monsanto 12-07-05

BRETT BEGEMANNEXECUTIVE VICE PRESIDENT,

INTERNATIONAL COMMERCIAL

Citigroup Investment Research 16th Annual Investment Conference

Dec. 7, 2005

Forward-Looking Statements

Certain statements contained in this presentation, such as statements concerning the company's anticipated financial results, current and future product performance, regulatory approvals, currency impact, business and financial plans, the outcome of contingencies and other non-historical facts are "forward-looking statements." 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: the company's exposure to various contingencies, including those related to Solutia Inc., litigation, intellectual property, regulatory compliance (including seed quality), environmental contamination and antitrust; successful completion and operation of recent and proposed acquisitions; fluctuations in exchange rates and other developments related to foreign currencies and economies; increased generic and branded competition for the company's Roundup herbicide; the accuracy of the company’s estimates and projections, for example, those with respect to product returns and grower use of our products and related distribution inventory levels; the effect of weather conditions and commodity markets on the agriculture business; the success of the company’s research and development activities and the speed with which regulatory authorizations and product launches may be achieved; domestic and foreign social, legal and political developments, especially those relating to agricultural products developed through biotechnology; the company’s ability to successfully market new and existing products in new and existing domestic and international markets; the company’s ability to obtain payment for the products that it sells; the company's ability to achieve and maintain protection for its intellectual property; the company's ability to fund its short-term financing needs; and other risks and factors detailed in the company's filings with the U.S. Securities and Exchange Commission. Undue reliance should not be placed on these forward-looking statements, which are current only as of the date of this release. The company disclaims any current intention or obligation to revise or update any forward-looking statements or any of the factors that may affect actual results, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Information

This presentation may use the non-GAAP financial measures of “free cash flow,” earnings per share (EPS) on an ongoing basis, and Return on Capital (ROC). We define free cash flow as the total of cash flows from operating activities and investing activities. A non-GAAP EPS financial measure, which we refer to as on-going EPS excludes certain after-tax items that we do not consider part of ongoing operations, which are identified in the reconciliation. ROC means net income (without the effect of certain items) exclusive of after-tax interest expenses, divided by the average of the beginning year and ending year net capital employed, as defined in the reconciliation. Our presentation of non-GAAP financial measures is intended to supplement investors’ understanding of our operating performance. These non-GAAP financial measures are not intended to replace net income (loss), cash flows, financial position, or comprehensive income (loss), as determined in accordance with accounting principles generally accepted in the United States. Furthermore, these non-GAAP financial measures may not be comparable to similar measures used by other companies. The non-GAAP financial measures used in this presentation are reconciled to the most directly comparable financial measures calculated and presented in accordance with GAAP, which can be found at the end of this presentation.

Fiscal Year

In this presentation, unless otherwise specified, references to Monsanto’s fiscal years refer to the 12-month period ending August 31.

Trademarks

Roundup, Roundup Ready, Roundup RReady2Yield, Bollgard, Bollgard II, YieldGard, Monsanto Imagine, Vine Design, Asgrow, DEKALB, Monsanto Choice Genetics, Posilac, Processor Preferred, Vistive and Seminis, Seminis Vegetable Seeds, Royal Sluis, Petoseed, and Bruinsma are trademarks owned by Monsanto Company and its wholly-owned subsidiaries and are italicized the first time they appear in this presentation.

OVERVIEW

Two-Step, Two-Horizon Strategy Creates a Line of Sight for Success through 2010

20102009200820072006

GROWGrow Current Portfolio

Grow Globally

Grow the Pipeline Translate Growth to Value

LEADLead through Innovation

Lead in an Increasingly Competitive Market

Lead in New Market Opportunities

Translate Leadership to Value

U.S., Argentina and Brazil Supply World’s Corn and Soy Needs

Source: U.S.D.A. Foreign Agricultural Service, ABIOVE, Independent Economists & Monsanto Estimates

OVERVIEW

EUROPE

20102005

3M MT1M MTSoy

55M MT52M MTCorn

ASIA

20102005

23 MT22M MTSoy

132M MT122M MTCorn

ARGENTINA

20102005

40M MT38M MTSoy

27M MT23M MTCorn

Net Exporter Production = ConsumptionNet Importer

BRAZIL

20102005

81M MT60M MTSoy

53M MT44M MTCorn

UNITED STATES

20102005

81M MT86M MTSoy

297M MT278M MTCorn

WORLD AREA GRAIN PRODUCTION

Acceleration In Seeds and Traits Drives Commercial Gross Profit Evolution

OVERVIEW

2003

TOTAL GROSS PROFIT = $2.3M

MONSANTO GROSS PROFIT GROWTH



2005 2007F

ALL OTHER AGRICULTURAL PRODUCTIVITY

ROUNDUP AND OTHER GLYPHOSATE-BASED HERBICIDES

SEEDS & GENOMICS

OVERVIEW

Breeding and Biotech Provide Parallel R&D Paths to Commercial Products

PHASE II PHASE III PHASE IVPHASE IDISCOVERY LAUNCH

BREEDING and BIOTECHNOLOGY form two R&D pathways

Separate, but parallel, the BREEDING and BIOTECHNOLOGY pathways are linked by shared tools.

ELI

TE

G

ER

MP

LAS

M

GE

NO

MIC

S

MA

RK

ER

S

ITP

LAT

FOR

M

AN

ALY

TIC

S

CO

MM

ER

CIA

L

BREEDING

BIOTECHNOLOGY

Germplasm

RSEED SOLD TO FARMERS

R&D PHASE:

Breeding Platform Powers Corn Franchise to Strong Growth

GROW

FLATBRAZIL

+1%MEXICO

FLATARGENTINA

+5.7%SOUTH AFRICA

FLATLATIN AMERICA REGION

+5.1%INDIA

+1.9%ASIA PACIFIC REGION

+5.2%TURKEY

+1.2%HUNGARY

+1.7%ITALY

+2.5%FRANCE

+2.2%EUROPE-AFRICA REGION

UNITED STATES

NORTH AMERICAN REGION

ALL WORLD AREAS

+2.0%

+2.2%

+2.9%

SCORECARDBRANDED MARKET SHARE GROWTH WORLDWIDE

2004 TO 20051

1 - Market share is for hybrid corn seed market only

RELATIVE MATURITIES (DAYS)

BU

SH

ELS

/AC

RE

U.S. MARKETS 2005 COMPETITIVE CORN YIELD COMPARISON

150

160

170

180

190

200

95 100 105 110 115

MONSANTO BRANDS COMPETITORS

Monsanto’s global “genetic footprint” has expanded

TARGET: GROW

U.S. Corn Channel Strategy

GROW

Global Breeding Capabilities Create Full Product Pipeline for Three Channels in U.S.

1

2

3LocalTarget reach:Regional, high-touchOutlet:Licensed, non-exclusiveChannel:

LocalTarget reach:Regional, high-touchOutlet:OwnedChannel:

NationalTarget reach:RetailOutlet:OwnedChannel:

U.S. CORN MARKET SHARE

0%

10%

20%

30%

40%

50%

60%

2001 2002 2003 2004 2005 2006 2007

DEKALB AND ASGROW BRANDS

HOLDENS/LICENSEES

AMERICAN SEEDS, INC. BRANDS

Monsanto branded seed gained 6 share points in the last 4 years

SUSTAINABLE 1-2 POINT SHARE GAINS

Europe-AfricaChannel Strategy

GROW

Breeding Gains Expand Global Genetic Footprint Worldwide

RELATIVE MATURITIES (DAYS)

BU

SH

ELS

/AC

RE

1

2Europe-AfricaTarget reach:Retail, RegionalOutlet:Licensed, non-exclusiveChannel:

EUROPE-AFRICA 2005 COMPETITIVE CORN YIELD

COMPARISON

NationalTarget reach:RetailOutlet:OwnedChannel:

100

110

120

130

140

150

160

85 90 95 100 105 110 115

MONSANTO BRANDS COMPETITORS

Cotton States Will Launch New Source of Cotton Seed

Cotton States

Germplasm licensed from third parties and developed through molecular breeding by Monsanto

Taking preliminary orders from licensees; Enough seed for approximately 1 million acres available for licensing in 2006

All varieties offered in 2006 will be on a second-generation trait platform

DISCOVERY PHASE IProof of Concept

PHASE IIEarly Development

PHASE IIIAdv. Development

PHASE IVPre-Launch

LAUNCH

GROW

KEY MARKET AREAS

TARGET MARKET

PERCENT PENETRATED

U.S.

7M-8M

0%

2005 UNIVERSITY COTTON VARIETY TESTSLB

S L

INT

/AC

RE

0150300450600750900

1,0501,2001,350

COTTON STATES VARIETIES

COMPETITIVE VARIETIES

CREATING VALUE

• Licensing fee reflects value of top quality germplasm, separate from value of trait

• Cotton seed currently sells for average of $20 per acre retail

UP NEXT

• 4+ licensees will sell seed sourced from Cotton States in 2006, located broadly throughout Cotton Belt




PHASE IVPre-Launch

LAUNCH

Mexican OP Conversion

GROW

Conversion from Open-Pollinated to Hybrid Offers Opportunity in Mexican Market

CREATING VALUE

As expected Better than expected

Not as well as expected

• Able to achieve increased uniformity, earlier maturity, higher produce quality

• Higher market yield and profitability• Better disease resistance• Value of hybrids already being recognized in the market

Mexican OP ConversionMULTI-STAGE: PHASE II THROUGH LAUNCH

OBSERVATIONS

New Hybrids

Horticultural Performance

Quality

2005 FIELD REPORT

NEW MARKET OPPORTUNITY

40%298KHOT PEPPERS

40%76KONIONS

10%67KCARROTS

5%100KSQUASH

PENETRATIONKEY

MARKET(Acres)

CROP

$0$10$20$30$40$50$60$70

HOTPEPPER

SQUASH ONION CARROT

$ M

ILLI

ON

S

CURRENT MARKET

POTENTIAL MARKET

Global Expansion, Trait Product Introductions Offer More Growth Potential Going Forward

GROW

GLOBAL PENETRATION OF MONSANTO BIOTECH TRAITS

AC

RE

S (

IN M

ILLI

ON

S)

020406080

100120140160180200

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

SOYBEANS CORN COTTON CANOLA

CONTINUED TRAIT PENETRATION, WITH HIGHER CONCENTRATION OF STACKED TRAITS

MONSANTO U.S. BIOTECH ACRES VS. AVERAGE MARKET PRICE

Biotechnology Adoption Reflects Trait Value, Independent of Commodity Prices

Source: USDA and Monsanto estimates

CORN BIOTECH ACRES

CORN COMMODITY PRICES

SOYBEAN BITOECH ACRES

SOYBEAN COMMODITY PRICES

GROW

R2 = .38

0

5

10

15

20

25

30

35

40

45

50

2000 2001 2002 2003 2004 2005

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

ACRES(IN MILLIONS) $/BU

CORN

0

10

20

30

40

50

60

70

2000 2001 2002 2003 2004 2005

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

ACRES(IN MILLIONS) $/BU

R2 = .58

SOYBEANS

Monsanto’s combination of germplasm and stacked traits is platform of choice

TARGET: GROW

Market Opportunity

GROW

Market Potential for Biotech Traits Highlights Continued Growth Opportunity

25-30M50-60M60M6 – 8M10 – 15M70MUNITED STATES

36-41M81 - 91M115M28.5 -35.8M

34.5 -44.8M 156.2MTOTAL KEY

MARKETS

-4M6M10M11M0.2MAFRICA

CORNCOTTONSOYBEANS

---0.5-0.8M0.5-0.8M-AUSTRALIA

5M8M24M--1MEUROPE

---10-15M10-15M-INDIA

1M4M5M--35MARGENTINA

5M15M20M2M3M50MBRAZIL

YieldGardRootworm

YieldGardCorn Borer

Roundup Ready

Bollgard I and II

Roundup ReadyFlex

Roundup ReadyKEY

MARKETS

Grow the value of the corn franchise

TARGET: GROW

Roundup ReadyCorn

GROW

Market Opportunity for Roundup Ready Corn on Track for 60M Acres Longer Term

SUSTAINABLEACREAGE GROWTH

0

5

10

15

20

25

30

1998 1999 2000 2001 2002 2003 2004 2005 2006F 2007F

U.S

. AC

RE

S

INFLECTION POINT:

DOMESTIC CHANNELING

PROGRAM

INFLECTION POINT: EU

IMPORT APPROVALS

Early order patterns for seeds and traits indicate a strong season ahead in the U.S.

Roundup Readycorn is on pace for 50M acres in 2008 in the U.S.

Longer term market potential of 60M acres

Grow the value of the corn franchise

TARGET: GROW

Zone-Based Royalty System

GROW

Zone-Based Royalties Leverage Roundup Ready Corn Base and Expand Market for YieldGard Family

Source: 2004 Farm Progress Grower Survey and Monsanto Estimates

STATES WITH WEED CONTROL NEEDS

SEGMENTED VALUE OPPORTUNITY

STATES WITH CONSISTENT NEED FOR WEED CONTROL, CORN-BORER CONTROL AND ROOTWORM CONTROL

STATES WITH CONSISTENT NEED FOR WEED CONTROL, CORN-BORER CONTROL AND SPORADIC ROOTWORM CONTROL

KEY MARKET ACRES

AVAILABLE MARKET

PERCENT PENETRATED

U.S. BRAZIL ARGENTINA

80M 30M 6M

0% 0% 0%




PHASE IVPre-Launch

LAUNCH

Drought-Tolerant Corn

LEAD

Drought-Tolerant Corn Is Lead Crop of Yield Family of Traits

CREATING VALUE

As expected Better than expected

Not as well as expected

LEAD GENE: COMPLETEDLEAD EVENT: IN PROGRESS

• Lead genes show consistent drought stress performance across years

• Mid-season drought performance results in more, bigger ears

• Up Next: Advance into early development

Drought-Tolerant CornPHASE II

Early Development

OBSERVATIONS

Lead Selection

Agronomic Performance

Trait Performance

2005 FIELD REPORT CONSISTENT RESULTS FROM EARLY LEADS AND MORE LEADS EMERGING FROM PIPELINE

WITH TRAIT WITHOUT TRAITWITH TRAIT WITHOUT TRAIT

4032 34oC 4032 34oC

WITH TRAIT WITHOUT TRAIT

KEY MARKET ACRES

AVAILABLE MARKET

PERCENT PENETRATED

U.S. BRAZIL ARGENTINA

50M 35M

0% 0% 0%




PHASE IVPre-Launch

LAUNCH

Roundup RReady2Yield Soybeans

LEAD

Roundup RReady2Yield Soybeans Expand Weed Control Window

CREATING VALUE

70M

BRAZILIAN HISTORICAL SOY YIELD GAINS

US HISTORICAL SOY YIELD GAINS

y = 0.4246x - 811.11

20

25

30

35

40

45

1970 1980 1990 2000

BU

SH

ELS

/AC

RE

y = 0.9043x - 1772.2

202530

354045

1991 1996 2001 2006

BU

SH

ELS

/AC

RE

Return value to farmer by bringing new technology

Yield improvement of 3 - 4+ bushels per acre in 2004 field trials

Flexibility by providing wider window of application

Research under way on potential for additional insurance for Asian soybean rust

Provides the platform for future soy technologies

•Drive additional trait penetration globally

TARGET: GROW

Brazilian Value Capture System

GROW

Brazil Offers Largest Global Opportunity to Create Value From New Trait Penetration

SeedMultiplier

Grain Delivery

4-5M acres for saleRetail price suggested at

$9 per acre

15–20Macres saved seed

Fee of $4.50 per acre

SoybeanFarmer

Monsanto

Monsanto

Royalty receivedfrom seed supplier

Royalty receivedfrom grain company, shared generously

Situation Update: Planted soybean acres: 50M

Dual value-capture systems

Anticipating royalty on 4 - 5M acres of fresh new Roundup Ready seed

Saved seed paid upon delivery of grain

Grain delivery system to be expanded in Brazil

0

3

6

9

12

15

1998 1999 2000 2001 2002 2003 2004 2005

Grow the branded & licensed cotton seed market share

TARGET: GROW

Roundup ReadyFlex Cotton

GROW

Experience Curve Allows Monsanto to Stage Largest Trait Launch in Biotech History

Value reflects greater convenience and enhanced weed control; lifts value of the Roundup Ready trait

Anticipated largest trait launch ever with 2-3 million acres, pending final approvals

80-90% of Roundup Ready Flex to be stacked with Bollgard II

Broad introduction led by Emergent and Cotton States

U.S. MONSANTO COTTON TRAIT ACRES

BOLLGARD & BOLLGARD II

ROUNDUP READY

STACKED

STACKEDPENETRATION

TREND

0%

5%

10%

15%

20%

25%

30%

2004 2005 2006F 2007F

SUSTAINABLE1-2 POINT SHARE GAIN WITH EMERGENT & COTTON STATES

MONSANTO COTTON SHARE GROWTH

EMERGENT

0

25

50

75

100

125

150

•International markets upgrade to stacked and next-generation trait products

TARGET: LEAD

Second-Generation Traits

LEAD

Momentum in Cotton Trait Adoption Will Accelerate With Second-Generation Launches in India and Australia

ROUNDUPREADY

COTTON

ROUNDUPREADYFLEX

CONVENTIONALCOTTON SEED

BOLLGARD II STACK WITH BOLLGARD II &

ROUNDUP READY FLEX

US

$/A

CR

E

In India, biotech cotton adoption reflects economic and environmental benefits

Yield Increase 58%

Pesticide Reduction (50%)

Farmer Net Return 163%

In India, Bollgard II will launch on small acres in 2006 and Roundup Ready Flex in 2010 range

In Australia, success of Bollgard II / Roundup Ready sets stage for launch of Bollgard II/ Roundup Ready Flex starting in 2006

COTTON RETAIL VALUE IN AUSTRALIAN MARKET

LEAD

New Traits, Trait Upgrades and New Stacked Combinations Are Creating New Platforms for Farmers

Preferred Trait CombinationsTrait OfferingsPreferred Trait

CombinationsTrait OfferingsPreferred Trait CombinationsTrait Offerings

2015F2010F2005

YIELDGARD CORN BORER

ROUNDUP READY CORN 2

YIELDGARD ROOTWORM

STACKED –DOUBLE:YIELDGARD PLUSYGCB + RRYGRW + RR

STACKED –TRIPLE:

YGRW+YGCB+RR



YIELDGARD ROOTWORM

2nd GENERATION YGRW

STACKED –TRIPLE:

YGRW+YGCB+RR

HIGH-VALUE CORN W/ LYSINE

STACKED –2nd GEN TRIPLE:

2nd GEN YGCB + 2nd GEN YGRW + RR

STACKED – TRIPLE+ FEED TRAITS:

HIGH-VALUE CORN W/ LYSINE + YGRW + YGCB + RR



YIELDGARD ROOTWORM

2nd GENERATION YGRW

HIGH-VALUE CORN W/ LYSINE

YIELD: DROUGHT

YIELD: INTRINSIC

YIELD: NITROGEN

2nd GEN HIGH-VALUE CORN W/

LYSINEFEED CORN WITH

BALANCED PROTEINS

STACKED –TRIPLE + YIELDTRAITS:

2nd GEN YGCB + 2nd GEN YGRW + RR+ DROUGHT+ INTRINSIC+ NITROGEN

STACKED – TRIPLE+ FEED TRAITS +YIELD TRAITS:

2nd GEN HIGH-VALUE CORN W/ LYSINE + YGRW + YGCB + RR

CORN

PROCESSOR BENEFITS

CONSUMER BENEFITS

FARMER BENEFITS

Consistency and Discipline that Typified 2003-2005 Will Remain Cornerstone of Monsanto’s Strategy

GROW

$400MALL OTHER AG PRODUCTIVITY GROSS PROFIT

2006

~$2.3BSEEDS & TRAITS GROSS PROFIT

~$600MROUNDUP GROSS PROFIT

~$350MCAPITAL EXPENDITURES

~10%R&D AS A % OF SALES

$825M - $900M

~22%SG&A AS A % OF SALES

FREE CASH FLOW

EARNINGS PER SHARE

Toward Upper End of $2.35-$2.50

UP TO 20% GROWTH FROM

2005

FY2006 TARGETS

GROWTH FACTORS

Grow Current Portfolio

Grow Globally

Grow the Pipeline

Translate Growth to Value

SUMMARY

Two-Step, Two-Horizon Strategy Creates a Line of Sight for Success through 2010

20102009200820072006

GROWGrow Current Portfolio

Grow Globally

Grow the Pipeline Translate Growth to Value

LEADLead through Innovation

Lead in an Increasingly Competitive Market

Lead in New Market Opportunities

Translate Leadership to Value

Reconciliation of Non-GAAP Financial Measures

$2.82-$3.00

--

--

--

--

--

--

$2.82-$3.00

12 Months Ended Aug. 31, 2007

--$(0.04)--(Income) Loss on Discontinued Operations and Related Restructuring

--$(0.39)--Tax Benefit on Loss from European Wheat andBarley Business

--$0.64--Solutia-Related Charge

--$0.91--In-Process R&D Write-off Related to the Seminis and Emergent Acquisitions

$2.08

--

$0.02

$0.94


$1.59$2.35-$2.50Diluted Earnings per Share from Ongoing Business

$0.24--Impairment of Goodwill

$0.36--Restructuring Charges -- Net

$0.99$2.35-$2.50Diluted Earnings per Share


12 Months Ended Aug. 31, 2006$ per share

Reconciliation of Non-GAAP EPS

Reconciliation of Free Cash Flow


N/A

N/A

$875-$950

$(500)

$1,375 - $1,450


$756$(512)N/ANet Increase (Decrease) in Cash and Cash Equivalents

$(243)$(582)N/ANet Cash Provided (Required) by Financing Activities

$999$70$825 - $900Free Cash Flow

$(262)$(1,667)$(350)Net Cash Provided (Required) by Investing Activities

$1,261$1,737$1,175-$1,250Net Cash Provided by Operations


12 Months Ended Aug. 31, 2006$ Millions

Reconciliation of Non-GAAP Financial Measures Reconciliation of Return on Capital

252——PCB Litigation Settlement Expense - Net

12——Cumulative Effect of a Change in Accounting Principle

Total Monsanto Company and Subsidiaries:

$ 413

(24)

63

—

18

24

—

—

—

$68

6.0%

6,846

$ 413

12 Months Ended

Aug. 31, 2003

—(106)Tax Benefit on Loss from European Wheat and Barley Business

—248In-Process R&D Write-Off Related to the Seminis and Emergent Acquisitions

—175Solutia-Related Charge

$ 463$612Operating Profit After-tax (excluding certain items)

(22)(29)Tax on Interest Expense – Net (at 38% tax rate)

5775Interest Expense – Net

64—Impairment of Goodwill

(1)(12)(Income) Loss on Discontinued Operations and Related Restructuring

986Restructuring Charges – Net

Adjustment for certain items, after-tax:

$267$255Net Income

Operating Profit After-tax (excluding certain items):

7.5%9.6%Return on Capital

6,1916,404Average Capital

$ 463$612Operating Profit After-tax (excluding certain items)

12 Months Ended

Aug. 31, 200412 Months

EndedAug. 31, 2005$ Millions

$6,846$6,191$6,404Average Capital7,1656,5275,854Prior Period Capital

7,1656,5275,8546,953Total Capital125125125125Cash for Operations

(137)(281)(1,037)(525)Cash and Cash Equivalents5,2585,1565,2585,613Shareowners’ Equity

$1,919$1,527$1,508$1,740Short-Term and Long-Term DebtAverage Capital:

2002200320042005As of Aug. 31,

monsanto 12-07-05

Economy & Finance

Transcript of monsanto 12-07-05