monsanto 200412/08
TRANSCRIPT
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Robert T. Fraley, Ph.D.Robert T. Fraley, Ph.D.
Chief Technology Officer and Executive Vice PresidentChief Technology Officer and Executive Vice President
1515thth Annual Chemical ConferenceAnnual Chemical Conference
Smith BarneySmith Barney
Dec. 8, 2004Dec. 8, 2004
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ForwardForward--Looking StatementsLooking Statements
Certain statements contained in this presentation, such as stateCertain statements contained in this presentation, such as statements concerning the company's anticipated ments concerning the company's anticipated financial results, current and future product performance, regulfinancial results, current and future product performance, regulatory approvals, currency impact, business and atory approvals, currency impact, business and financial plans and other nonfinancial plans and other non--historical facts are "forwardhistorical facts are "forward--looking statements." These statements are based on looking statements." These statements are based on current expectations and currently available information. Howevecurrent expectations and currently available information. However, since these statements are based on factors that r, since these statements are based on factors that involve risks and uncertainties, the companyinvolve risks and uncertainties, the company’’s actual performance and results may differ materially from thoss actual performance and results may differ materially from those e described or implied by such forwarddescribed or implied by such forward--looking statements. Factors that could cause or contribute to sulooking statements. Factors that could cause or contribute to such differences ch differences include, among others: the company's exposure to various continginclude, among others: the company's exposure to various contingencies, including those related to Solutia Inc., encies, including those related to Solutia Inc., litigation, intellectual property, regulatory compliance (includlitigation, intellectual property, regulatory compliance (including seed quality), environmental contamination and ing seed quality), environmental contamination and antitrust; fluctuations in exchange rates and other developmentsantitrust; fluctuations in exchange rates and other developments related to foreign currencies and economies; related to foreign currencies and economies; increased generic and branded competition for the company's Rounincreased generic and branded competition for the company's Roundup herbicide; the accuracy of the companydup herbicide; the accuracy of the company’’s s estimates and projections, for example, those with respect to prestimates and projections, for example, those with respect to product returns and grower use of our products and oduct returns and grower use of our products and related distribution inventory levels; the effect of weather conrelated distribution inventory levels; the effect of weather conditions and commodity markets on the agriculture ditions and commodity markets on the agriculture business; the success of the companybusiness; the success of the company’’s research and development activities and the speed with which rs research and development activities and the speed with which regulatory egulatory authorizations and product launches may be achieved; domestic anauthorizations and product launches may be achieved; domestic and foreign social, legal and political d foreign social, legal and political developments, especially those relating to agricultural productsdevelopments, especially those relating to agricultural products developed through biotechnology; the companydeveloped through biotechnology; the company’’s s ability to successfully market new and existing products in new ability to successfully market new and existing products in new and existing domestic and international markets; the and existing domestic and international markets; the companycompany’’s ability to obtain payment for the products that it sells; the s ability to obtain payment for the products that it sells; the company's ability to achieve and maintain company's ability to achieve and maintain protection for its intellectual property; the effects of the comprotection for its intellectual property; the effects of the company's accounting policies and changes in generally pany's accounting policies and changes in generally accepted accounting principles; the company's ability to fund itaccepted accounting principles; the company's ability to fund its shorts short--term financing needs; general economic and term financing needs; general economic and business conditions; political and economic conditions due to thbusiness conditions; political and economic conditions due to threat of future terrorist activity and related military reat of future terrorist activity and related military action; and other risks and factors detailed in the company's fiaction; and other risks and factors detailed in the company's filings with the U.S. Securities and Exchange lings with the U.S. Securities and Exchange Commission. Undue reliance should not be placed on these forwardCommission. Undue reliance should not be placed on these forward--looking statements, which are current only as of looking statements, which are current only as of the date of this release. The company disclaims any current intthe date of this release. The company disclaims any current intention to revise or update any forwardention to revise or update any forward--looking looking statements or any of the factors that may affect actual results,statements or any of the factors that may affect actual results, whether as a result of new information, future events whether as a result of new information, future events or otherwise. or otherwise.
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Additional DisclosuresAdditional Disclosures
This presentation uses the nonThis presentation uses the non--GAAP financial measure of earnings per share (GAAP financial measure of earnings per share (““EPSEPS””) excluding the effect of ) excluding the effect of certain items. A noncertain items. A non--GAAP EPS financial measure (which we sometimes refer to as EPS oGAAP EPS financial measure (which we sometimes refer to as EPS on an ongoing basis) may n an ongoing basis) may exclude the impact of restructuring charges, charges associated exclude the impact of restructuring charges, charges associated with the settlement of litigation, gains and losses with the settlement of litigation, gains and losses on the sale of assets, and certain other items. The specific iton the sale of assets, and certain other items. The specific items that are excluded from, and result in, our nonems that are excluded from, and result in, our non--GAAP EPS financial measure are clearly identified as such in thiGAAP EPS financial measure are clearly identified as such in this presentation. The presentation of EPS excluding s presentation. The presentation of EPS excluding the effect of certain items is intended to supplement investorsthe effect of certain items is intended to supplement investors’’ understanding of our operating performance. This understanding of our operating performance. This nonnon--GAAP financial measure may not be comparable to similar measuresGAAP financial measure may not be comparable to similar measures used by other companies. Furthermore, used by other companies. Furthermore, this nonthis non--GAAP financial measure is not intended to replace net income (loGAAP financial measure is not intended to replace net income (loss), cash flows, financial position, or ss), cash flows, financial position, or comprehensive income (loss), as determined in accordance with accomprehensive income (loss), as determined in accordance with accounting principles generally accepted in the counting principles generally accepted in the United States. The nonUnited States. The non--GAAP financial measure used in this presentation is reconciled tGAAP financial measure used in this presentation is reconciled to the most directly o the most directly comparable financial measure calculated and presented in accordacomparable financial measure calculated and presented in accordance with GAAP and can be found at the end of nce with GAAP and can be found at the end of this presentation.this presentation.
Fiscal YearFiscal YearIn this presentation, unless otherwise specified:In this presentation, unless otherwise specified:References to years, or to fiscal years, 2001 through 2006 are oReferences to years, or to fiscal years, 2001 through 2006 are on a fiscal year basis and refer to the 12n a fiscal year basis and refer to the 12--month period month period
ending August 31.ending August 31.
TrademarksTrademarksRoundup, Roundup Ready, Bollgard, Bollgard II, YieldGard, AsgrowRoundup, Roundup Ready, Bollgard, Bollgard II, YieldGard, Asgrow, DeKalb, VISTIVE, and the Monsanto, Imagine and , DeKalb, VISTIVE, and the Monsanto, Imagine and vine logo are trademarks owned by Monsanto Company and its whollvine logo are trademarks owned by Monsanto Company and its wholly owned subsidiaries. All other trademarks are y owned subsidiaries. All other trademarks are the property of their respective owners. the property of their respective owners. ©© 2004. Monsanto Company. All Rights Reserved.2004. Monsanto Company. All Rights Reserved.
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Biotechnology Is Most Rapidly Adopted Technology in Biotechnology Is Most Rapidly Adopted Technology in History of AgricultureHistory of Agriculture
Global Monsanto Planted Biotech AcresGlobal Monsanto Planted Biotech Acres
OverviewOverview
Acres in millionsAcres in millions
0
20
40
60
80
100
120
140
160
180
1996 1997 1998 1999 2000 2001 2002 2003 2004
Canola
Cotton
Corn
Soybeans
Source: Monsanto estimatesSource: Monsanto estimates
5
Biotechnology Provides Better Economical and Biotechnology Provides Better Economical and Environmental SolutionsEnvironmental Solutions
OverviewOverview
Effect of Biotech Crops on U.S. Pesticide UseEffect of Biotech Crops on U.S. Pesticide Usein 2003in 2003 Million Million
Lbs.Lbs.
SoybeansSoybeans (20)(20)
CornCorn (13)(13)
CottonCotton (13)(13)
CanolaCanola (0.2)(0.2)
Total Reduction in Total Reduction in Pesticide UsePesticide Use (46)(46)
Source: Source: ““US Agriculture of Biotechnology Derived Crops Planted in 2003 US Agriculture of Biotechnology Derived Crops Planted in 2003 –– An Update of Eleven cases An Update of Eleven cases of Eleven Case Studies,of Eleven Case Studies,”” National Center for Food & Agriculture Policy. October 20, 20National Center for Food & Agriculture Policy. October 20, 200404
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Early, Major Investment in Seeds Captured Value ShiftEarly, Major Investment in Seeds Captured Value ShiftOverviewOverview
Source: Monsanto EstimatesSource: Monsanto Estimates
0%
10%
20%
30%
40%
50%
60%
2001 2002 2003 2004
Monsanto Seed Partners ShareMonsanto Seed Partners Share
Monsanto Brand ShareMonsanto Brand ShareMonsanto Genetic Market Share in U.S. Corn SeedMonsanto Genetic Market Share in U.S. Corn Seed
American Seeds Brand ShareAmerican Seeds Brand Share
43%43% 45%45%48%48%
49%49%
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Monsanto Now Services Seed Market Monsanto Now Services Seed Market Through Three OutletsThrough Three Outlets
OverviewOverview
American Seeds, Inc.American Seeds, Inc.American Seeds, Inc.
Branded Seed Businesses
Seed Partners
Autonomous Seed Co.
Autonomous Seed Co.
Autonomous Seed Co.
Genomics-Based R&D Pipeline
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Product Development, Regulatory and Commercial Product Development, Regulatory and Commercial Experience Generate MomentumExperience Generate Momentum
OverviewOverview
0123456
MON DD BAY DOW SYT BAS
Pipeline products Pipeline products in USDA in USDA
review processreview process
05
1015202530
MON DD BAY DOW SYT BAS
USDA BiotechUSDA BiotechApprovalsApprovals
020406080
100120140
MON DD BAY DOW SYT BAS
U.S. Trait Acres U.S. Trait Acres 20042004
9
Round 1:Round 1: Seed and SingleSeed and Single--Trait Positions Firmly Trait Positions Firmly Established and GrowingEstablished and Growing
•• Seed Breeding AdvancementsSeed Breeding Advancements
•• FirstFirst--Generation TraitsGeneration Traits
•• Geographic ExpansionGeographic Expansion
•• Value CaptureValue Capture
Round 1
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Industry’s Most Diverse Genetic Pool Created Industry’s Most Diverse Genetic Pool Created New OpportunitiesNew Opportunities
Round 1: BreedingRound 1: Breeding
TemperateTemperateTemperate
Sub-TropicalSubSub--TropicalTropical
TropicalTropicalTropical
Sub-TropicalSubSub--TropicalTropical
TemperateTemperateTemperate
6-to-8 year process66--toto--8 year process8 year processLate 1990sLate 1990s
Acquired 36 major corn Acquired 36 major corn breeding programsbreeding programs
((12 countries x average of 3 12 countries x average of 3 companies per country)companies per country)
Early 2000sEarly 2000sCrossed genetic lines Crossed genetic lines
across acquired across acquired companiescompanies
TodayTodayLaunching new hybrids Launching new hybrids
from interfrom inter--company company crossescrosses
Monsanto Monsanto corn corn
germplasm germplasm flows flows
globallyglobally
11
Yield Gains from Seed Breeding AcceleratingYield Gains from Seed Breeding AcceleratingRound 1: BreedingRound 1: Breeding
High Performing Germplasm
150
160
170
180
190
200
210
220
95 100 105 110 115
Monsanto BrandCompetitors
Relative Maturity (Days)
Corn Yield (Bushels/Acre)
MON 2004 Branded Yield vs. Competitors
40
45
50
55
60
65
Group I Group II Group III Group IV Group V
Monsanto BrandCompetitors
Maturity Zones
Soybean Yield (Bushels/Acre)
MON 2004 Branded Yield vs. Competitors
Source: Monsanto estimate, includes ASI formation
12DiscoveryDiscovery Phase 1Phase 1
Proof of ConceptProof of ConceptPhase 2Phase 2
Early DevelopmentEarly DevelopmentPhase 3Phase 3
Adv. DevelopmentAdv. DevelopmentPhase 4Phase 4
PrePre--LaunchLaunchLaunchLaunch
Available Market for Roundup Ready Corn Is GrowingAvailable Market for Roundup Ready Corn Is GrowingRound 1: Geographic ExpansionRound 1: Geographic Expansion
Key Market AcresKey Market AcresKey Market Acres
0%0%0%0%0%0%33%33%33%Percent Penetrated (2004)Percent Penetrated (2004)Percent Penetrated (2004)5M5M5M20M20M20M50M50M50MAvailable MarketAvailable MarketAvailable Market
ArgentinaArgentinaArgentinaBrazilBrazilBrazilU.S.U.S.U.S.Contributing PlatformsContributing Platforms
GenomicsGenomics
ConventionalConventionalBreedingBreeding
Crop AnalyticsCrop Analytics
BiotechnologyBiotechnology
MolecularMolecularBreedingBreeding
Regulatory ProcessesRegulatory ProcessesEuropean UnionEuropean Union
22 products in regulatory queue 22 products in regulatory queue under Directive 2001/18; 11 from under Directive 2001/18; 11 from MonsantoMonsanto
Roundup Ready corn (NK603) Roundup Ready corn (NK603) approved for importation and whole approved for importation and whole corn feed in July 2004; approved for corn feed in July 2004; approved for Novel Food in October 2004Novel Food in October 2004
Applications for stacks in queueApplications for stacks in queue
ArgentinaArgentina
NK603 approved for planting in NK603 approved for planting in Argentina in July 2004Argentina in July 2004
Application for stacks in queueApplication for stacks in queue
11
13
Contributing PlatformsContributing Platforms
DiscoveryDiscovery Phase 1Phase 1Proof of ConceptProof of Concept
Phase 2Phase 2Early DevelopmentEarly Development
Phase 3Phase 3Adv. DevelopmentAdv. Development
Phase 4Phase 4PrePre--LaunchLaunch
LaunchLaunch
Available Market for Roundup Ready Corn Is GrowingAvailable Market for Roundup Ready Corn Is GrowingRound 1: Geographic ExpansionRound 1: Geographic Expansion
22 Grain Channeling in the United StatesGrain Channeling in the United States
Business ApproachBusiness ApproachWebsite indicates to farmers Website indicates to farmers which elevators in their area which elevators in their area accept biotech grain not yet accept biotech grain not yet approved for import into the approved for import into the European UnionEuropean UnionCommunication and Communication and education program under wayeducation program under wayPercent of growers citing Percent of growers citing grain marketing concerns has grain marketing concerns has dropped from roughly 60% to dropped from roughly 60% to nearly 30% in past year*nearly 30% in past year*
*Based on Roundup Ready corn surveys taken in fall of 2003 and *Based on Roundup Ready corn surveys taken in fall of 2003 and spring of 2004 in Eastern Iowa/Northern Illinois regionspring of 2004 in Eastern Iowa/Northern Illinois region
www.866sellcorn.comwww.866sellcorn.com
Key Market AcresKey Market AcresKey Market Acres
0%0%0%0%0%0%33%33%33%Percent Penetrated (2004)Percent Penetrated (2004)Percent Penetrated (2004)5M5M5M20M20M20M50M50M50MAvailable MarketAvailable MarketAvailable Market
ArgentinaArgentinaArgentinaBrazilBrazilBrazilU.S.U.S.U.S.
GenomicsGenomics
ConventionalConventionalBreedingBreeding
Crop AnalyticsCrop Analytics
BiotechnologyBiotechnology
MolecularMolecularBreedingBreeding
14DiscoveryDiscovery Phase 1Phase 1
Proof of ConceptProof of ConceptPhase 2Phase 2
Early DevelopmentEarly DevelopmentPhase 3Phase 3
Adv. DevelopmentAdv. DevelopmentPhase 4Phase 4
PrePre--LaunchLaunchLaunchLaunch
Round 1: FirstRound 1: First--Generation TraitsGeneration TraitsYieldGard Rootworm Continues High Satisfaction YieldGard Rootworm Continues High Satisfaction Pattern with Biotech TraitsPattern with Biotech Traits
Key Market AcresKey Market AcresKey Market Acres
0%0%0%0%0%0%9%9%9%Percent Penetrated (2004)Percent Penetrated (2004)Percent Penetrated (2004)1M1M1M5M5M5M15M-20M15M15M--20M20MAvailable MarketAvailable MarketAvailable Market
ArgentinaArgentinaArgentinaBrazilBrazilBrazilU.S.U.S.U.S.
11 Grower SatisfactionGrower Satisfaction
11Based on all growers using specified seed and treatment and ableBased on all growers using specified seed and treatment and able to answer very satisfied, somewhat satisfied, neutral, or not sto answer very satisfied, somewhat satisfied, neutral, or not satisfied.atisfied.*Source: Marketing Horizons Trait Satisfaction Studies 2002*Source: Marketing Horizons Trait Satisfaction Studies 2002**Source: Marketing Horizons Trait Satisfaction Studies 2004**Source: Marketing Horizons Trait Satisfaction Studies 2004
0%
20%
40%
60%
80%
100%
RoundupRoundupReadyReady
Soybeans*Soybeans*
RoundupRoundupReady Ready Cotton*Cotton*
Bollgard/Bollgard/RoundupRoundup
ReadyReadyCotton*Cotton*
Roundup Roundup ReadyReadyCorn*Corn*
YieldGardYieldGardRootwormRootworm
Corn**Corn**
YieldGardYieldGardCornCorn
Borer*Borer*
Percent of customers very or somewhat satisfiedPercent of customers very or somewhat satisfied11
Contributing PlatformsContributing Platforms
GenomicsGenomics
ConventionalConventionalBreedingBreeding
Crop AnalyticsCrop Analytics
BiotechnologyBiotechnology
MolecularMolecularBreedingBreeding
15
Round 1: FirstRound 1: First--Generation TraitsGeneration TraitsYieldGard Rootworm Continues High Satisfaction YieldGard Rootworm Continues High Satisfaction Pattern with Biotech TraitsPattern with Biotech Traits
22 Split Planter 32Split Planter 32--Inch Rows Inch Rows –– Rock County, MN Rock County, MN –– August 2004August 2004
12121111886644151533
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1.1. DEKALB DKC46DEKALB DKC46--22 22 –– YieldGard RootwormYieldGard Rootworm2.2. Mycogen 2K541 CruiserMycogen 2K541 Cruiser3.3. DEKALB DKC42DEKALB DKC42--88 88 –– YieldGard RootwormYieldGard Rootworm4.4. DEKALB DKC52DEKALB DKC52--40 40 –– YieldGard RootwormYieldGard Rootworm5.5. Wensman W6212RR untreatedWensman W6212RR untreated6.6. DEKALB DKC42DEKALB DKC42--88 88 –– YieldGard RootwormYieldGard Rootworm7.7. Pioneer 38H66 CruiserPioneer 38H66 Cruiser8.8. DEKALB DKC51DEKALB DKC51--39 39 –– YieldGard RootwormYieldGard Rootworm9.9. DEKALB DKC47DEKALB DKC47--10 P25010 P25010.10. DEKALB DKC46DEKALB DKC46--28 P25028 P25011.11. DEKALB DKC42DEKALB DKC42--88 88 –– YieldGard RootwormYieldGard Rootworm12.12. DEKALB DKC46DEKALB DKC46--22 22 –– YieldGard RootwormYieldGard Rootworm13.13. AgVenture 4882RR Cruiser CRWAgVenture 4882RR Cruiser CRW14.14. Channel 6965RR Cruiser CRWChannel 6965RR Cruiser CRW15.15. DEKALB DKC42DEKALB DKC42--88 88 –– YieldGard RootwormYieldGard Rootworm16.16. Kruger 93P92 untreatedKruger 93P92 untreated
16
Contributing PlatformsContributing Platforms
DiscoveryDiscovery Phase 1Phase 1Proof of ConceptProof of Concept
Phase 2Phase 2Early DevelopmentEarly Development
Phase 3Phase 3Adv. DevelopmentAdv. Development
Phase 4Phase 4PrePre--LaunchLaunch
LaunchLaunch
Round 1: FirstRound 1: First--Generation TraitsGeneration TraitsYieldGard Rootworm Continues High Satisfaction YieldGard Rootworm Continues High Satisfaction Pattern with Biotech TraitsPattern with Biotech Traits
Key Market AcresKey Market AcresKey Market Acres
0%0%0%0%0%0%9%9%9%Percent Penetrated (2004)Percent Penetrated (2004)Percent Penetrated (2004)1M1M1M5M5M5M15M-20M15M15M--20M20MAvailable MarketAvailable MarketAvailable Market
ArgentinaArgentinaArgentinaBrazilBrazilBrazilU.S.U.S.U.S.
GenomicsGenomics
ConventionalConventionalBreedingBreeding
Crop AnalyticsCrop Analytics
BiotechnologyBiotechnology
MolecularMolecularBreedingBreeding
33 Advantage of Bigger and Healthier RootsAdvantage of Bigger and Healthier Roots
From 172 field trials in Illinois in 2004
− YieldGard Rootworm had greater yield than competition
− Just under 12 bushels per acre advantage, or just over $33 per acre
190
200
210
220
Yield (Bushels/Acre) 460
480
500
520
Gross Income ($/Acre)YieldGard Rootworm Competition
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Round 2:Round 2: Monsanto Is Uniquely Positioned To Monsanto Is Uniquely Positioned To Bring Next Generation of Traits to MarketBring Next Generation of Traits to Market
•• Continued Growth from Round 1 Continued Growth from Round 1
•• SecondSecond--Generation TraitsGeneration Traits
•• Greater Intensity of Stacked TraitsGreater Intensity of Stacked Traits
Round 2Round 1
18DiscoveryDiscovery Phase 1Phase 1
Proof of ConceptProof of ConceptPhase 2Phase 2
Early DevelopmentEarly DevelopmentPhase 3Phase 3
Adv. DevelopmentAdv. DevelopmentPhase 4Phase 4
PrePre--LaunchLaunchLaunchLaunch
Key Market AcresKey Market AcresKey Market Acres
0%0%0%0%0%0%Percent PenetratedPercent PenetratedPercent Penetrated0.5M – 0.8M0.5M 0.5M –– 0.8M0.8M10M-15M10M10M--15M15MAvailable MarketAvailable MarketAvailable MarketAustraliaAustraliaAustraliaU.S.U.S.U.S.
Roundup Ready Flex Cotton Raises the BarRoundup Ready Flex Cotton Raises the BarRound 2: SecondRound 2: Second--Generation TraitsGeneration Traits
11 Expanded Window of ApplicationExpanded Window of Application
EmergenceEmergence LaybyLayby Preharvest HarvestPreharvest Harvest
OverOver--thethe--top window of applicationtop window of applicationRoundup ReadyRoundup Ready®® Flex Cotton Flex Cotton
Roundup ReadyRoundup Ready®®
CottonCotton((< < 4 lf.)4 lf.)
Expanded window of overExpanded window of over--thethe--top applicationtop application-- Increased margin of crop safetyIncreased margin of crop safety-- More More ““flexibleflexible”” weed controlweed control
Increased grower convenienceIncreased grower convenienceReduced need for specialized spray equipmentReduced need for specialized spray equipment
Contributing PlatformsContributing Platforms
GenomicsGenomics
ConventionalConventionalBreedingBreeding
Crop AnalyticsCrop Analytics
BiotechnologyBiotechnology
MolecularMolecularBreedingBreeding
19
Contributing PlatformsContributing Platforms
DiscoveryDiscovery Phase 1Phase 1Proof of ConceptProof of Concept
Phase 2Phase 2Early DevelopmentEarly Development
Phase 3Phase 3Adv. DevelopmentAdv. Development
Phase 4Phase 4PrePre--LaunchLaunch
LaunchLaunch
Key Market AcresKey Market AcresKey Market Acres
0%0%0%0%0%0%Percent PenetratedPercent PenetratedPercent Penetrated0.5M – 0.8M0.5M 0.5M –– 0.8M0.8M10M-15M10M10M--15M15MAvailable MarketAvailable MarketAvailable MarketAustraliaAustraliaAustraliaU.S.U.S.U.S.
Roundup Ready Flex Cotton Raises the BarRoundup Ready Flex Cotton Raises the BarRound 2: SecondRound 2: Second--Generation TraitsGeneration Traits
Over 200 field trials conducted in Over 200 field trials conducted in 20042004
8 cotton seed companies 8 cotton seed companies participating in trial programparticipating in trial program
Cotton States launching Cotton States launching exclusively on a secondexclusively on a second--generation generation trait platformtrait platform
22 2004 Field Trial Update2004 Field Trial Update
GenomicsGenomics
ConventionalConventionalBreedingBreeding
Crop AnalyticsCrop Analytics
BiotechnologyBiotechnology
MolecularMolecularBreedingBreeding
20
Contributing PlatformsContributing Platforms
DiscoveryDiscovery Phase 1Phase 1Proof of ConceptProof of Concept
Phase 2Phase 2Early DevelopmentEarly Development
Phase 3Phase 3Adv. DevelopmentAdv. Development
Phase 4Phase 4PrePre--LaunchLaunch
LaunchLaunch
Key Market AcresKey Market AcresKey Market Acres
0%0%0%0%0%0%Percent PenetratedPercent PenetratedPercent Penetrated0.5M – 0.8M0.5M 0.5M –– 0.8M0.8M10M-15M10M10M--15M15MAvailable MarketAvailable MarketAvailable MarketAustraliaAustraliaAustraliaU.S.U.S.U.S.
Round 2: SecondRound 2: Second--Generation TraitsGeneration Traits
GenomicsGenomics
ConventionalConventionalBreedingBreeding
Crop AnalyticsCrop Analytics
BiotechnologyBiotechnology
MolecularMolecularBreedingBreeding
Broad Licensing Supports Roundup Ready Flex Broad Licensing Supports Roundup Ready Flex IntroductionIntroduction
33 Broad LicensingBroad LicensingBroad licensing mitigates risk of seed market share Broad licensing mitigates risk of seed market share changeschanges
0%
25%
50%
75%
100%
1999 2000 2001 2002 2003 2004
DPLStonevilleFiberMaxPhytogenOthers
U.S. cotton seed market sharesU.S. cotton seed market shares
Source: USDASource: USDA
21
1.5
1.2
1.01
1.1
1.2
1.3
1.4
1.5
1.6
1996 1997 1998 1999 2000 2001 2002 2003 2004F 2005F 2006F
Cotton (2 Traits)
Corn (3 Traits)
Soybeans (1 Trait)
Stacking Biotech Traits Adds New Dimension to Stacking Biotech Traits Adds New Dimension to Market Potential Market Potential —— Multiplying Margin OpportunitiesMultiplying Margin Opportunities
Monsanto U.S. Biotech Intensity Index*Monsanto U.S. Biotech Intensity Index*
Average number of biotech traits per biotech acreAverage number of biotech traits per biotech acre
Round 2: Stacked TraitsRound 2: Stacked Traits
10 million 10 million biotech biotech acresacres
16 million16 millionbiotech biotech margin margin
opportunitiesopportunities
==XX1.5 1.5
intensity intensity indexindex
CottonCotton42 million 42 million biotech biotech acresacres
52 million52 millionbiotech biotech margin margin
opportunitiesopportunities
==XX1.2 1.2
intensity intensity indexindex
CornCornU.S. Biotech Margin OpportunitiesU.S. Biotech Margin Opportunities
* Monsanto traits only* Monsanto traits only
22
Round 3:Round 3: Pipeline Potential Builds on Established Pipeline Potential Builds on Established PlatformPlatform
•• Continued Growth from Rounds 1 & 2Continued Growth from Rounds 1 & 2
•• Improved Food and Feed Biotech TraitsImproved Food and Feed Biotech Traits
•• Biotech Yield TraitsBiotech Yield Traits
Round 1 Round 2 Round 3
23
Pipeline Products Reach New Markets and Expand Pipeline Products Reach New Markets and Expand Base in Corn, Soybeans and CottonBase in Corn, Soybeans and Cotton
Round 3: Food, Feed and Yield TraitsRound 3: Food, Feed and Yield Traits
Roundup Ready Roundup Ready Flex CottonFlex Cotton
Commercialized Agronomic TraitsCommercialized Agronomic Traits
Roundup Roundup Ready Corn, Ready Corn, Soy, CottonSoy, Cotton
YieldGard YieldGard Corn BorerCorn Borer
Bollgard I & II Bollgard I & II CottonCotton
YieldGard YieldGard Rootworm Rootworm
CornCorn
YGCB II CornYGCB II Corn YGRW II CornYGRW II Corn22ndnd GenerationGenerationAgronomic TraitsAgronomic Traits
Nitrogen Nitrogen Utilization CornUtilization Corn
Cold Tolerant Cold Tolerant CornCorn
Drought Tolerant Drought Tolerant Corn, Soy, CottonCorn, Soy, Cotton
YieldYield
Low Linolenic Low Linolenic SoySoy
Healthier Oil SoyHealthier Oil Soy(Low Linolenic(Low Linolenic
Mid OleicMid OleicLow Saturate)Low Saturate)
OmegaOmega--3 Soy3 Soy(Stearidonic acid)(Stearidonic acid)
FoodFoodFeedFeed
High Lysine CornHigh Lysine Corn
Enhanced High Enhanced High Lysine CornLysine Corn
Improved Protein Improved Protein SoySoy
Improved Protein SoyImproved Protein Soy(Beta Conglycinin)(Beta Conglycinin)
24
Round 3: Feed TraitsRound 3: Feed Traits
High Lysine Enhances Essential Amino Acids in FeedHigh Lysine Enhances Essential Amino Acids in Feed
DiscoveryDiscovery Phase 1Phase 1Proof of ConceptProof of Concept
Phase 2Phase 2Early DevelopmentEarly Development
Phase 3Phase 3Adv. DevelopmentAdv. Development
Phase 4Phase 4PrePre--LaunchLaunch
LaunchLaunch
Key Market AcresKey Market AcresKey Market Acres
0%0%0%0%0%0%0%0%0%Percent PenetratedPercent PenetratedPercent PenetratedTBDTBDTBDTBDTBDTBDTBDTBDTBDAvailable MarketAvailable MarketAvailable Market
ArgentinaArgentinaArgentinaBrazilBrazilBrazilU.S.U.S.U.S.Contributing PlatformsContributing Platforms
GenomicsGenomics
ConventionalConventionalBreedingBreeding
Crop AnalyticsCrop Analytics
BiotechnologyBiotechnology
MolecularMolecularBreedingBreeding
11 High Lysine Corn High Lysine Corn Enhance level of limiting Enhance level of limiting essential amino acids in feedessential amino acids in feed
Lower cost of animal feed rationLower cost of animal feed ration
Improved amino acid balanceImproved amino acid balance
High Lysine Corn High Lysine Corn –– Total LysineTotal Lysine
Inde
xed
Inde
xed
00
5050
100100
150150
Neg.Neg. Neg.Neg.Pos.Pos. Pos.Pos.Event 1Event 1 Event 2Event 2
TargetTargetIncreased total Increased total energyenergy
U.S. regulatory U.S. regulatory packages packages submittedsubmitted
25
Round 3: Feed TraitsRound 3: Feed Traits
High Lysine Enhances Essential Amino Acids in FeedHigh Lysine Enhances Essential Amino Acids in FeedContributing PlatformsContributing Platforms
DiscoveryDiscovery Phase 1Phase 1Proof of ConceptProof of Concept
Phase 2Phase 2Early DevelopmentEarly Development
Phase 3Phase 3Adv. DevelopmentAdv. Development
Phase 4Phase 4PrePre--LaunchLaunch
LaunchLaunch
Key Market AcresKey Market AcresKey Market Acres
0%0%0%0%0%0%0%0%0%Percent PenetratedPercent PenetratedPercent PenetratedTBDTBDTBDTBDTBDTBDTBDTBDTBDAvailable MarketAvailable MarketAvailable Market
ArgentinaArgentinaArgentinaBrazilBrazilBrazilU.S.U.S.U.S.
22 2004 Field and Feeding Trial Update2004 Field and Feeding Trial Update
Field trials conducted in United Field trials conducted in United States and Argentina this yearStates and Argentina this yearEvaluating over 12 hybrid Evaluating over 12 hybrid genotypes in this yeargenotypes in this year’’s programs programExcellent performance Excellent performance demonstrated in feeding trials to demonstrated in feeding trials to datedate
GenomicsGenomics
ConventionalConventionalBreedingBreeding
Crop AnalyticsCrop Analytics
BiotechnologyBiotechnology
MolecularMolecularBreedingBreeding
26
Contributing PlatformsContributing Platforms
DiscoveryDiscovery Phase 1Phase 1Proof of ConceptProof of Concept
Phase 2Phase 2Early DevelopmentEarly Development
Phase 3Phase 3Adv. DevelopmentAdv. Development
Phase 4Phase 4PrePre--LaunchLaunch
LaunchLaunch
High Lysine Enhances Essential Amino Acids in FeedHigh Lysine Enhances Essential Amino Acids in FeedRound 3: Feed TraitsRound 3: Feed Traits
Key Market AcresKey Market AcresKey Market Acres
0%0%0%0%0%0%0%0%0%Percent PenetratedPercent PenetratedPercent PenetratedTBDTBDTBDTBDTBDTBDTBDTBDTBDAvailable MarketAvailable MarketAvailable Market
ArgentinaArgentinaArgentinaBrazilBrazilBrazilU.S.U.S.U.S.
GenomicsGenomics
ConventionalConventionalBreedingBreeding
Crop AnalyticsCrop Analytics
BiotechnologyBiotechnology
MolecularMolecularBreedingBreeding
33 2004 Field Trial Update2004 Field Trial Update
Initial evaluations show germplasm hitting or exceeding Initial evaluations show germplasm hitting or exceeding efficacy targetsefficacy targets
0
200
400
600
800
1000
1200
1400
1600
1800
2000
Free
Lys
ine
(ppm
)
Neg HybridControls
South America Neg HybridControls
U.S.
27DiscoveryDiscovery Phase 1Phase 1
Proof of ConceptProof of ConceptPhase 2Phase 2
Early DevelopmentEarly DevelopmentPhase 3Phase 3
Adv. DevelopmentAdv. DevelopmentPhase 4Phase 4
PrePre--LaunchLaunchLaunchLaunch
Key Market AcresKey Market AcresKey Market Acres
0%0%0%0%0%0%0%0%0%Percent PenetratedPercent PenetratedPercent PenetratedTBDTBDTBDTBDTBDTBD5M5M5MAvailable MarketAvailable MarketAvailable Market
ArgentinaArgentinaArgentinaBrazilBrazilBrazilU.S.U.S.U.S.
Preparing for 2005 Launch of FirstPreparing for 2005 Launch of First--Generation Output Generation Output Trait Trait —— VISTIVE SoybeansVISTIVE Soybeans
Round 3: Food TraitsRound 3: Food Traits
Contributing PlatformsContributing Platforms
GenomicsGenomics
ConventionalConventionalBreedingBreeding
Crop AnalyticsCrop Analytics
BiotechnologyBiotechnology
MolecularMolecularBreedingBreeding
1 VISTIVE Low Linolenic Soy
Reduce/eliminate trans fats with increased oil stability, requiring less hydrogenation
Achieve yield parity and stack with Roundup Ready trait
Reduce linolenic acid to <3%
Standard Soybean
Low Lin
Linoleic18:2
Oleic18:1
Sats18:0 / 16:0
Linolenic18:3
Mid Oleic + Low Lin
Zero Sat + Mid Oleic + Low Lin
28
Contributing PlatformsContributing Platforms
DiscoveryDiscovery Phase 1Phase 1Proof of ConceptProof of Concept
Phase 2Phase 2Early DevelopmentEarly Development
Phase 3Phase 3Adv. DevelopmentAdv. Development
Phase 4Phase 4PrePre--LaunchLaunch
LaunchLaunch
Key Market AcresKey Market AcresKey Market Acres
0%0%0%0%0%0%0%0%0%Percent PenetratedPercent PenetratedPercent PenetratedTBDTBDTBDTBDTBDTBD5M5M5MAvailable MarketAvailable MarketAvailable Market
ArgentinaArgentinaArgentinaBrazilBrazilBrazilU.S.U.S.U.S.
Preparing for 2005 Launch of FirstPreparing for 2005 Launch of First--Generation Output Generation Output Trait Trait —— VISTIVE SoybeansVISTIVE Soybeans
Round 3: Food TraitsRound 3: Food Traits
22 2004 Field Trial Update2004 Field Trial Update
Advanced field testing Advanced field testing Shipping several tons of oil to food Shipping several tons of oil to food companies for food formulation testingcompanies for food formulation testingFinalizing processor programs; Ag Finalizing processor programs; Ag Processing, Inc. (AGP) and Cargill Processing, Inc. (AGP) and Cargill participatingparticipatingLaunch in 2005Launch in 2005
GenomicsGenomics
ConventionalConventionalBreedingBreeding
Crop AnalyticsCrop Analytics
BiotechnologyBiotechnology
MolecularMolecularBreedingBreeding
29DiscoveryDiscovery Phase 1Phase 1
Proof of ConceptProof of ConceptPhase 2Phase 2
Early DevelopmentEarly DevelopmentPhase 3Phase 3
Adv. DevelopmentAdv. DevelopmentPhase 4Phase 4
PrePre--LaunchLaunchLaunchLaunch
Key Market AcresKey Market AcresKey Market Acres
0%0%0%0%0%0%0%0%0%Percent PenetratedPercent PenetratedPercent PenetratedTBDTBDTBDTBDTBDTBDTBDTBDTBDAvailable MarketAvailable MarketAvailable Market
ArgentinaArgentinaArgentinaBrazilBrazilBrazilU.S.U.S.U.S.
Round 3: Food TraitsRound 3: Food TraitsOmegaOmega--3 3 Biofortification Is a Food Industry Biofortification Is a Food Industry BreakthroughBreakthrough
PIC?PIC?
Contributing PlatformsContributing Platforms
GenomicsGenomics
ConventionalConventionalBreedingBreeding
Crop AnalyticsCrop Analytics
BiotechnologyBiotechnology
MolecularMolecularBreedingBreeding
11 Oilseed Produced OmegaOilseed Produced Omega--33
American Heart Assn., American Heart Assn., American Dietetic American Dietetic Assn., and 1,600+ Assn., and 1,600+ research studies research studies support health benefitssupport health benefitsVegetable oils Vegetable oils enriched with bioenriched with bio--available Omegaavailable Omega--33OmegaOmega--3 promotes 3 promotes heart healthheart healthEnhanced stabilityEnhanced stability
Dietary Omega-3 in Biotech Oilseed
Mono-unsaturates
Saturates
Other Poly-unsaturates
New Bio-available Omega-3
0
20
40
60
80
100%
ControlOilseed
BiotechOilseed
Fatty Acid (wt%)
30DiscoveryDiscovery Phase 1Phase 1
Proof of ConceptProof of ConceptPhase 2Phase 2
Early DevelopmentEarly DevelopmentPhase 3Phase 3
Adv. DevelopmentAdv. DevelopmentPhase 4Phase 4
PrePre--LaunchLaunchLaunchLaunch
Key Market AcresKey Market AcresKey Market Acres
0%0%0%0%0%0%0%0%0%Percent PenetratedPercent PenetratedPercent PenetratedTBDTBDTBDTBDTBDTBDTBDTBDTBDAvailable MarketAvailable MarketAvailable Market
ArgentinaArgentinaArgentinaBrazilBrazilBrazilU.S.U.S.U.S.
Round 3: Food TraitsRound 3: Food TraitsOmegaOmega--3 3 Biofortification Is a Food Industry Biofortification Is a Food Industry BreakthroughBreakthrough
PIC?PIC?
Contributing PlatformsContributing Platforms
GenomicsGenomics
ConventionalConventionalBreedingBreeding
Crop AnalyticsCrop Analytics
BiotechnologyBiotechnology
MolecularMolecularBreedingBreeding
22 2004 Field Trial Update2004 Field Trial Update
SDA/GLA Levels(7 Lead Events in 9 Locations)
0
5
1015
20
25
30
SDAGLA
Fatty
Aci
d W
t %
Target
31DiscoveryDiscovery Phase 1Phase 1
Proof of ConceptProof of ConceptPhase 2Phase 2
Early DevelopmentEarly DevelopmentPhase 3Phase 3
Adv. DevelopmentAdv. DevelopmentPhase 4Phase 4
PrePre--LaunchLaunchLaunchLaunch
Key Market AcresKey Market AcresKey Market Acres
0%0%0%0%0%0%0%0%0%Percent PenetratedPercent PenetratedPercent PenetratedTBDTBDTBDTBDTBDTBDTBDTBDTBDAvailable MarketAvailable MarketAvailable Market
ArgentinaArgentinaArgentinaBrazilBrazilBrazilU.S.U.S.U.S.
Round 3: YieldRound 3: YieldDrought Stress Tolerance Is One of Potential New Drought Stress Tolerance Is One of Potential New Agronomic Traits in PipelineAgronomic Traits in Pipeline
Contributing PlatformsContributing Platforms
GenomicsGenomics
ConventionalConventionalBreedingBreeding
Crop AnalyticsCrop Analytics
BiotechnologyBiotechnology
MolecularMolecularBreedingBreeding
11 Drought ToleranceDrought ToleranceYield protectionYield protectionon all acres to on all acres to protect against protect against water deficitswater deficits
Yield enhancementYield enhancementon all acres on all acres through improved through improved water usewater use
Cost savingsCost savingson irrigated acreson irrigated acres
Pricing depends on choice Pricing depends on choice of marketof market
Stack with weed and insect Stack with weed and insect control traits enhances control traits enhances margin opportunitymargin opportunity
32
Contributing PlatformsContributing Platforms
DiscoveryDiscovery Phase 1Phase 1Proof of ConceptProof of Concept
Phase 2Phase 2Early DevelopmentEarly Development
Phase 3Phase 3Adv. DevelopmentAdv. Development
Phase 4Phase 4PrePre--LaunchLaunch
LaunchLaunch
Key Market AcresKey Market AcresKey Market Acres
0%0%0%0%0%0%0%0%0%Percent PenetratedPercent PenetratedPercent PenetratedTBDTBDTBDTBDTBDTBDTBDTBDTBDAvailable MarketAvailable MarketAvailable Market
ArgentinaArgentinaArgentinaBrazilBrazilBrazilU.S.U.S.U.S.
Round 3: YieldRound 3: YieldDrought Stress Tolerance Is One of Potential New Drought Stress Tolerance Is One of Potential New Agronomic Traits in PipelineAgronomic Traits in Pipeline
GenomicsGenomics
ConventionalConventionalBreedingBreeding
Crop AnalyticsCrop Analytics
BiotechnologyBiotechnology
MolecularMolecularBreedingBreeding
22 2004 Field Trial Update2004 Field Trial UpdateTwo gene leads obtained positive results with more than one transformed event
0
5
10
15
20
25
30
35
Event One Event Two Event Three
Yield Increase (bu/acre)
Performance of 3 Events (Gene 1)
0
2
4
6
8
10
12
14
16
18
Event One Event Two Event Three
Yield Increase (bu/acre)
Performance of 3 Events (Gene 2)
33
SummarySummary
Value Shift to Seed Continues…Value Shift to Seed Continues…
Source: U.S. 1996Source: U.S. 1996--2003 Doane AgroTrak & Seed Studies; 2008 Monsanto Estimate2003 Doane AgroTrak & Seed Studies; 2008 Monsanto Estimate
Crop ChemicalsCrop Chemicals GermplasmGermplasm Biotech TraitsBiotech Traits
$4.5$4.5
$3.0$3.0
$0.1$0.1
1996 1996 $7.5 Billion$7.5 Billion
$3.6$3.6
$3.5$3.5 $1.3$1.3
20032003$8.4 Billion$8.4 Billion
$2.6$2.6$3.8$3.8
$2.7$2.7
2008F 2008F $9.2 Billion$9.2 Billion
Industry value shift from crop chemicals to Industry value shift from crop chemicals to seeds and traits is well under wayseeds and traits is well under way
34
SummarySummary
…to Food, Feed and Yield…to Food, Feed and Yield
SeedSeed
CropChemicals
CropCropChemicalsChemicals Value ShiftValue ShiftValue Shift
AnimalNutritionAnimalAnimal
NutritionNutrition Value ShiftValue ShiftValue Shift
HumanHealthHumanHumanHealthHealth Value ShiftValue ShiftValue Shift
Water and Soil
Nutrients
Water and Water and Soil Soil
NutrientsNutrientsValue ShiftValue ShiftValue Shift
35
Questions?Questions?