Monsanto Crop Protection Sales 2017
Crop Protection Regional Sales
Sales of Agricultural Productivity in Q4 decreased 5.9% over Q4 2016. For the fiscal year ending August 2017 sales grew 6%, while growing 8.5% during the calendar 9-months period.
Growth for the quarter was driven by volumes (3%) and price (2.9%). For the 12-month Fiscal period sales were driven by volumes +8.8%, price (3%) and currency +0.2%. For the calendar 9-month period growth was driven by volumes +11.5%, price (3%).
Sales in North America declined (0.8%) during the reporting quarter, while increasing 13.7% for the fiscal year and increased by 16.7% for the 9-month calendar period, driving growth in the segment. The key factor was the full launch of the XtendiMax® formulations with dicamba-combination herbicides in corn, soybean and cotton.
Price growth was seen from the dicamba-based XtendiMax® products, with prices for Roundup™ stabilising over the past 6 months. The growth in volumes for herbicide combinations in maize/corn in fiscal Q4 / calendar Q3 corresponded with planting in North America. As mentioned earlier this year, Monsanto would need to monitor, contain and address complaints arising from dicamba injury in cotton, soybeans and other crops where farmers are using other brands of dicamba offered by BASF and other players.
Syngenta and DuPont have already signed deals with Monsanto to sell the herbicide using the patented VaporGrip™ technology which is supposed to prevent or at least, reduce, damage by drift. Unfortunately for Monsanto, there was a host of complaints which led to sales being suspended by 4 states. These injury claims are being reviewed, with most of the university scientists backing the farmers and extension agents, while the industry tries to defend its position. Monsanto have gone to the extent of suing the Arkansas Department of Agriculture.
Glyphosate continues to face severe price competition from Chinese suppliers and others like Albaugh, DAS, Syngenta.
European region sales declined (15.2%) for the quarter, and (2%) for the fiscal 12-month period, decreasing slightly (0.9%) for the first 3 calendar quarter, due to divestment of silthiofam (Latitude™ ) fungicide seed treatment for cereals. There is also considerable competitive pressure on price from generic and own-brand sales of other companies and distributors. Volumes were impacted slightly by lower planting in spring crops due to the dry weather conditions.
Bayer, who have been focusing on the merger with Monsanto, have now signed an agreement with BASF to sell off the glufosinate business particularly for canola, corn, cotton seeds (LibertyLink™ ) in tandem with the relevant seeds + traits in areas where the glufosinate -tolerant trait is approved. They are intent on harnessing the larger share of Monsanto’s newer herbicides, despite the problem of glyphosate-resistant weeds in North America.
Their strategy would be to capture the increased dicamba-combination herbicide market, while relegating the generic market to distributors and co-operatives selling own-label formulations at cheaper prices. This two-pronged strategy could also contain their rivals BASF who are planning expansion of their dicamba herbicides business.
Latin American sales declined (9.4%) during the reporting quarter with glyphosate prices under severe pressure from generic products. For the fiscal year sales declined (1.4%) and (0.9%) for the 9-month calendar period.
Longer term, Monsanto (with Bayer) will focus on developing Xtend™ varieties using the dicamba-based combinations. Royalty income from the Roundup™ brand licensed to Albaugh-Atanor in the Americas, would bolster their position to some extent. Monsanto had used this in the past, not very successfully with Nufarm in Australia-SE Asia.
In Asia-Pacific sales declined for the quarter (7.1%), although ending strongly +7.9% for the fiscal year and +11% for the calendar 9-month period.
Sales were driven primarily in Australia, China and SE Asia, where Monsanto’s partner/distributor Sinochem has strengthened its network and presence. Sales were stronger due to increase in Australian planted area for RR cotton and canola; as well as increased area for sorghum. Australian markets also face strong competition with many distributors importing directly from China.
Crop Protection Product Sales
Herbicides sales performance was driven largely by sales of XtendiMax™ brand dicamba-based combination products and seed treatments in the quarterly, fiscal 12 months and calendar 9 months YTD revenues, while sales of glyphosate declined (7.9%) for the quarter, (2.1%) for the fiscal year and increased slightly +1.3% for the calendar 9-month period.
Monsanto’s flagship Roundup™ brands stabilized in prices after licensing the brand name to Albaugh-Atanor and as Chinese manufacturers were forced to change their accounting practices to reflect full costs.
Their dicamba-based and other herbicides grew 0.5% for the quarter, 28.4% for the fiscal 12 months and 31.2% for the first 9 months of the calendar year.
Lawn & Garden
Their Lawn and Garden business (glyphosate Other) was certainly impacted negatively by the loss of Scotts MiracleGroR business, competitive offers and enhanced distribution of generics from other non-crop marketers.
Monsanto’s Ag Productivity segment which had weakened considerably over the last few years, due to competition in glyphosate markets has fared much better with their launch of dicamba-based XtendiMax/XtendFlex system in soybean, corn and cotton. Cropnosis’ opinion is that this is bad strategy in the long term, as their “new” herbicides are basically a combination of 2 very old actives. There has been a huge build-up of dicamba and glyphosate since their announcement and it is highly likely that competition led by BASF would also offer formulations with low-volatility.
Complaints of crop injury have started pouring in and it will be the combined responsibility of all manufacturers to sort out problems which are genuine and those which are not, based on their proprietary VaporGrip technology which has been licensed out to DuPont and Syngenta. This often can be detrimental if the actual formulations used by neighbouring farmers are different from those of Monsanto. Also, it must be remembered that Monsanto and other players had high advance sales in Q2-Q3 fiscal/calendar H1 2017. Unused/unsold products would show up as returns and recorded as losses in Q4(Q3). The company have also indicated this likelihood for the fiscal year ending August 2017.
Monsanto has offered limited quantities of new mixes with dicamba and partnerships with selective herbicide manufacturers like FMC – primarily to combat herbicide resistance issues in soybean and maize growing areas. Technical supplies of glyphosate from their Louisiana plant and changeover of formulation units to produce dicamba formulations for their launch of RR Xtend™ varieties, are now confirmed with cost increases of $91 million showing up in the P&L statement.
The promised efficacy of their “VaporGrip”™ technology is still to be tested over large areas, so caveats would be suited for the 2017 sales, in spite of Monsanto’s and BASF’s bullish views. BASF is already facing a host of complaints. The Glyphosate (Other) non-crop business sales continued to suffer as contractual sales to the garden retail market remained weak.
Competition in glyphosate remains detrimental to Monsanto’s position as Chinese producers have higher inventory and lock low prices, with even leaders like Syngenta dropping prices to clear their 2-year inventory. Bayer’s acquisition of/merger with Monsanto will offer a much wider range of selective and non-selective herbicides from 2018, assuming they receive the approval from competition authorities this year. They will also have a more balanced portfolio with a broader range of insecticides for soil (like imidacloprid, tefluthrin) and seed treatment. Their tactical offerings to farmers with financial incentives remain in place.
Sales of Monsanto’s Acceleron™ Seed Applied Solutions business for seed protection and Biologicals for seed enhancement grew strongly with higher sales of soybean and cotton seeds, as well as the record planting of soybean, cotton and corn seeds in North America. Growth for the quarter was 19%, with fiscal annual growth at 45.2%, while growth for the calendar 9-months period was at 37.9%.
Sales of proprietary brand Acceleron™ using insecticides and fungicides from BASF and Bayer grew in line with their seed sales. These sales were complemented by Novozymes nitrogen-fixing Rhizobium spp. bacterial coatings for soybeans and other pulses.
Their latest addition to the Seed Applied Solutions is the new active ingredient tioxazafen. Tioxazafen is a disubstituted oxadiazole, and a new class of nematicidal chemistry, branded NemaStrikeTM Technology by Monsanto. This was approved by the EPA in August this year and the company plans to launch it for use by farmers during the 2018 planting season.
According to trial reports released by Monsanto protected crop yields due to nematode control range from an increase of 7 bu/acre over the standard in corn – a 73 percent positive response rate; 3 bu/acre in soybeans, a 68 percent positive response rate; and 80 lbs. lint per acre in cotton, a 86 percent positive response rate.
The silthiofam (Latitude™ ) cereal seed treatment fungicide was sold in December 2016, valued at $140 million. It has been confirmed that this will be bought by Mitsui largely for the European cereal seeds sector, where the product has a niche market for “take-all” disease. Monsanto has recognised part payment for the sale and will recognise another $30-$40m from their buyer as success of the brand is expected to strengthen in Europe, where Mitsui (Certis) is increasing its share. This income will be shown in their discontinued operations, adding to the bottom line.