monsanto 09-18-2006

1

TERRY CREWSCHIEF FINANCIAL OFFICER,MONSANTO COMPANY

BANK OF AMERICA 36TH ANNUAL INVESTMENT CONFERENCE

September 18, 2006

2

Forward-Looking Statements

Certain statements contained in this presentation are "forward-looking statements," such as statements concerning the company's anticipated financial results, current and future product performance, regulatory approvals, business and financial plans and other non-historical facts. These statements are based on current expectations and currently available information. However, since these statements are based on factors that involve risks and uncertainties, the company's actual performance and results may differ materially from those described or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, among others: continued competition in seeds, traits and agricultural chemicals; the company's exposure to various contingencies, including those related to intellectual property protection, regulatory compliance and the speed with which approvals are received, and public acceptance of biotechnology products; the success of the company's research and development activities; the outcomes of major lawsuits, including proceedings related to Solutia Inc.; developments related to foreign currencies and economies; successful completion and operation of recent and proposed acquisitions; fluctuations in commodity prices; compliance with regulations affecting our manufacturing; the accuracy of the company's estimates related to distribution inventory levels; the company's ability to fund its short-term financing needs and to obtain payment for the products that it sells; the effect of weather conditions, natural disasters and accidents on the agriculture business or the company's facilities; and other risks and factors detailed in the company's filings with the SEC. Undue reliance should not be placed on these forward-looking statements, which are current only as of the date of this presentation. The company disclaims any current intention or obligation to update any forward-looking statements or any of the factors that may affect actual results.

TrademarksTrademarks owned by Monsanto Company and its wholly-owned subsidiaries are italicized in this presentation.

Mavera™ is a trademark of Renessen.

© 2006 Monsanto Company

3

OVERVIEW

Monsanto Is an Agricultural Company; Our Strategy Is Focused on Helping Farmers Be More Productive

We are an agricultural company. We apply innovation and technology to make farmers more productive and profitable by improving the ways they can produce food, fiber and feed.

4.95.4

6.3

0

1

2

3

4

5

6

7

2003 2004 2005

FOCUS: NET SALES

NE

T S

ALE

S (

$ IN

BIL

LIO

NS

)

2005 SALES BREAKDOWN

SEEDS & GENOMICS AGRICULTURAL PRODUCTIVITY

NORTH AMERICALATIN AMERICAEUROPE-AFRICAASIA PACIFIC

4

Monsanto’s Strategic and Financial Opportunity Lies In The Seed and Trait Business

OVERVIEW12

-MO

NT

H R

OLL

ING

GR

OS

S P

RO

FIT

($

IN

MIL

LIO

NS

)

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Q1 20

03Q2

2003

Q3 20

03Q4

2003

Q1 20

04Q2

2004

Q3 20

04Q4

2004

Q1 20

05Q2

2005

Q3 20

05Q4

2005

Q1 20

06Q2

2006

Q3 20

06

FOCUS: 12-MONTH ROLLING GROSS PROFIT BY BUSINESS SEGMENT

SEEDS & GENOMICS SEGMENT

AGRICULTURAL PRODUCTIVITY SEGMENT

KEY INFLECTION POINT:MID-2004, THE ROLLING GROSS PROFIT FOR THE SEEDS & GENOMICS BUSINESS SEGMENT SURPASSES AGRICULTURAL PRODUCTIVITY

5

OVERVIEW

Profit Growth Is Reflected Across All Four Seed and Trait Platforms

BIOTECH AND

BREEDING R&D

PLATFORM

• YIELDGARD FAMILY• ROUNDUP READY

FAMILY

KEY TRAITS

• DEKALB/ASGROW• ASI, INC.• HOLDEN’S/CORN

STATES

SEED CHANNELS

CORN

• ROUNDUP READYFAMILY

• VISTIVE FAMILY

KEY TRAITS

• DEKALB/ASGROW• ASI, INC.• HOLDEN’S/CORN

STATES

SEED CHANNELS

SOYBEANS

• TOMATOES, MELONS, PEPPERS

KEY CROPS

• SEMINIS AND RELATED BRANDS

SEED CHANNELS

VEGETABLES

• BOLLGARD FAMILY• ROUNDUP READY

FAMILY

KEY TRAITS

• PROPOSED DELTA AND PINE LAND ACQUISITION

• COTTON STATES

SEED CHANNELS

COTTON

6

Six Factors Will Redefine the Game By End of the DecadeCOMMERCIAL OPPORTUNITY

Commercial viability of seeds and traits established; Supporting infrastructure in place

PERIOD : SEED & TRAITS ESTABLISHED

Seed and trait growth comes from: penetration, stacking, multi-generation traits, and breeding enhancement. Corn defines the future direction

PERIOD : CORN IS ON THE LEADING EDGE

Gross profit opportunity expands with penetration, stacking, and second-generation traits– even as competition advances

PERIOD : THE GAME CHANGES

2004 2005 2006 2007 2008 20092003 2010

Cotton platform creates new opportunities for growth 4

Growth in the U.S. corn market is not over1

Growth in international corn market share2

Biotech traits are advancing internationally3

Seminis to capture additional gross margin5

Next-generation pipeline poised for enhanced commercial delivery6

THESE SIX FACTORS SHOULD COLLECTIVELY DRIVE GROSS PROFIT THROUGH 2010

7

Next-generation pipeline poised for enhanced commercial delivery

6



GROSS PROFIT DRIVERS




0%

10%

20%

30%

40%

50%

60%

2001 2002 2003 2004 2005 2006F

U.S. CORN MARKET SHARE

HOLDENS/CORN STATES LICENSEES

AMERICAN SEEDS, INC. BRANDS

DEKALB AND ASGROW BRANDS

Grow U.S. national branded seed market share by 1-2 points annually through 2010

1

GROSS PROFIT OBJECTIVES

Migrate more of the portfolio to multiple-trait, high-margin sales

3

Grow trait penetration2

Performance Acceleration Across U.S. Commercial Channels Is Reflected in Market Share Growth

COMMERCIAL OPPORTUNITY

8

With the Corn Trait Technology in Hand Today, There’s Opportunity to Double Penetration By End of Decade



1



3


FOCUS:OPPORTUNITY

U.S. TRAIT ACRE OPPORTUNITY:

CURRENT COMMERCIAL CORN TRAITS

2006F:Under 50% penetrated to date


6







BIOTECH ACRES PLANTED 2006F

REMAINING AVAILABLE ACRES

55% 52% 30%

U.S. CORN TRAIT OPPORTUNITY

9-10M31-32M33-34M2006F

25-30M50-60M60M2010 OPPORTUNITY

YIELDGARDROOTWORM

YIELDGARDCORN BORER

ROUNDUP READY CORN 2

By the end of 2006, Monsanto should penetrate roughly half of the market opportunity with existing biotech traits. This means we have the opportunity to penetrate another 50% by the end of the decade with our current commercial portfolio.

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Stacking Multiplies the Value Opportunity Per AcreCOMMERCIAL OPPORTUNITY

1 = INDEXED VALUE OF SINGLE TRAIT

1

1.5

2

2.5

3

3.5

TR

AIT

RE

TA

IL V

ALU

E P

ER

A

CR

E(I

ND

EX

ED

)

1.59

3.42

TRAIT RETAIL VALUE ADDED PER ACRE

DOUBLE STACK

TRIPLE STACK

AVERAGE U.S. RETAIL VALUE ADDED WITH STACKED TRAITS


1



3



6







2006F20052004200320022001

5-6

20-21

23-24

1.3

13.0

30.6

0

8.7

33.6

000U.S. TRIPLE TRAIT ACRES

5.12.21.2U.S. DOUBLE TRAIT ACRES

27.323.817.7U.S. SINGLE TRAIT ACRES

ABSOLUTE U.S. CORN ACRES1 (IN MILLIONS)

1. Absolute acres represent the total number of acres with at least one trait.

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Monsanto’s U.S. Market Share Gains Poised to Be Replicated in Key International Corn Growing Areas

35%

35%

58%

37%

29%

35%

38%

17%

26%

14%

10%

13%

14%

14%

FY2004

35%

34%

60%

38%

35%

35%

49%

23%

32%

21%

15%

15%

18%

19%

FY2006F CHANGE (’04-’06)FY2005

FLAT

-1%

+2%

+1%

+6%

FLAT

+11%

+6%

+6%

+7%

+5%

+2%

+4%

+5%

35%BRAZIL

57%MEXICO

37%ARGENTINA

44%SOUTH AFRICA

38%LATIN AMERICA REGION

34%INDIA

37%ASIA-PACIFIC REGION

23%TURKEY

30%HUNGARY

17%ITALY

14%FRANCE

15%EUROPE-AFRICA REGION

UNITED STATES

NORTH AMERICAN REGION

16%

16%

SCORECARDGLOBAL BRANDED MARKET SHARE


6







Grow branded seed market share overall internationally by 1-2 points annually through 2010

1


Build strategic alliances and establish hybrid licensing to increase genetic footprint for future trait penetration

2

11

Roundup Ready Flex with Bollgard II stack launches in FY 2007

OPPORTUNITY:

In 2005-2006 season, over half of all acres with at least one trait were stacked

20M acre potential for stack of Insect Resistant Soybeans with Roundup RReady2Yield and 15M acre potential for stack of Roundup Ready Corn 2 and Yieldgard Corn Borer

OPPORTUNITY:

Biotech traits in regulatory queue

24M acre opportunity for Roundup Ready Corn 2 and 8M acres for Yieldgard Corn Borer at the turn of the decade

OPPORTUNITY:

In 2006, biotech traits were planted in six countries

CURRENT STATUS:

EXAMPLE: COTTON TRAITS IN AUSTRALIA

MULTI-GENERATION

CURRENT STATUS:

EXAMPLE: BIOTECH TRAITS IN BRAZIL

STACKING

CURRENT STATUS:

PENETRATION AND EXPANSION

EXAMPLE: BIOTECH TRAITS IN EUROPE

Biotech Traits Set Up Three Pathways for Mid-Term Growth Internationally



6







Rapidly penetrate and expand planting of biotech traits in key countries

1


Migrate the portfolio to multiple-trait, and/or second generation trait, high-margin sales

2

12

Market Potential for International Biotech Traits by 2010 Highlights Continued Growth Opportunity

COMMERCIAL


6







Rapidly penetrate and expand planting of biotech traits in key countries

1


Migrate the portfolio to multiple-trait, and / or second generation trait, high-margin sales

2

BIOTECH ACRES PLANTED 2006F REMAINING AVAILABLE ACRES

63% 0% 31% 1% 11% 0%

11M34-36M58-60M22.5-27.8M

24.5–29.8M88.2MTOTAL KEY

MARKETS

-4M6M10M11M0.2MAFRICA

CORNCOTTONSOYBEANS

---0.5M-0.8M

0.5M-0.8M-AUSTRALIA

5M8M24M--1MEUROPE

-3 – 5M3 – 5M10-15M10-15M-INDIA

1M4M5M--37MARGENTINA

5M15M20M2M3M50MBRAZIL

YIELDGARDCORN

BORER

ROUNDUP READY CORN 2

ROUNDUP READYFLEX

ROUNDUP READY

KEY MARKETS YIELDGARD

ROOTWORMBOLLGARD & BOLLGARD II

2010 INTERNATIONAL TRAIT OPPORTUNITY

13

U.S. COTTON MARKET SHARE

7%DELTA AND PINE LAND

6-8MBOLLGARD II

10-15MROUNDUP READY FLEX

2010 U.S. MARKET OPPORTUNITY

2006 SECOND-GENERATION TRAIT PENETRATION 1


In Cotton, Expanded Trait Offerings Create Most Significant Opportunity for Increased Profitability

0%

20%

40%

60%

80%

100%

1999 2000 2001 2002 2003 2004 2005

FIBERMAX

OTHERS

STONEVILLE

DELTA AND PINE LAND

1. Second-generation trait penetration reflects percent of commercial portfolio containing either Roundup Ready Flex, Bollgard II or both traits.


6







Expand second-generation, higher-margin trait offerings1


Apply molecular breeding to cotton2

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Seminis to Leverage Portfolio, Pricing and Molecular Breeding to Create New Growth


Commercialize first hybrids developed by molecular breeding

Launch succession of consumer benefit products

PIPELINE ADVANCEMENTBY END OF FY 2010

Identify and implement opportunities to price products to value

Build business models to create and capture downstream value opportunities

Enhance product quality and reduce costs through manufacturing and logistical improvements

NEW VALUE CREATION

BY END OF FY 2008

OVER THE MID-TERM, SEMINIS WILL UNDERGO THREE PHASES OF EXECUTION EN ROUTE TO UNLOCKING ADDITIONAL VALUE

Prioritize product portfolio by focusing on 20 – 25 key crops that drive profitability

Assemble genetic maps for key crops

Enhance R&D capability and deploy molecular markers for agronomic and consumer benefits

Integrate and streamline back–office operations

OPERATIONAL EXCELLENCE

BY END OF FY 2007

VALUE ENHANCEMENT TIMELINE

+ +


6







Intensify value creation by commercializing new products derived from molecular breeding

2

Prioritize product portfolio1


15

PIPELINE OPPORTUNITY

“HIT” Projects Designed to Pull Forward the Net Present Value of Select Pipeline Traits Through Larger-Acre Launches

• Parallel work in breeding and biotechnology• Simultaneous regulatory work, submissions moving

forward along with project testing for key launch countries

PHASE III

Roundup RReady2Yield soybeans

• Parallel work in breeding and biotechnology • Early-stage R&D and commercial integration

PHASE IIDrought-tolerant corn

• Progress will allow Vistive III to “leap-frog,” shortening the gap in commercialization between Vistive I and Vistive III

PHASE IIVistive III soybeans

P R O J E C T

P R O J E C T

P R O J E C T

P R O J E C T

\High-Impact Technology\: A designated sub-set of the R&D pipeline placed on a graduated track to streamline development work and improve commercial readiness. Designed to pull forward the Net Present Value (NPV) through larger-acre launches in elite germplasm with a greater financial benefit.


6







Bring “HIT” traits to market with larger-acre launches in the best seed

2

Streamline development work and advance regulatory submissions simultaneously with project testing

1


16

0%0%0%PERCENT PENETRATED

35M

ARGENTINA

50M70MAVAILABLE MARKET

BRAZILU.S.KEY MARKET ACRES

Roundup RReady2Yield Soybeans


Reflecting HIT Status, Roundup RReady2Yield Soybeans Is Targeted for Most Significant Commercial Trait Launch

CREATING VALUE

• Value is additive, with target of up to 5 bushel-per-acre yield improvement over comparable Roundup Ready soybeans

• Value created through yield gains will be shared with farmer and value chain as has been Monsanto’s practice

• Market opportunity for Roundup RReady2Yieldsoybeans recognizes competition from other traits

High (>20M acres)TOTAL ACRE OPPORTUNITY:

Medium (>$10/acre to <$30/acre)RETAIL VALUE/ACRE:

Roundup RReady2Yield soybeansPHASE IVPHASE IIDISCOVERY

VALUE CONSIDERATIONS

PHASE IIIPHASE I

• Roundup RReady2Yield is the second-generation of Monsanto’s popular herbicide-tolerant platform in soybeans

HIT Project

PRODUCT CONCEPT

ROUNDUP RREADY2YIELD: COMMERCIAL MILESTONESSTARTING POINTU.S. REGULATORY APPROVAL

SEASON 1 LAUNCH YEARGLOBAL REGULATORY CLEARANCES

COMMERCIAL LAUNCHPRE-COMMERCIAL USER-RELIABILITY TRIALS

0

0.5

1

1.5

2

2.5

3

CORN TRAITSSOYBEAN

TRAITS COTTON TRAITS

LAUNCH ACRES OF U.S. TRAITSHISTORICAL COMMERCIALIZED TRAITS (1996-2006)

Target acreage for Roundup RReady2Yieldcommercial launch is expected to be a multiple above historical acreages in launch years

AC

RE

S (

IN M

ILLI

ON

S)

AVERAGE HISTORIC TRAIT LAUNCH: 1.2M ACRES

17

0%0%0%PERCENT PENETRATED

6M

ARGENTINA

30M80MAVAILABLE MARKET

BRAZILU.S.KEY MARKET ACRES

Drought-tolerant corn

VALUE CONSIDERATIONS

• Farmers value water-use in “acre-inches of water” needed to support yield potential – farmers need 18-20 inches of moisture from natural or irrigated sources during growing season

• Value of the trait is in better yields under moisture-stressed conditions; Varies by region (see table at right)

• The value will be specific to the variable costs of water use by farmers, not fixed costs of irrigation

• First value models are based in U.S.; International markets follow similar value proposition

High (>20M acres)TOTAL ACRE OPPORTUNITY:

Medium (>$10/acre to <$30/acre)RETAIL VALUE/ACRE:

Drought-tolerant cornPHASE IVPHASE IIDISCOVERY PHASE IIIPHASE I

• Drought-tolerance is a family of products, aimed at providing consistent yield and buffering against the effects of water limitations

HIT ProjectPRODUCT CONCEPT SEGMENTED VALUE OPPORTUNITY

ACROSS MARKETS: U.S. EXAMPLE

STABILITYWESTERN DRYLANDIRRIGATED

Value is in improved yields when moisture is less than optimal

Value is in improved yields annually, by improving water-use efficiency

Value is in replacing irrigation, reducing the variable costs of irrigation

Non-irrigatedNon-irrigatedIrrigated

17-19” typical precipitation in growing season



50-60M acres10-12M acres8-12M acres

High annual precipitation

Low annual precipitation

Source: Spatial Climate Analysis Service, Oregon State University

P R O J E C T


Multi-Generational Drought-Tolerant Corn to Create Value Across Multiple Market Segments

18

Six Drivers Set Up Seeds and Traits for Further Acceleration into the Next Decade

FINANCIAL OUTLOOK

42%

44%

46%

48%

50%

52%

54%

2003 2004 2005 2010F

FOCUS: BUSINESS OPPORTUNITY FOCUS: FINANCIAL TARGET

Six drivers are expected to provide a positive pull on gross profit with higher-margin, higher-growth opportunity. That pull disproportionately benefits Seeds & Genomics segment, but also has a positive effect on the gross-profit-to-net-sales ratio for the company. GROSS PROFIT AS A PERCENT OF SALES

Monsanto sees a path to cross the 50% gross margin mark in the next few years and moving toward a 51% to 53% gross margin by the end of 2010

TARGET OF UP TO 51% - 53% GROSS MARGIN BY 2010






Next-generation pipeline poised for enhanced commercial delivery6


monsanto 09-18-2006

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