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Herbicide sales hurt Monsanto's profits

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Kai Ryssdal: Being almost too good at what it does has proved to be a problem for Monsanto. The company said today it's looking at declining profits next year after eight years of gains. Mostly because sales of its blockbuster weedkiller Roundup are dropping fast. Marketplace's Jeremy Hobson has more.


JEREMY HOBSON: In short, cheap generic herbicides are undercutting Monsanto's Roundup business. But it's more complicated than that, says analyst Mike Judd with Greenwich consultants.

A lot of things factor into herbicide sales. Like the weather and how much commodities like corn and soybeans are selling for.

MIKE JUDD: If a farmer is really in a great year, he's making a lot of money, he might prefer to have a brand name herbicide versus a non-branded herbicide, a generic.

This year, farmers profits are down. Unlike the last two years, when farmers were raking it in, and buying gallon after gallon of Roundup.

JUDD: Basically, unsustainable profits for Monsanto over the last two years are coming to an end.

Or at least that's the view of an analyst with a sell rating on Monsanto. Analyst Charlie Rentschler with Wall Street Access has a buy rating on the stock. He says Roundup has served its purpose for Monsanto.

CHARLIE RENTSCHLER: This was the business that really produced the cashflow to fund hundreds of millions of dollars per year of R&D in seeds and traits.

And that area -- genetically modified products -- is where Rentschler sees Monsanto's future.

RENTSCHLER: This company yearns to be a strictly biological company and not a combination biological-chemical company.

That seems to be where Monsanto's chief financial officer thinks the money is. In a conference call this morning, he said he expects the world's demand for food to double by 2030, while the land available to farmers will shrink. He called that an opportunity for Monsanto.

In New York, I'm Jeremy Hobson for Marketplace.

About the author

Jeremy Hobson is host of Marketplace Morning Report, where he looks at business news from a global perspective to prepare listeners for the day ahead.

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