A Lone Ray of Sunshine From MON

In seeds, soybeans are off to a notably strong start. In the U.S., ordering is earlier than usual and seems to be aggressive. Monsanto is at 100% of plan in beans so far, whereas corn is only at 90%. Roundup Ready beans are approaching 60% market share in Brazil. Prepayments are 50% ahead of last year, indicating that order strength should continue. Management estimates that corn acreage will be up this year, while soybeans should be down somewhat, but it is too early for the company to project firm numbers.

Management spent significant time reviewing the new product pipeline. Notably, two products are a year ahead of schedule in the development process, boding well for results in 2010 and beyond. The EPA package for SmartStax (weed/bug control in corn) was submitted as was the package for drought-tolerant corn. Management believes drought-tolerant can be a "blockbuster" product, and uncertainty is greatly reduced by having the application now in Washington. Generically, management believes the new product pipeline represents "$22 billion of value" to customers in terms of yield improvements, and this value will, of course, flow through to Monsanto over time.

There is nothing to argue about in this report. The EPS beat probably does not signal an approaching string of upsides, since some volume timing issues goosed results this quarter. Nonetheless, a meaningful beat in an environment when most other firms are cutting earnings significantly indicates the strength of the Monsanto franchise.

The stock is not dirt cheap, but it is not expensive for a world-class franchise that is performing. Even in a recession, people need to eat, so agriculture can be a defensive sector, and Monsanto can sell on the numbers of yield improvements. Dollars in farmers' pockets means dollars to Monsanto, no matter the economy.

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Know What You Own: Monsanto operates in the agricultural chemicals industry, and some of the other stocks in its field include Potash (POT - commentary - Cramer's Take), Syngenta (SYT - commentary - Cramer's Take), Mosaic (MOS - commentary - Cramer's Take), Agrium (AGU - commentary - Cramer's Take), CF Industries (CF - commentary - Cramer's Take) and Compass Minerals (CMP - commentary - Cramer's Take). For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.

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At the time of publication, Dvorchak was long Monsanto, although positions can change at any time.

Gary Dvorchak is a managing partner of Aviance Capital Management, a Sarasota, Fla.-based institutional asset manager that manages $200 million in growth and value equities and fixed income. Dvorchak holds a master's degree in business administration from Northwestern University and a bachelor's degree in computer science from the University of Iowa.