Strong South America sowings lift Monsanto profits

Monsanto offered good news to agribusiness investors tested by a weekend announcement of job cuts at Cargill, raising earnings guidance after a further boost at its Latin American operations.

The seeds giant lifted to $0.15-0.20 a share, from $0.10-0.15 a share, its forecast for earnings in the September-to-November quarter, putting its guidance clear of Wall Street estimates of a $0.13-a-share result.

The increase reflected "primarily" the "strength of the business in Brazil and Argentina", a region Monsanto forecast in October was set to be the group's "largest source of new growth" in the current financial year, which ends next August.

The company also noted "some contribution from timing benefits in the US and Australia", with factors such as the weather, or futures market, conditions often changing farmers' buying patterns.

Brazil booster

The statement comes a strong sowing season for South American farmers, who have been encouraged by relatively high crop prices to lift seedings, with generally benign weather helping them to hit targets.

Monsanto in October flagged the opportunity for sales driven by the "the ramp up of the corn opportunity in Brazil and Argentina", whose corn harvests early in 2012 are indeed currently forecast to be especially strong.

Other agribusiness groups too have benefited from the South America boom, with farm sprays groups such as BASF, Bayer, Dow Chemical and DuPont in October highlighting rising sales in the region.

Job cuts

However, Monsanto's upgrade contrasts with more downbeat statements elsewhere in the sector, with Russian fertilizer group Uralkali on Wednesday forecasting a stagnant potash market in Europe, thanks to tightened credit conditions, and US agribusiness giant Cargill over the weekend unveiling 2,000 job cuts.

The reductions were made "in response to the continued weak global economy", said Cargill, which in October unveiled a 66% slump in first-quarter earnings, as its risk management teams struggled to keep up with volatile markets.

"As economic conditions change, so must we," said Mike Fernandez, Cargill corporate vice-president of corporate affairs, in a statement blamed for instilling weakness on Monday in shares in trading groups such as Archer Daniels Midland and Bunge, against broader market rises.

Monsanto shares closed down 0.8% to $71.73 in New York on Wednesday despite the profits upgrade.