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Higher Demand For Corn Equals Higher Stock Prices For Monsanto

Published: April 7, 2012
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Source: Seeking Alpha

There's something special about seeds. They are so tiny and look like nothing, but when you plant, water, and cultivate them, they transform into beautiful flowers and bountiful fruits and vegetables. Jesus taught that we only need faith the size of a mustard seed to move a mountain from here to there. The major global seed producer, Monsanto (MON), stands to benefit from increased agricultural demand. This demand is the seed that will produce higher earnings and stock prices for the company.

Monsanto just revised its earnings per share for 2012 from previous estimates of $3.34 - $3.44 to more optimistic estimates of $3.49 - $3.54. These positive earnings revisions typically lead to positive earnings reports when the quarterly figures are publicized. Monsanto has exceeded its earnings estimates in its last five quarters and it looks like it will accomplish this again for the next quarter.

The company said that a strong seed selling season contributed to its 19% increase in net income for Q2 2012. Monsanto also had increased corn seed sales in Latin America yielding a gross profit increase of 29%. Sales of its largest segment, corn seeds and traits increased 17% overall, while sales of its second largest segment, soybean seed and traits increased 12%.

Good news is being projected for corn for 2012 by the USDA. The U.S. Department of Agriculture is calling for the largest corn acreage in 2012 since 1937. This 75 year high is expected to include a total of $95.9 million acres of corn. This is good news for Monsanto as corn seed is its largest segment.

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