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Monsanto: The Dark View

In November, Monsanto evaluated the final data from last year's SmartStax crop -- the first year those seeds were on the market -- and called it a success, saying that it had produced 3.6 more bushels per acre than Monsanto's old corn-seed product.

The initial scare erupted after early data suggested that SmartStax was doing worse than the older product. According to some who have a wide-angle view on the farm industry, growers remain skeptical about the performance of SmartStax. "If there was a differential it was either negligible or marginal, and it didn't justify the higher cost," said Jon Gates, research director at OTR Global, which conducts ground-level channel checks with farm-supply dealers and growers and provides industry data to institutional investors. "At the end of day, a farmer is managing a portfolio of crops, just like a money manager on Wall Street, and they need a return on it."

Monsanto did cut prices for SmartStax last year based on the lackluster performance. Pricing in the seed business is enormously complex, but boiled to its essence, Monsanto used to take a 50% cut of the incremental revenue per bushel that farmers obtained from higher yields produced by a new Monsanto seed product. Now, the company has slashed that premium to 20%.

But that won't likely convince farmers to fall in love with the SmartStax seed, Gates told the TheStreet. Instead, he said, Monsanto was surprised last year to see that a pair of other new corn-seed products, called Double Pro and Triple Pro, impressed farmers with their yields and started selling as fast as funnel cakes at the Illinois State Fair. But the seeds were so new that Monsanto had put them on the market in a limited release.

Now, Gates says, the company has scrambled to shift its product mix, pumping out as much of the Double and Triple Pro as possible in order to meet demand. The company won't likely take real advantage of that trend until 2012, by which time it will be able to ramp up production.

"The mood has swung back favorably toward Monsanto," Gates said. "But not toward SmartStax yet."

In its first-quarter conference call with analysts in early January, Monsanto's energetic Scotsman CEO, Hugh Grant, made sure to address the whole corn-seed issue. "But what matters more than our data is that our customers have responded to both the product and the pricing changes that we've made, and that feedback is good," he said. "At this point in the year, you can't really declare a victory, but you do know if you're off plan, and I'm pleased to say that we've seen all the right indications at this point."

In the very long term, Monsanto has much in its research-and-development pipeline, something it strives to ballyhoo as much as it strives to deflect those who criticize genetically modified food and monoculture crops. Naturally, Christopherson has reservations about the pipeline. "It consists of things that are really just tweaks," he said. "They're not life-changing for the grower."

It remains to be seen who will declare victory in the long run: the CEO or the uber-bear.

-- Written by Scott Eden in New York

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>To contact the writer of this article, click here: Scott Eden.

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.
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