David Riedel has been thinking about the agricultural challenges facing the world, and he's come up with some ways for investors to harvest profits from the planting and growing of crops.
"They're going to have to apply modern methods and machinery to the farmland around the world," the president and founder of Riedel Research told CNBC. "They're going to need to aggregate farmland into larger plots, so they can use machinery and fertilizers...to raise those yields."
Recommendations:
So how does this all play into a portfolio?
"We're finding Brazilian aggregators...we're finding Russian aggregators like...Black Earth Farming BLACK EARTH FARMING LTDBLERF
but for the U.S. investors who wants to find something closer to home, I would definitely point people towards Deere Deere & he said. "They're definitely a company that's going to benefit from the global demand for their high-tech agricultural machinery, as people ty to find a way to raise their yield."
Fertilizer plays can be tricky, he says.
"I think potash is pretty much played out...I don't think we've got another opportunity for potash prices to triple like they did this year," he said.
Still, he's got a potash play.
"Uralkali Uralkaliy it's a Russian company, very huge resources of potash in Russia, and Uralkali is very well positioned to benefit from the global demand for potash fertilizer," he said.
Tuesday, June 10, 2008
Dow Chemical's Liveris Interview: Part III- Agriculture
In part three we discuss Dow Ag and the agricultural sector in general including DuPont (DD) and Monsanto (MON).
Todd:
Roughly a third of earnings in the most recent quarter were Dow Ag. After you sell the commodity business, we are looking well in excess of that. I have not been able to find what percent of future earnings you expect them to be and what type of growth and how far out, as right now you are at about 20-25% annual EPS growth at Dow Ag. Going out 2009-2010 and beyond, to me 20% -25% EPS growth there seems sustainable if not surpassable. Accurate or not?
Andrew:
I think you are more accurate than not, remember the current % of Dow earnings is because AG is front loaded. It tends to be a first half year event for all of us because we are in the northern hemisphere and that's whether its Dow (DOW), DuPont (DD) or Monsanto (MON). The whole year happens in the first six months. We have some southern hemisphere exposure, notably Brazil and Argentina and my country Australia, but most of it is titled towards the northern hemisphere as a % of total earnings. Those numbers are distorted at this moment, but if you take the whole year and you say in '07 Dow AG earned about 10% to 15% of Dow's earnings but their growth rate was like you said, 20 some odd percent for the last five years.
They achieved that through 2 mechanisms one of which will continue to be a big plus that will ultimate if not continue that 20% ramp up it will get very close. The first mechanism is we have been levering Dow's considerable operational efficiencies over to Dow's Agroscience. Even though it is a small co. $3 to $4 billion in revenue, it has the power of a $50 billion co. in terms of operational excellence in its manufacturing, plants and supply chain. In its governance and share services it operates with its access to big company infrastructure, that's number one.
That's helped a lot of the cost line. Number two, the most exciting part is its pipeline. I mean, four years ago we made a conscious decision we said,"look, we're never going to be a big seed co. because its too expensive, one of these days we might be able to find an answer on U.S. corn, but between now and then let's rev up the technology engine and frankly not just in bio and seeds and traits in germplasm, but also in crop chemicals." I don't care what people say, GMOs will not replace crop chemicals in totality because growers will always need variety in their toolbox, its about diversity of solution and biotech cannot answer everything.
So we said "let's put R & D in focus on the pipeline that we now have" in crop chemicals in particular things that are not just in corn, but outside of corn, in cotton, rapeoil and canola, in seed ,in soy beans and of course over range and pasture. The crop chemical R & D pipeline we have right now and what we have done in traits, and in particular our new traits that we have announced plus the SmartStax agreement with Monsanto, have put us in a tremendous position. By 2010 when SmartStax gets launched, when our new traits get launched and our crop protection pipeline comes through, the R & D engine will yield real margin expansion for Dow AG.
I happen to think that Dow Ag in many ways doesn't need to have big revenues because its margins at 16%, 18%, 20% bottom line margins is packing a big punch in terms of its ability to deliver margin despite its size. We're increasing the R & D spending there. Dow Ag has a quarter of the R & D spending as a company which is a phenomenal statement when considering the size of the company we are and out there in the future Todd, we might be able to find rationalization opportunity and I will say out there, we'll find another one. In the meantime keep making that growth story.
Todd:
That was actually the next question. Ag sector valuations are stratospheric just now.
Andrew:
Oh yeah, I mean look, what were seeing now of the whole food change now started by corn and ethanol, that whole thing. Having said that, we're seeing China, this whole point about China's surge and as the Chinese eat more protein, eat more animals, those animals have to be nutured on agriculture, agriculture comes from feed, feed comes from corn and you know, there you go.
The food price things is real because of China's assention and I do think that's going to get worse before it gets better and I think the world is going to have to address it. I do not know what the systems will be. I do think the poverty side of it is big. The agricultural sector and the commodity boom in agriculture is compelling valuations to stratospheres, I mean Monsanto is the great flag carrier there, they are doing great and it wasn't long ago they were on their knees.
Todd:
Roughly a third of earnings in the most recent quarter were Dow Ag. After you sell the commodity business, we are looking well in excess of that. I have not been able to find what percent of future earnings you expect them to be and what type of growth and how far out, as right now you are at about 20-25% annual EPS growth at Dow Ag. Going out 2009-2010 and beyond, to me 20% -25% EPS growth there seems sustainable if not surpassable. Accurate or not?
Andrew:
I think you are more accurate than not, remember the current % of Dow earnings is because AG is front loaded. It tends to be a first half year event for all of us because we are in the northern hemisphere and that's whether its Dow (DOW), DuPont (DD) or Monsanto (MON). The whole year happens in the first six months. We have some southern hemisphere exposure, notably Brazil and Argentina and my country Australia, but most of it is titled towards the northern hemisphere as a % of total earnings. Those numbers are distorted at this moment, but if you take the whole year and you say in '07 Dow AG earned about 10% to 15% of Dow's earnings but their growth rate was like you said, 20 some odd percent for the last five years.
They achieved that through 2 mechanisms one of which will continue to be a big plus that will ultimate if not continue that 20% ramp up it will get very close. The first mechanism is we have been levering Dow's considerable operational efficiencies over to Dow's Agroscience. Even though it is a small co. $3 to $4 billion in revenue, it has the power of a $50 billion co. in terms of operational excellence in its manufacturing, plants and supply chain. In its governance and share services it operates with its access to big company infrastructure, that's number one.
That's helped a lot of the cost line. Number two, the most exciting part is its pipeline. I mean, four years ago we made a conscious decision we said,"look, we're never going to be a big seed co. because its too expensive, one of these days we might be able to find an answer on U.S. corn, but between now and then let's rev up the technology engine and frankly not just in bio and seeds and traits in germplasm, but also in crop chemicals." I don't care what people say, GMOs will not replace crop chemicals in totality because growers will always need variety in their toolbox, its about diversity of solution and biotech cannot answer everything.
So we said "let's put R & D in focus on the pipeline that we now have" in crop chemicals in particular things that are not just in corn, but outside of corn, in cotton, rapeoil and canola, in seed ,in soy beans and of course over range and pasture. The crop chemical R & D pipeline we have right now and what we have done in traits, and in particular our new traits that we have announced plus the SmartStax agreement with Monsanto, have put us in a tremendous position. By 2010 when SmartStax gets launched, when our new traits get launched and our crop protection pipeline comes through, the R & D engine will yield real margin expansion for Dow AG.
I happen to think that Dow Ag in many ways doesn't need to have big revenues because its margins at 16%, 18%, 20% bottom line margins is packing a big punch in terms of its ability to deliver margin despite its size. We're increasing the R & D spending there. Dow Ag has a quarter of the R & D spending as a company which is a phenomenal statement when considering the size of the company we are and out there in the future Todd, we might be able to find rationalization opportunity and I will say out there, we'll find another one. In the meantime keep making that growth story.
Todd:
That was actually the next question. Ag sector valuations are stratospheric just now.
Andrew:
Oh yeah, I mean look, what were seeing now of the whole food change now started by corn and ethanol, that whole thing. Having said that, we're seeing China, this whole point about China's surge and as the Chinese eat more protein, eat more animals, those animals have to be nutured on agriculture, agriculture comes from feed, feed comes from corn and you know, there you go.
The food price things is real because of China's assention and I do think that's going to get worse before it gets better and I think the world is going to have to address it. I do not know what the systems will be. I do think the poverty side of it is big. The agricultural sector and the commodity boom in agriculture is compelling valuations to stratospheres, I mean Monsanto is the great flag carrier there, they are doing great and it wasn't long ago they were on their knees.
The Mosaic Co. Added to Goldman's Conviction Buy List
I’d like to congratulate Goldman Sachs for its deft and timely upgrade of Mosaic (MOS) to its “Conviction Buy List” on Monday. With Bubble 3.0 in full swing, and Mosaic up a mere 1,000% in two years, such insights of unknown companies in unknown industries are highly appreciated by a market where manic behavior is evident on only some trading days.
Mosiac trades at a mere 47x trailing earnings, 11x book value, 8x sales and 34x cash flow. That’s a bargain compared to PotashCorp of Saskatchewan (POT), which is trading at 52x trailing earnings, 11x book, 12x sales and 32x cash flow. Heck, Mosaic and Potash are trading at only half what Cisco (CSCO) traded during Bubble 1.0!
Some doom-and-gloom types might point out to you that over the past couple hundred years, such manic behavior and silly valuations in commodities and commodity stocks have always lead to tremendous collapses. Don’t listen to them, because it’s different this time.
Mosiac trades at a mere 47x trailing earnings, 11x book value, 8x sales and 34x cash flow. That’s a bargain compared to PotashCorp of Saskatchewan (POT), which is trading at 52x trailing earnings, 11x book, 12x sales and 32x cash flow. Heck, Mosaic and Potash are trading at only half what Cisco (CSCO) traded during Bubble 1.0!
Some doom-and-gloom types might point out to you that over the past couple hundred years, such manic behavior and silly valuations in commodities and commodity stocks have always lead to tremendous collapses. Don’t listen to them, because it’s different this time.
Monday, June 9, 2008
Ag Plays Continue to Run
For a time it appeared as if the agricultural plays, which ran wild in 2007, were going to languish as investors snapped up other investments in 2008. Those stocks pulled back in mid-May, along with the rest of the market, but have put together another sharp rally in the last two weeks.
Potash Corp. of Saskatchewan was up by 4.2% Monday after gaining 51% in 2008, while rival Agrium Inc. tacked on 3.9% after a 28% gain in the first five-plus months of the year. Jeffrey Cooper, writing on Minyanville.com, says that Potash “and its entourage surely are reminiscient of hammer-time in the Internets” dating back to 1999. And yet, these stocks continue their surge.
Goldman Sachs analysts raised earnings estimates for two prominent names — Potash and Mosaic, saying they “continue to believe that exposure to companies significant potash exposure will lead to greater rewards for investors because of the superior industry structure of potash compared to the other nutrients.”
Seed giant Monsanto was also doing well, gaining 3.1%; the stock was up nearly 22% headed into today’s trade. Also gaining was Intrepid Potash, which rose 7%, and Mosaic Co., which rose 6.4%.
Potash Corp. of Saskatchewan was up by 4.2% Monday after gaining 51% in 2008, while rival Agrium Inc. tacked on 3.9% after a 28% gain in the first five-plus months of the year. Jeffrey Cooper, writing on Minyanville.com, says that Potash “and its entourage surely are reminiscient of hammer-time in the Internets” dating back to 1999. And yet, these stocks continue their surge.
Goldman Sachs analysts raised earnings estimates for two prominent names — Potash and Mosaic, saying they “continue to believe that exposure to companies significant potash exposure will lead to greater rewards for investors because of the superior industry structure of potash compared to the other nutrients.”
Seed giant Monsanto was also doing well, gaining 3.1%; the stock was up nearly 22% headed into today’s trade. Also gaining was Intrepid Potash, which rose 7%, and Mosaic Co., which rose 6.4%.
IBD's Top 10 - Monday
New iPhone Out; RIM Unfazed
1 As expected, Apple (NasdaqGS:AAPL - News) unveiled a high-speed version of its smart phone. The 3G iPhone, which will go on sale July 11, features GPS and costs less than the original, priced starting at $199. Apple also revealed a MobileMe online service for synchronizing applications that costs $99 a year. Apple shares fell 2%. BlackBerry maker Research In Motion (NasdaqGS:RIMM - News) wasn't fazed, rising 2%.
Lehman Raising $6B, Sees Loss
2 The investment bank plans to raise new capital to cover a Q2 loss of $2.8 bil, or $5.14 a share, its first as a public firm. Views were for a loss of 22 cents. Lehman Bros. (NYSE:LEH - News) expects net revenue to be a negative $700 mil, largely on trading losses. It said it sold about $130 bil of assets in Q2, with mortgage-related assets and leveraged loans down 15%-20%. Shares fell 9%.
Pending Home Sales Rebound
3 An index tracking contract signings for existing homes shot up 6.3% in April to a 6-month high from Oct.'s record low as buyers snapped up bargains in beaten-down markets, the Nat'l Association of Realtors said. The report suggests resale closings likely improved in May or this month. Some analysts see signs of a bottom, but prices have yet to stabilize.
Oil Eases On Dollar, Awaits Data
4 Crude backed off Fri.'s highs, ending down $4.19 to $134.35 a barrel as the dollar edged off record lows vs. the euro. Average gasoline prices topped $4 a gallon for the first time Sun. and moved to $4.02 on Mon. Saudi Arabia called for a meeting between oil producers and consumers, though analysts doubt that'll have much impact.
Indexes Mixed; Nasdaq Slides
5 The Nasdaq fell 0.6%, undercutting its May lows. Apple's 2% drop weighed on the composite, which trimmed losses late as Research In Motion rallied off its 50-day line. The NYSE composite was flat while the S&P 500 edged up 0.1% and the Dow gained 0.6% on strong McDonald's sales. Volume fell. The 10-year Treasury yield rose 8 basis points to 4.02%.
Iran Blames Iraq Woes On U.S.
6 Iran's supreme leader, Ayatollah Ali Khamenei, told visiting Iraqi PM Nouri al-Maliki that U.S. forces in his country pose the biggest obstacle to Iraq's future. Al-Maliki was in Tehran to foster stronger trading ties, even though Iran has long been accused of arming Iraqi militias. Tehran is hoping to undermine ongoing U.S.-Iraqi talks on a long-term security deal.
Obama, McCain Spar On Economy
7 Barack Obama said his GOP rival is an extension of President Bush and the "most fiscally irresponsible administration in history." Obama said he would keep Bush's income tax cuts for those making less than $200,000. John McCain's spokesman said Obama was a tax-and-spend liberal whose policies would destroy jobs. McCain will speak before a key business group on Tue.
High Court Limits Patent Rights
8 The Supreme Court unanimously ruled that firms give up the right to control how patented tech is used by the buyer once it is sold. The ruling vs. S. Korea's LG Electronics could affect patent holders like wireless tech giant Qualcomm (NasdaqGS:QCOM - News) and seed king Monsanto (NYSE:MON - News). Patent holders likely could still restrict future uses via license agreements.
Bush Arrives For Final EU Summit
9 The president arrived in Slovenia for his last U.S.-EU Summit at which he'll push for stronger penalties vs. Iran to discourage it from developing atomic weapons. Bush will also discuss with European leaders the world food crisis and Israeli-Palestinian peace talks. Bush will also visit Germany, Italy, France, England and N. Ireland.
Violent Crime Declined In U.S.
10 Violent crimes dipped 1.4% last year, reversing 2 years of increases, the FBI reported. Crime trends weren't uniform, however, with murders plunging 9.8% in big cities with more than 1 mil people while rising 3.7% in cities with 50,000-100,000. Property crimes fell 2.1%, the biggest drop in 4 years.
1 As expected, Apple (NasdaqGS:AAPL - News) unveiled a high-speed version of its smart phone. The 3G iPhone, which will go on sale July 11, features GPS and costs less than the original, priced starting at $199. Apple also revealed a MobileMe online service for synchronizing applications that costs $99 a year. Apple shares fell 2%. BlackBerry maker Research In Motion (NasdaqGS:RIMM - News) wasn't fazed, rising 2%.
Lehman Raising $6B, Sees Loss
2 The investment bank plans to raise new capital to cover a Q2 loss of $2.8 bil, or $5.14 a share, its first as a public firm. Views were for a loss of 22 cents. Lehman Bros. (NYSE:LEH - News) expects net revenue to be a negative $700 mil, largely on trading losses. It said it sold about $130 bil of assets in Q2, with mortgage-related assets and leveraged loans down 15%-20%. Shares fell 9%.
Pending Home Sales Rebound
3 An index tracking contract signings for existing homes shot up 6.3% in April to a 6-month high from Oct.'s record low as buyers snapped up bargains in beaten-down markets, the Nat'l Association of Realtors said. The report suggests resale closings likely improved in May or this month. Some analysts see signs of a bottom, but prices have yet to stabilize.
Oil Eases On Dollar, Awaits Data
4 Crude backed off Fri.'s highs, ending down $4.19 to $134.35 a barrel as the dollar edged off record lows vs. the euro. Average gasoline prices topped $4 a gallon for the first time Sun. and moved to $4.02 on Mon. Saudi Arabia called for a meeting between oil producers and consumers, though analysts doubt that'll have much impact.
Indexes Mixed; Nasdaq Slides
5 The Nasdaq fell 0.6%, undercutting its May lows. Apple's 2% drop weighed on the composite, which trimmed losses late as Research In Motion rallied off its 50-day line. The NYSE composite was flat while the S&P 500 edged up 0.1% and the Dow gained 0.6% on strong McDonald's sales. Volume fell. The 10-year Treasury yield rose 8 basis points to 4.02%.
Iran Blames Iraq Woes On U.S.
6 Iran's supreme leader, Ayatollah Ali Khamenei, told visiting Iraqi PM Nouri al-Maliki that U.S. forces in his country pose the biggest obstacle to Iraq's future. Al-Maliki was in Tehran to foster stronger trading ties, even though Iran has long been accused of arming Iraqi militias. Tehran is hoping to undermine ongoing U.S.-Iraqi talks on a long-term security deal.
Obama, McCain Spar On Economy
7 Barack Obama said his GOP rival is an extension of President Bush and the "most fiscally irresponsible administration in history." Obama said he would keep Bush's income tax cuts for those making less than $200,000. John McCain's spokesman said Obama was a tax-and-spend liberal whose policies would destroy jobs. McCain will speak before a key business group on Tue.
High Court Limits Patent Rights
8 The Supreme Court unanimously ruled that firms give up the right to control how patented tech is used by the buyer once it is sold. The ruling vs. S. Korea's LG Electronics could affect patent holders like wireless tech giant Qualcomm (NasdaqGS:QCOM - News) and seed king Monsanto (NYSE:MON - News). Patent holders likely could still restrict future uses via license agreements.
Bush Arrives For Final EU Summit
9 The president arrived in Slovenia for his last U.S.-EU Summit at which he'll push for stronger penalties vs. Iran to discourage it from developing atomic weapons. Bush will also discuss with European leaders the world food crisis and Israeli-Palestinian peace talks. Bush will also visit Germany, Italy, France, England and N. Ireland.
Violent Crime Declined In U.S.
10 Violent crimes dipped 1.4% last year, reversing 2 years of increases, the FBI reported. Crime trends weren't uniform, however, with murders plunging 9.8% in big cities with more than 1 mil people while rising 3.7% in cities with 50,000-100,000. Property crimes fell 2.1%, the biggest drop in 4 years.
Heavy Rains Hurting Corn and Soybean Yields, Raising Prices
Rainfall has been over 3 times the normal amount in the Midwest the last few weeks, with more rain on the way. The heavy rains are affecting corn and soybean yields (video source: Clip Syndicate, Bloomberg), with just 74% of corn emerged from the ground, and only 32% of soybeans emerged.
Farmers are now at a point of needing to make a decision of whether to take the Government subsidized crop insurance and keep the ground idle, or plant and take the risks of lower yields, which could be potentially as low as 75% of normal yield levels. As much as 500,000 to 3 million acres may become idle. Analysts are already cutting corn crop yields by 4 bushels per acre. As ethanol production continues to increase, expect corn prices to rise, with consumers feeling the effects at both the pump and in the grocery store.
Companies to watch that may be impacted include Archer Daniels Midland (ADM) and Bugne (BG). Others that are likely to continue to benefit from rising demand for food commodities include fertilizer companies such as Mosaic (MOS), Potash (POT), and Agrium (AGU), chemical and seed companies such as Dow Chemical (DOW) and Monsanto (MON), and agricultural machinery makers such as Deere (DE).
On the direct downside are the users of corn, especially the restaurants and food producers with lower margins and less pricing power, such as Darden (DRI) and Tyson Foods (TSN).
Farmers are now at a point of needing to make a decision of whether to take the Government subsidized crop insurance and keep the ground idle, or plant and take the risks of lower yields, which could be potentially as low as 75% of normal yield levels. As much as 500,000 to 3 million acres may become idle. Analysts are already cutting corn crop yields by 4 bushels per acre. As ethanol production continues to increase, expect corn prices to rise, with consumers feeling the effects at both the pump and in the grocery store.
Companies to watch that may be impacted include Archer Daniels Midland (ADM) and Bugne (BG). Others that are likely to continue to benefit from rising demand for food commodities include fertilizer companies such as Mosaic (MOS), Potash (POT), and Agrium (AGU), chemical and seed companies such as Dow Chemical (DOW) and Monsanto (MON), and agricultural machinery makers such as Deere (DE).
On the direct downside are the users of corn, especially the restaurants and food producers with lower margins and less pricing power, such as Darden (DRI) and Tyson Foods (TSN).
Friday, June 6, 2008
Can Monsanto Double Grain Yields?
Monsanto (MON) is a name I've had on the radar a long while, as part of the global agriculture boom. [Oct 9: Looking Ahead to Monsanto] It has always been deemed 'expensive' but frankly due to it's scarcity value (only one relative true peer in Syngenta (SYT)) it will probably trade at a premium for a long while. The trick for a stock like this is it must be bought during a serious market swoon (i.e. mid March) to get a price that can create comparable upside to some other ideas in the fund.
First let's quickly point out the company has come out with a reiteration last week of guidance to double gross profit by 2012
Monsanto says it still expects its gross profit to more than double by 2012 by increasing productivity and yields to farmers.
In 2007, the company's gross profit was $4.29 billion. If the company can double that number, its gross profit will reach about $8.5 billion by 2012. Gross profit is the difference between income and the expenses directly attributed to it.
Now on to some commentary by the company to double yields by 2030 (again we need breakthroughs left and right across agriculture and energy to compensate for a new batch of 2.5 billion humans set to join us by 2050)
Monsanto Co. Chief Executive Hugh Grant set a bold goal for the company on Wednesday, promising to develop by 2030 new strains of corn, soybeans and cotton that can yield twice as much grain and fiber per-acre while consuming just two-thirds the water.
A key part of realizing the goal is breeding crops that need less water to survive, he said. (for those readers who were not around in the fall - i.e. most of you - I had maintained then that in the future wars between countries will be fought over fresh water, not oil... err weapons of mass destruction - that will be the ultimate shortage; the one truly non negotiable factor in human life)
While grain yields have been relatively flat over the last decade, its possible they could double over the next 22 years, said Michael Aide, chair of the Southeast Missouri State University Department of Agriculture. Farmers in southeast Missouri, for example, can grow about 200 bushels of corn per acre, far more than double what they could grow during World War II, he said. Over the last 60 years, yield increases have come in big jumps when new technologies like artificial fertilizer were introduced.
Monsanto plans to increase its grain yields gradually, Grant said, as the company introduces new strains of crops. The company will use advanced breeding techniques to develop heartier, more fruitful crops. At the same time, it will use genetic engineering to give the plants the ability to withstand pests like corn worms.
Some commentators in this NYTimes story have their doubts
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.”
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. (that has already begun to change due to economics - as with the environment once costs hit a certain price level, non economic considerations get thrown out the door)
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.
Moreover, the company is not talking about the United States alone. In some countries, output could be increased dramatically 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.
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.”
First let's quickly point out the company has come out with a reiteration last week of guidance to double gross profit by 2012
Monsanto says it still expects its gross profit to more than double by 2012 by increasing productivity and yields to farmers.
In 2007, the company's gross profit was $4.29 billion. If the company can double that number, its gross profit will reach about $8.5 billion by 2012. Gross profit is the difference between income and the expenses directly attributed to it.
Now on to some commentary by the company to double yields by 2030 (again we need breakthroughs left and right across agriculture and energy to compensate for a new batch of 2.5 billion humans set to join us by 2050)
Monsanto Co. Chief Executive Hugh Grant set a bold goal for the company on Wednesday, promising to develop by 2030 new strains of corn, soybeans and cotton that can yield twice as much grain and fiber per-acre while consuming just two-thirds the water.
A key part of realizing the goal is breeding crops that need less water to survive, he said. (for those readers who were not around in the fall - i.e. most of you - I had maintained then that in the future wars between countries will be fought over fresh water, not oil... err weapons of mass destruction - that will be the ultimate shortage; the one truly non negotiable factor in human life)
While grain yields have been relatively flat over the last decade, its possible they could double over the next 22 years, said Michael Aide, chair of the Southeast Missouri State University Department of Agriculture. Farmers in southeast Missouri, for example, can grow about 200 bushels of corn per acre, far more than double what they could grow during World War II, he said. Over the last 60 years, yield increases have come in big jumps when new technologies like artificial fertilizer were introduced.
Monsanto plans to increase its grain yields gradually, Grant said, as the company introduces new strains of crops. The company will use advanced breeding techniques to develop heartier, more fruitful crops. At the same time, it will use genetic engineering to give the plants the ability to withstand pests like corn worms.
Some commentators in this NYTimes story have their doubts
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.”
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. (that has already begun to change due to economics - as with the environment once costs hit a certain price level, non economic considerations get thrown out the door)
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.
Moreover, the company is not talking about the United States alone. In some countries, output could be increased dramatically 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.
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.”
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