This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Monsanto: The Dark View

True to Gilford's Chanos legacy, Christopherson has a morbid long-term view of Monsanto and its business prospects -- the company, he says, is in the midst of a protracted "unraveling process" -- and it has little to do with the sort of criticism leveled at Monsanto from environmentalists or the documentary Food Inc..

Though he's of the opinion that the general commodities bubble could burst after the Federal Reserve pulls out its QE2 props, his thesis really boils down to one thing: corn.

More than any other single product, Monsanto's business and growth goals now depend on corn seeds and traits, including its new SmartStax-branded genetically modified maize product, which debuted on the market last year. Corn-related seeds and traits now account for just shy of 50% of the company's gross profit.

According to Christopherson, this is bad news. He offers up the argument that corn prices, which have pushed above $7 a bushel for the first time ever, depend entirely on ethanol. And the ethanol industry, which bought some 35% to 40% of the U.S. corn harvest last year, depends entirely on government subsidies. And government farm subsidies, despite a powerful lobby in Washington, may come in for attack in the new budget-conscious Zeitgeist on Capitol Hill.

"At some point here, we'll have to address the nuttiness of ethanol, and burning it in cars," Christopherson said. "Everybody in the room knows that's just nuts."

Thus, he believes, if the subsidies go, so do these historically elevated corn prices. Farmers are richer than they've ever been, according to the USDA, which has forecast all-time high income levels for growers this year. If flush ag pros looking to hike yields will allow Monsanto to sell more and higher priced maize seeds, then any drop in corn prices will take its toll on the company's sales, as it will on many correlated agriculture names, like fertilizer producers and tractor makers.

Others counter that the EPA's recent approval of a new ethanol-gasoline blend for cars, called E15, is a sign that the government isn't about to back off on subsidies

Christopherson also argues that growing competition from the likes of Dupont (DD - Get Report) and Syngenta (SYT) will no longer lend Monsanto the pricing power it had previously held over farmers. Further, there's the worrisome trend of weeds becoming resistant to herbicides like Monsanto's classic RoundUp -- indeed, it has been Monsanto's basic business model to sell seeds genetically programmed to withstand its own chemical weed-killer spray. And, doubly further, Christopherson is unconvinced that the company's SmartStax seeds will offer enough yield gains for farmers to justify their use.

Monsanto begs to differ, of course. The company has pointed out that the yield scare early in the 2010 harvest season, when analysts worried that SmartStax wasn't producing as many bushels as promised, was just that: a scare.

2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
DD $77.85 0.00%
MON $120.43 0.00%
SYT $70.65 0.00%
AAPL $128.46 0.00%
FB $78.97 0.00%

Markets

DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs