World’s largest seed company, Monsanto Co. (MON - Analyst Report), announced to raise prices for its DeKalb brand of corn seeds in 2012 by an average of 5% to 10% amid the present worldwide food crisis.
The price rise reflects higher cost of production for the high-yielding corn genes. These insecticide- producing biotechnology seeds have been depicting improved performance and higher sales of crops for the growers over time. The company anticipates that more and more farmers will shift to the new, higher-yielding seeds rapidly.
Higher prices of corn seeds are anticipated to help Monsanto achieve its target of boosting earnings by 13% to 17% a year. In 2011, Monsanto lowered corn seed prices, especially Smartax, after the farmers increased purchases from DuPont Co.’s lower-priced Pioneer Brand. Added to the peril was the bad weather condition, which came as a backlash for Monsanto’s earnings after the customer loyalty shift.
Hence, the company now needs to recoup losses through contracts with the growers in a wide geographic area by raising corn seed prices, after overcoming drought and other weather issues. The company also plans to raise seeds in Latin America.
Price increase, however, seems risky, given the intensifying competition and global food crisis. However, Monsanto is confident about its product line and expect the price increase to show continued momentum with customers while facilitating the company to meet its growth projections
Of late, Monsanto’s genetically altered corn seeds were reported of getting infected with some sort of seed resistant bugs. These seeds are produced by combining seed and pesticides, developed by Monsanto. Reports suspected, as the resistant insects breed with other unaffected plants nearby, there is a chance of contamination with non-resistant offsprings with widespread effect. The company, however, pointed out that the seeds are giving good results and at the same time, affirmed that they are ready with potential safeguards in place, for any such adverse situation.
Missouri-based Monsanto Company, together with its subsidiaries, is a leading global provider of agricultural products for farmers in the United States and internationally. Monsanto's biotechnology research and rich product pipeline provides strong competition to its peers, such as The Dow Chemical Company (DOW), Syngenta AG (SYT - Analyst Report), The Scotts Miracle-Gro Co (SMG - Snapshot Report), BASF ([url=http://www.zacks.com/stock/quote/basfy]BASFY[/url]).