Monsanto, the agri-chemical giant, is growing at a pace not seen in years, as it reaps a fortune on herbicides, seeds genetically modified to withstand those herbicides and grow-your-own pesticides.
With 46 cents a share, its stock is up 188% from a year ago, and 11 cents above Wall Street forecasts, according to Investor's Business Daily. Sales grew 36% to $2.1 billion, the fastest growth in four years, and Monsanto expects that growth to continue into 2008.
Monsanto profited handsomely from federal subsidies for ethanol, which led to a near-record planting of corn across the Midwest. Between 2000 and 2007, the use of genetically modified corn seed grew from 25% of acres planted to 73% in the U.S., and the Department of Agriculture recently started giving farmers a break on insurance premiums if they use these seeds, creating yet another incentive. The seeds are genetically modified to either resist death by herbicide, allowing farmers to spray liberally to kill nearby weeds that lack resistance, or else to grow into plants that produce substances toxic to insect pests (allowing farmers to spray less, but worrying some about potential health risks).
But while sales of its Roundup herbicide (perfect for use on "Roundup-ready" corn, genetically fortified to resist death by herbicide) was part of the growth, the other driver was sale of corn seeds south of the border primarily in Brazil and Argentina. Part of the growth in the market there has the same origins in U.S. farm policy; since ethanol demand has absorbed so much of the corn grown, more people in more places have incentive to grow it to fill needs both old (food, feed) and new (fuel).
One analyst quoted by Investor's Business Daily calls that "agflation."
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