SELLING THE DREAM
1.As food crisis worsens, firms push GM seeds
2.Monsanto plans future seeds to double yields for 3 crops
3.BASF sees strong trend continuing
4.Monsanto Seeks Big Increase in Crop Yields
5.Beware Faux Growth
6.Chairman of Syngenta's board high on modern agriculture
NOTE: Monsanto, having failed to increase yields to date but having increased inputs (more agrochems, more expensive non re-usable seeds), now says it will solve all known agricultural problems! (items 2 and 4)
EXTRACT: Monsanto - 'the biggest "feed the world" concept stock'. (item 5)
1. As food crisis worsens, firms push GM seeds
Times of India, 4 Jun 2008
As the world grapples with the worst food crisis in recent years, firms like, Cargill, Archer Daniels Midlands, Hong Kong-based Noble Group, trading in grains are reaping profits.
Its European competitor Syngenta is doing even better, declaring net profits of over $1.1 billion in 2007, up by 75% over the previous year. Both companies, US-based Monsanto and Syngenta are vigorously pushing their genetically modified (GM) seeds hoping that they will become acceptable now.
GM seeds have often been accused of triggering unsuspected crop failures or pest attacks. Global fertilizer companies are also on the fast track, as they promise higher yields in times of dwindling stocks. Two of the biggest fertilizer companies Potash Corp of Canada and Yara of Norway have made profits of over $1 billion each last year.
Potash was running at a loss of over $123 million in 2003. Others in the big league are Mosaic and Agrium of the US and ICL of Israel, all with about half a billion dollars profit each in 2007. Cargill created Mosaic in 2004.
While the agri-business giants mentioned above trade in physical commodities and are open to some scrutiny, there is a phalanx of traders who have made millions through just betting on prices.
According to GRAIN, a network of NGOs working for sustainable agriculture, speculative investment in commodities futures has zoomed from about $5 billion in 2000 to $175 billion to 2007. These include Louis Dreyfus of France, a private agricultural commodities trading firm with annual sales exceeding $22 billion, which does not report its profits.
An indication of the scale at which the speculative futures markets operate is given by trading volumes in the world’s largest commodity exchange, the Chicago Board of Trade. In its April 2008 update, CBOT reported that during January and April 2008 644,741 contracts were traded on average every day, an increase of 17% over last year. The average notional value for a day’s trading was about $2.8 billion for wheat, $8.9 billion for corn and $11.2 billion for soyabean.
In 2005, out of 216 countries in the world, 207 had to import wheat and 170 had to import rice from international markets, according to FAO. That is why the sun never sets in the offices of big agri-business.
2. Monsanto plans future seeds to double yields for 3 crops
Chicago Tribune, June 5 2008
Monsanto Co., the world's biggest seed producer, pledged to develop seeds that will double yields for three major crops to meet surging global demand for food, fuel and fiber.
Yields for corn, soybeans and cotton will climb twofold by 2030 from the levels in 2000, St. Louis-based Monsanto said. New seeds also will reduce the amount of water and other resources needed to grow crops by one-third, Monsanto said.
Chief Executive Hugh Grant is adding cotton and soybeans to yield goals as some areas of the world face food shortages.
The challenge: Doubling soybean yields may prove the most difficult because output in Illinois, the largest-producing state, has improved only 0.5 percent a year this decade, said Peter Goldsmith, an associate professor of agribusiness at the University of Illinois.
3. BASF sees strong trend continuing
By Mantik Kusjanto and Frank Siebelt
Reuters, June 5 2008
* Positive trend from first quarter continuing
* Significant price increases expected
* Tight supply throughout industry
FRANKFURT, June 5 (Reuters) - BASF AG will benefit further from booming agricultural markets as farmers seek more chemicals to kill fungi, weeds and bugs to boost crop output, a top executive told Reuters.
"We had a strong start this year. This positive trend is continuing into the second quarter," BASF's president for crop protection Michael Heinz said in an interview.
"We will also look at significant price increases," he said, adding that rising raw material and energy prices are among the factors driving price hikes. He said the impact of price increases would be felt even more in the second half and next year.
Speaking this week at his office in a renovated 1922-built villa in the town of Limburgerhof in central Germany, Heinz, 44, said the period of overcapacity in the industry was over.
"It is a nice problem that we are now having, to think about expanding capacities," he said.
Like bigger rivals Bayer CropScience and Syngenta, BASF is operating at full steam to cash in on a global rush for chemicals that can boost output of crops such as corn, soybean and wheat given rising demand and soaring prices.
Other top players fighting for a slice of the 29 billion euro ($45 billion) crop protection market include Dow Chemical and Dupont.
"Supply is tight throughout the industry and it is just that there has been an exorbitant increase in demand," Heinz said. "No manufacturer had really foreseen 24 months ago that we would see this type of development".
BASF shares were down 0.3 percent at 96.41 euros by 0807 GMT, while the DJ Stoxx European chemicals index was off 0.4 percent.
In the first quarter, earnings before interest and taxes before special items at the agricultural products segment of BASF rose 12 percent to 259 million euros on the back of a 5 percent increase in sales.
The business, which achieves margins of over 20 percent and is relatively immune to economic cycles, accounted for 6 percent of group sales and 11 percent of operating profit before special items.
Klaus Welsch, head of BASF crop protection's European business, said farmers were using more higher-value products to protect their crops.
"We can see a real paradigm shift away from pure disease control towards yield protection and enhancement," Welsch said.
Heinz added: "Farmers are going for more preventative types of solutions. As a result, we see very strong demand".
BASF, the world's biggest chemicals group by sales, is the world's third-largest player in insecticides and fungicides and number five in herbicides.
Heinz, who joined BASF in 1984 and holds an MBA from Duke University in North Carolina, said the company has one of the strongest active-ingredient pipelines in the industry.
"We certainly feel that we have an edge over our competitors," he said, adding that one key new product is F-500 which controls all classes of fungi in many crops including cereals, grapes, fruits and vegetables.
"F-500 has been very, very successful. Last year, this product was on more than 10 million acres in North America. We intend to more than double it this year," he added.
Heinz said he was "very optimistic" thanks to the group's cooperation with Monsanto, the top biotech seeds company, in promoting the product for corn and soybeans.
BASF and Monsanto also agreed in March last year to collaborate on developing higher-yielding crops that are more tolerant to adverse environmental conditions such as drought.
Asked about the impact of market speculation on commodity prices, Heinz said: "The icing on the cake is speculation but the cake has very solid fundamentals". (Editing by David Holmes)
4. Monsanto Seeks Big Increase in Crop Yields
By ANDREW POLLACK
New York Times, June 5 2008
Monsanto, the leader in agricultural biotechnology, pledged Wednesday to develop seeds that would double the yields of corn, soybeans and cotton by 2030 and would require 30 percent less water, land and energy to grow.
The announcement, coming as world leaders are meeting in Rome to discuss rising food prices and growing food shortages, appears to be aimed at least in part at winning acceptance of genetically modified crops by showing that they can play a major role in feeding the world.
Much of what is in the commitment are things the company was doing anyway. But Monsanto's chief executive, Hugh Grant, said in an interview Wednesday that the company wanted to make the goals public "so this isn't just a bound report on some library shelf." He said it was only coincidence that the announcement was made at the same time as the meeting in Rome.
Monsanto said it had developed its commitment after consulting farmers, political leaders, academics and advocacy groups as to what needed to be done to increase food production without converting more forests into farmland or increasing pollution.
It is a matter of debate how much genetic engineering, which involves adding bacterial or other foreign genes to the DNA of plants, could contribute to improving output.
A recent review of agricultural technology, sponsored by the United Nations and the World Bank, depicted a limited role. But in Rome on Tuesday, the United States secretary of agriculture, Edward T. Schafer, said biotechnology would be essential if the world was to increase food supply by 2030 to meet rising demand.
Soybeans, corn and cotton that have been genetically engineered to provide herbicide tolerance, insect resistance or both are widely grown in the United States and several other countries. But they are largely shunned in Europe and some other areas because of concerns about potential environmental and health effects.
Perhaps seeking to avoid controversy, Monsanto’s announcement did not mention the term “genetic engineering.” It referred instead to “other technologies” beyond breeding.
Monsanto’s goal of doubling yields by 2030 over levels in 2000 might require a sharp acceleration in the rate by which agricultural productivity has been increasing. James E. Specht, a soybean genetics expert at the University of Nebraska, said he doubted it could be done.
“The hype-to-reality ratio of that one is essentially infinity,” Mr. Specht said. “Seeing an exponential change in the yield curve is unlikely.”
Mr. Specht said that on irrigated farms in Nebraska, soybean yields have been increasing by about 0.6 bushels an acre every year. At that rate it would take 83 years for yields to double from the 50 bushels an acre recorded in 2000.
But Monsanto executives say that a new technique called marker-assisted selection could double the rate of gain made from breeding. That technique does not involve altering crops by putting in foreign genes. Rather it uses genetic tests to help choose which plants to use in conventional cross-breeding, vastly speeding up the process.
Monsanto executives say genetic engineering could provide additional increases in output beyond that. The company’s insect-resistant crops already help protect corn and cotton. And Monsanto scientists are working on genetically engineered crops that would grow better with less water and fertilizer.
Moreover, the company is not talking about the United States alone. In some countries, output could be increased sharply just by introducing modern hybrid corn, whether or not that corn is genetically engineered, Mr. Grant said.
Bill Freese, a science policy analyst at the Center for Food Safety, a Washington group critical of biotech crops, said some studies had shown that genetic engineering can actually reduce yields. He and other critics also say that the biotech crops developed so far have mainly been aimed at feeding livestock in wealthy countries, not improving the staple crops grown by small farmers in poor countries.
As part of its announcement Wednesday, Monsanto said it would work to improve the lives of small and poor farmers by sharing its technology. It recently announced a project with some other organizations to develop drought-tolerant corn for Africa, with Monsanto not charging royalties for use of its technology.
Monsanto also said it would donate $10 million over five years to public-sector programs aimed at improving yields of wheat and rice, which are not a primary focus of the company’s efforts. Much of the breeding of those two food staples are performed by governments and universities.
While Mr. Grant said that skeptics might say Monsanto was exploiting the food crisis to win acceptance for its technology, other people “will say it’s long overdue, and thank goodness the companies are stepping up.”
Shares of Monsanto fell by $1.54, to close at $131.60 Wednesday. But the stock has more than doubled in the last year, in part because of soaring crop prices. Besides being a leader in genetic engineering, Monsanto is one of the largest suppliers of seeds in the world.
5. Beware Faux Growth
Martin T. Sosnoff
Forbes, 5 June 2008
... during the past two months, growth stocks have totally eclipsed their value counterparts, which led handily during the first quarter. In fact, the Russell Growth Index is outpacing the Russell Value Index by more than 400 basis points so far this quarter and now leads Russell Value by 240 basis points year-to-date.
Nobody expected this...
I turned to the stock listings in the Russell Growth Index to check market weightings and to make sure that I hadn't overlooked any well-behaved properties. Monsanto (nyse: MON - news - people ) stared up at me with pleading eyes. While I bought the fertilizer plays Potash (nyse: POT - news - people ) and Mosaic (nyse: MOS - news - people ), I had missed the biggest "feed the world" concept stock.
Monsanto is the leading purveyor of corn seed, and its herbicide, Roundup, dominates the worldwide market. Monsanto is listed by Russell under "materials and processing," but it is truly a biotechnology house. If you believe corn futures are never going below $6 a bushel, you can own Monsanto. But right now, it's pricey.
For me, the Russell Growth Index contains too many quirks and peculiarities. Exxon Mobil (nyse: XOM - news - people ), for example, is there despite its incapacity to grow oil production. Microsoft and even General Electric (nyse: GE - news - people ) are understandable, but Exxon is a value property with a low price-to-earnings ratio and viciously cyclical refining and marketing operations. In good times, half their earnings come from downstream assets; in bad times, close to zilch. Why does Russell list refiners like Valero (nyse: VLO - news - people ) in its growth index?
Exxon reminds me of the complacent General Motors (nyse: GM - news - people ) in the 1950s, when the company owned 50% of the domestic market and most everyone drove a two-tone Chevy.
The biggest problem we all face is that there are so few exciting big-cap names. Where are all the girls in summer dresses walking down Fifth Avenue?
Martin T. Sosnoff is chairman and founder of Atalanta/Sosnoff Capital, a private-investment management company with over $9 billion in assets under management.
6. Chairman of Syngenta's board high on modern agriculture
Better Farming, Jun 4 2008
Martin Taylor, the Switzerland based chairman of the board of Syngenta AG, is high on modern agriculture as a way to solve the food crisis and says Canada has a part to play. Stewart, on a two-week tour of Canada, addressed a group of farm leaders and agricultural journalists in Guelph Tuesday night.
“Agriculture is sexy for the first time since the Bronze Age,” Taylor said and the debate about how to deal with a worldwide food crisis is running high. But world leaders aren’t talking about adopting modern technology as a means of solving it. “I don’t know if they are embarrassed by it (the technology) or politically opposed to it,” he said. “Maybe they don’t know about it.”
Yet for Taylor, modern technology’s role was apparent and crucial: “The world has to choose between technology, deforestation and hunger,” he said.
“I can’t see another way out.”
He decried “the move towards mediaeval agriculture, especially in Europe,” where he says hostility towards agricultural technology “is extraordinarily pronounced.” He predicted that genetically modified foods that are now banned will be allowed into Europe gradually, first as animal feed and then later as food for humans. He doesn’t see that changing in the short term as the European Union commissioners who have the power to bring changes won’t raise controversy until their terms are renewed in the next year.
The European attitude towards farmers is perverse, Taylor said. Their view is that “growers are a parasitic bunch as a whole. Individual growers are heroes who go out in the snow.”
The food crisis should have been foreseen, Taylor said. Agricultural productivity gains have slowed from the rapid in pace in the 1970s and ‘80s. For years storage stocks have shrank but price increases that should have sparked more production failed to take place. “Population growth is the steady drumbeat, behind this,” along with diet changes in China, the world’s most populous nation.
“On top of all this is the diversion of crops towards biofuel,” he added, noting he was “not one of these that believe biofuel is a wicked experiment. It is unfortunate this (perception) has gained so much currency.”
Taylor said Canada has an important role in solving the food crisis. It is one of five countries that can ramp up agricultural production to meet increasing worldwide demand for food; the other areas being Russia, the Ukraine, Argentina and Brazil.
On top of that, Canada, which has generally adopted new agricultural technology, is viewed as a reasonable country in Europe, where ideas are sometimes rejected simply because they come from the United States. BF