Monsanto reported a loss of nearly $500 million in the fourth quarter of its fiscal year and said it plans to slash about 2,600 jobs as part of a restructuring.
The St. Louis-based corporation is a giant in the world of genetically modified crop seeds and herbicides. Despite its dominance, it's still vulnerable to a global slump in commodity prices.
Jason Ward, with Northstar Commodity in Minneapolis, said a global glut of corn and soybeans is pushing prices down, a bad situation for Midwestern farmers who are otherwise expecting bumper crops this year.
“We've got too much of something that's too expensive, and it just needs to be cheap for a while to kind of grind through it,” he said.
Starting in 2006, demand for ethanol and livestock feed pushed prices up, according to economist Bruce Babcock at Iowa State University. That goosed sales at companies like Monsanto.
“When those prices were rising, those farmers could afford to pay a lot for their inputs, their seed, their fertilizer, their chemicals,” he said. “And Monsanto, like all agricultural input suppliers, raised their prices.”
But Babcock said corn and soybean prices have come down nearly 50 percent from their peak. Ward said they're below the break-even point for farmers. Many farmers can no longer afford all those seeds and fertilizers, which hurts Monsanto.
Soybean farmer Theresia Gillie near Hallock, Minnesota, projected her own income will drop by roughly $300,000 this year, which will compel her to cut costs.
She says that might mean ditching Monsanto's genetically modified seeds in favor of traditional seeds, which are cheaper. Or, she says, farmers might push Monsanto for lower prices.
“I’ve got to tell you, I don't think there's a farmer out there that isn't going to look for any angle they can cut,” she said.
No matter what, she said, it will be a skinny year for a lot of people in agriculture, from big Monsanto down to the small farmers.