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Argent in the News

Deep pockets: With cash reserves, is Monsanto eying a deal?

15 September 2014

(St. Louis Business Journal)

“Kirk McDonald, a senior research analyst with Argent Capital Management in Clayton, said the company could also see significant growth in soybean seed sales from South American markets, including Brazil and Argentina.”

September 12, 2014  (Ben Unglesbee)

Even with corn prices in freefall, Monsanto Co. has big plans for growth in the coming years. Working against the agrochemical and biotech company could be its own quest to improve farmers’ yields. And some think Monsanto, which reported 2013 revenue of $14.86 billion, could also be planning to grow another way — by using its large cash reserves to make an acquisition.

Earlier this year Monsanto unveiled a five-year plan to double its earnings per share and add $4 billion in gross profits by expanding its corn and soy seed markets, introducing new soybean products and getting farmers hooked on new services like its Climate Corp. platform. In September the company announced an employee incentive program to help meet its goals.
“I think it’s achievable,” Christopher Muir, a senior industry analyst with S&P Capital IQ, said of Monsanto’s plan to double earnings per share. “The question is whether they can execute on it.”
Muir pointed to Monsanto’s Roundup Ready 2 Xtend soybean system and Smartstax PRO technology as being key to the company’s plan. Kirk McDonald, a senior research analyst with Argent Capital Management in Clayton, said the company could also see significant growth in soybean seed sales from South American markets, including Brazil and Argentina.

In an August presentation to investors,Monsanto CEO Hugh Grant said the company expects yield gains for soybeans to account for 85 percent of crop production increases in the next five years. By developing products that increase crop yield for farmers, Monsanto also faces a paradox. As Muir points out, when yields increase, it ultimately drives down the prices for crops and, with them, seeds. But falling corn prices haven’t stopped Monsanto from increasing seed prices for the next growing season. In August, Monsanto told the Wall Street Journal it would increase prices, as it does each year, typically by 5 percent to 10 percent.