELD ETHANOL 0.30 GAIN 2X ANNUALLY PRODUCTION AND BIOTECH OPENS NEW TRAITS PROTECT REVENUE 0.10 THAT YIELD STREAMS THAT POTENTIAL DEFRAY COST OF LABOR OTHER* CORN PRODUCTION -0.10 SUPPLIES & OVH DENATURANT KEY TOOLS: DEPR. UTILITIES CO- -0.30 RENESSEN CORN PRODUCT FRACTIONATION VALUE PROCESS BUILDS *OTHER INCLUDES ENZYMES - AMYLASE ON HIGH-LYSINE PRODUCT TO CREATE NEW FEED OPPORTUNITIES 23
  24. 24. LEADERSHIP Right to Lead in Seeds and Traits Is Earned by Companies That Deliver Best Options to Farmers EXPANDED The seeds & traits industry is FOOD AND FEED dynamic. As it matures, different TRAITS qualities will differentiate leaders ACCELERATED / CONSUMER DIFFERENTIATED and followers. The qualities that TRAITS GLOBAL TRAITS set a company like Monsanto apart today will be the table stakes for participation by the FOOD AND FEED FOOD AND FEED GLOBAL TRAITS GLOBAL TRAITS end of the decade TRAITS TRAITS SECOND-GEN TRIPLE-STACK SECOND-GEN TRIPLE-STACK TRAITS TRAITS TRAITS TRAITS REGIONAL SEED VARIABLE-BASED REGIONAL SEED VARIABLE-BASED LEAD MODEL PRICING MODEL PRICING TECHNOLOGY TECHNOLOGY TECHNOLOGY MOLECULAR MOLECULAR MOLECULAR LICENSING LICENSING LICENSING BREEDING BREEDING BREEDING AGREEMENTS AGREEMENTS AGREEMENTS GLOBAL GLOBAL GLOBAL STRONG BRAND STRONG BRAND STRONG BRAND REGULATORY REGULATORY REGULATORY PORTFOLIO PORTFOLIO PORTFOLIO EXPERTISE EXPERTISE EXPERTISE BROAD BROAD STACKED TRAIT STACKED TRAIT STACKED TRAIT BROAD LICENSING LICENSING LICENSING OFFERING OFFERING OFFERING STRATEGY STRATEGY STRATEGY PARTICIPATE IP GERMPLASM IP GERMPLASM IP GERMPLASM ESTATE LICENSING ESTATE LICENSING ESTATE LICENSING BRANDED SKU BRANDED SKU BRANDED SKU GERMPLASM MANAGEMENT GERMPLASM MANAGEMENT GERMPLASM MANAGEMENT BRANDED TRAIT SEED BRANDED TRAIT SEED BRANDED TRAIT SEED OFFERING MANUFACTURING OFFERING MANUFACTURING OFFERING MANUFACTURING EARLY DECADE MID-DECADE END OF DECADE 2000 - 2004 2005 - 2008 2009 - 2012 24
  25. 25. OVERVIEW Monsanto’s Seeds And Traits Strategy Is Played Out Across Four Core Crop Franchises SEED & TRAIT CROP PLATFORMS SMALL-ACRE CROPS LARGE-ACRE CROPS CORN SOYBEANS COTTON VEGETABLE Branded Licensed Branded Branded Licensed Branded Licensed ASI ASI ASGROW STONEVILLE DEKALB SEMINIS DEKALB ASGROW HOLDEN’S/ HOLDEN’S/ COTTON CORN CORN STATES STATES STATES AMERICAN AMERICAN SEEDS, INC. SEEDS, INC. BIOTECHNOLOGY R&D PLATFORMS MOLECULAR AND CONVENTIONAL BREEDING 25

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