Monument Circle Acquisition Corp (MON)

[Democritus_of_Abdera]

Yield comparisons ...

Yield comparisons should be simple... Grant (and Monsanto’s speakers in general), however, make it complicated. Complications arise because of references to data that is not provided and by a penchant for using a 3 yr running average of yield data rather than that of a specific year. For example (in the Nov 8 CC, Hugh Grant stated in his prepared remarks) ...

A bunch of chatter and a lot of noise on the early Roundup Ready 2 Yield performance. If you look across 40,000 trials, 40,000 data points over three years, we see a 7% lift. So a 7% yield improvement on our Roundup Ready 2 Yield platform. If you compare the Class of 2010, so the offering that we will deliver to growers in the 2010 springtime, so the ‘10 planting. If you look at that 2010 Class, we anticipate we’ll have about 60 varieties for sale as compared to 15, one, five. That’s the Scottish accent, 15 varieties this year. So we’ll have about four times the offering of varieties that more accurately reflects a range in environmental conditions. And when you look at that Class of 2010, they will outperform that 7% average that was seen in the past.

The “chatter” refers to 2009 soybean yields in the field. Grant has diverted the discussion away the most recent year comparison (where Pioneer says it has a 2.7 bushel/acre advantage or about 5%, see #msg-4387750) to the 3 yr moving average for both the competition and for Monsanto (where the data includes all breeding and commercial strip trial data and is weighted equally by year). Then he has compared Monsanto’s anticipated class of 2010 yield to the 3 yr moving averages...

Ostensibly, this discussion has addressed concerns that the competition’s 2009 yield advantage wiill continue into 2010 (and the near future).... However, my concerns were not addressed.... What I needed to see was an apples-to-apples comparison of 2009 yields (i.e. if Monsanto includes breeding trial data in thier numbers, then include the competitor’s breeding trial data). And, I needed to see an apples-to-apples comparison of Monsanto’s anticipated 2010 yields to Monsanto’s 2009 yields (where this comparison probably must rest upon breeding trial data). I would expect to find Pioneer’s anticipated 2010 yields elsewhere.

In short, the moving averages are useful background data for my long-term investment plans, but they do not clarify the current “chatter” issue.

This obfuscation of yield data is out of character for Grant. In general I have been quite favorably impressed with his ability to make complicated things simple by explicitly defining what is most important and not digressing into tangential story lines.

For example, in the Nov 8 CC he repeatedly emphasizes that:

1. The two most important determinants of Monsanto’s success in the next 3 yrs are a) the degree to which farmers switch to SmartStax and Roundup Ready 2, and b) the regulatory changes in Argentina and Brazil. Adoption of Roundup Ready 2 soybeans is important, but less so than SmartStax; vegetables and cotton are less important than soybeans.

2. Monsanto’s most important marketing challenge is to get farmers to switch to SmartStax. Thus, Monsanto is changing its marketing focus from cost reductions due to insecticide and herbicide related traits to a focus upon reduced refuge enhancement of yield.

He could have just as easily focused upon a rosy distant future centered around the exciting prospects for taste and nutrition advances in vegetables and drought/nitrogen utilization traits in row crops. All very interesting, but not directly relevant to performance in the next 2-3 years.