Monsanto claims more global biotech victories

updated 6:45 p.m. ET March 15, 2005

ST. LOUIS - When Monsanto Co. scrapped its plans last May to market its most-anticipated product in — genetically modified wheat — even biotechnology's most ardent supporters complained about the company's lackluster pipeline.

The lucrative European market, meanwhile, remains shut to the company's wares and Monsanto has posted losses for the past two quarters. The company also has agreed to pay $1.5 million in penalties for bribing an Indonesian government official, a scandal its opponents eagerly are exploiting to keep Monsanto's wares out of southeast Asia.

So why is the stock trading at historic highs?

Despite the high-profile resistance to genetically engineered products, biotech crops continue to sprout on more of the world's arable acreage every year. And despite its losses, Monsanto's financial forecasts for this year and next are rosy.

In 1996, about 4.3 million acres were under biotechnology cultivation; that number has swelled to some 200 million acres.

Wall Street has rewarded Monsanto chief executive Hugh Grant's risky decision two years ago to distance the company from its historic chemical-making roots and refashion the St. Louis fixture as a biotechnology outfit.

Monsanto is using its grip on the small but growing niche of genetically engineered agriculture to push into markets outside the United States, where it controls nearly the nation's entire soy crop and half the corn supply.

The company has also begun to tame a flourishing black market for its products in South America, while more of its cotton seed is bought and sown in India each year.

'Just the beginning'
With one-tenth of the world's high-value farmland growing biotech crops, "this is just the beginning," said Robb Fraley, the company's chief technology officer. "What gives me comfort is that we're seeing the momentum really across the world."

Wall Street has noticed. Monsanto's shares rose a blistering 93 percent for 2004 after a 49 percent jump the previous year.

Though the company has posted losses in the last two quarters, mostly associated with the bankruptcy of the chemical concern it spun off, it has boosted its financial forecast for the next two years. That's because its genetically engineered seed sales are booming — a 20 percent increase last quarter — and the company expects the growth to continue as it expands outside the United States.

Still, there's concern that that growth is driven by three products that benefit consumers little.

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