Monsanto at BMO Conference Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

900m bushels of corn demand increase driven by ethanol/emerging middle class

“over the past 10 years, we’ve seen about 900 million bushels a year of corn demand increase and that’s a — a lot of that’s been driven by in the U.S. and about the ethanol but it’s also about the continued expansion of population in the middle class where people are going to upgrading their diet.”

Most of that was met by bringing new acres in

“The interesting thing about this, 900 million bushels a year, the majority of that demand, about 70% of it was met by bringing new acres into production.”

Going forward have to increase the productivity of acreage

“he challenge for this next increment of productivity is, is that we’re not to be able to bring significant amount of new acres into production. It’s going to have to come from productivity on the acres that we have or a shift in acres from other crops into corn.”

Have to increase productivity by 2%, that’s not happened before

” We have around, globally around 300 million acres of productive corn acres globally and in order to meet this 500 to 600 million bushel a year increase in demand. We would have to increase productivity on those acres by 2% a year. So we’ve never done that before. That’s never happened”

Need more environmentally efficient productivity too

“Ag already uses 70% of the freshwater consumed on earth, so we will see not only there is need for increased productivity, increased productivity per acre but a sustainable increased productivity per acre as we go forward just to meet this demand curve in corn and you will see and it’s similar in soybeans as well. ”

A challenging environment so far

“let me give you a read on where we are this season, this year and kind of a mid season checkpoint. Again this has been one of the most challenging Ag environments we’ve had, with significant headwinds around acres, around currency, commodity price, political unrest”

Northern hemisphere running at about the 5 year average for acres planted, dakotas are running behind though

“in the northern hemisphere while corn planting if you look, is about at the five year average. If you look specifically into the Dakota so the northern corn belt where there’s about 8 million acres of corn in North and South Dakota and where we have very-very high share, they’re about 10% planted and well behind the average, so we’re looking at whether or not we’ll see potential acre shifts between corn and soybeans in that region but clearly an area that we’re keeping focused on and most of that’s going to play out over the next couple of weeks as planting will continue through the first insurance day which will be May 25th so North and South Dakota there’s some weather impacts and we’re monitoring.”

A little softness in Brazil

“we are seeing a little bit of softness, more softness than we originally expected in the safrinha acres in Brazil and Paraguay.”

Tight credit is a headwind in otherwise growing Ukraine

“political uncertainty in the Ukraine, our Corn business in the Ukraine is growing very-very well. It is our fastest-growing business and will continue to grow this year, but the political uncertainty there has taken some of the top-end off of that, as we see some softness and some uncertainty, mostly driven by smaller growers and credit risk, and tightening of credit in the region”

Bring growers information solutions to monitor productivity

“growers are demanding, information solutions, they’re looking for companies who can come together and provide integrative solutions that can help them manage variability on their farm and make better decisions. A grower typically makes about 40 decisions a year on their farm and typically these are reactive decisions, they go out, they walk on their field, they say oh I have a problem, I have a bug problem, I have a disease problem, I have a fertilizer problem, fertility problem and then they go ahead and act and by that time you’ve already lost some of the yield and that’s why we see variability in yield, year-over-year.

We’re going to — what we’ll be able to do and we are going to with our precision Ag offering around climate is really go ahead and help these growers make proactive decisions to be able to predict what’s happening in the field and make proactive decisions that can drive productivity.”