Monument Circle Acquisition Corp (MON)

[Democritus_of_Abdera]

Mid-teen Guidance....

As Dew stated in #msg-50939149 Hugh Grant stated at the Bernstien webcast of June 3:

MON’s long-term guidance of mid-teens EPS growth assumes zero growth in Europe ...

The keyword in this statement is “long-term”.... My take home message from the Bernstein Conference webcast is that growth in 2010 will not meet this long-term expectation.

I continue to believe that Monsanto will be required to reduce prices more than they are projecting at this time... This belief is supported by Grant’s statement that when tested, price does indeed make a difference in market share and my expectation that the competition will protect their market share by reducing their prices tit for tat....

Grant counters my pessimistic view by raising the expectation that Monsanto’s portfolio mix will shift towards the higher margined triple-stack corn in 2010 and the introduction of the double-stack corn in the Western US. I agree with him that changes in mix (and margin) will be the long term driver towards mid-teen EPS growth (largely because the distribution costs for a stacked product do not increase in proportion to the price asked). I simply expect this margin shift to lag the adjustment required for penetration pricing.

The key quotes in the presentation (IMO) were:

In Grant’s prepared remarks...

In 2010, as we look at our corn market share, we anticipate that it will be flat on a year-on-year basis.

So as we look at the 2011 season, we will have reduced refuge products that stretch our SmartStax family to a double product in the West, a triple in the South, and the SmartStax core product in the Central Corn Belt.

Roundup Ready 2 Yield as a new platform builds the way or paves the way for a four-way stack in the future in soybeans, in the same way that we’ve seen incremental value and incremental performance layered into our corn seed strategy. So by early – by 2012-2013, we’ll see additional herbicide tolerants that will enter our soybean platform. We’ll see improvements in yield and stress, and we’ll see the emergence of consumer traits with healthier oils all packaged in for soybean seeds in the near future.

And we made some early price moves in our triple-stacks this year, which we applied differentially and saw differential share gains and losses depending on those price spreads. So we are looking at optimizing price premiums. I don’t see this as clearance sales or fire sales. And I think across our technologies and across geographies in the U.S., we will continue to sell at a premium to our competitors because these products work better.

Grant’s statements in the Q&A....

I think for us, the learning and what we’re doing in our repositioning this year is just as much about the price spreads within our portfolio as the price spreads between us and our nearest competitor. So we will make two shifts this year, and we haven’t announced our pricing yet... what we have learned is, as you migrate away from a one-third to two-third value share to a 50-50, you chill growth. And you chill growth because you change the risk coefficient for that growth.

So as we think about doubles moving to triples, triples moving to SmartStax, and SmartStax migrating to Refuge In a Bag, there was a volume driver assumption in that, because you expand the platform as you migrate. And that’s what we need to get back to this fall.

If you look this year – so flat share growth, but despite flat share growth, we have seen our portfolio continue to drive towards triple-stacks.... And our portfolio this year would be in excess of 70% triples.

for the first time we will have a double-stack reduced refuge product for about 10 million acres of the Western Corn Belt, so it allows us to compete in a new space.

We will become more cost-efficient. We are taking a much harder look at our price premiums. So it isn’t a fire sale, it’s reducing the spread in some of our premiums within our technologies and between our technologies and competitors.