Monsanto Refocuses
February 9, 2010 Monsanto appears to be rededicated to its glyphosate business. Amid widespread speculation that Monsanto was restructuring its chemical business in a stand-alone unit to sell, it announced in September that it will bolster supply of Roundup and cut prices to about half of 2008’s peak prices in the U.S.
The initiative is an obvious reaction to the supply shortfall that occurred in 2008 when manufacturers in China cut production in the months preceding the Olympic Games in Beijing. The resulting undersupply raised glyphosate prices from Chinese manufacturers on the world market, forcing Monsanto to raise its prices above those set by the markets for generic products. Monsanto has had a practice of charging a premium for Roundup over other glyphosate products.
Although Monsanto’s price hike was reactionary and in line with what they have traditionally done, many perceived the move as the world’s largest supplier driving the higher prices instead of reacting to the market. Roundup is still used by the vast majority of American growers, but they have displayed an increasing trend toward using generic glyphosate since it became available in 2000, especially for burndown. American growers were outspoken about their concerns that Monsanto was manipulating the market.
Increasing Production
In an effort to reassure American growers that it is doing more to stabilize the market and subsequent costs for growers, Monsanto is bolstering its production capacity to offer North American growers a more stable supply. In the past two years, the company has invested $200 million into additional production capacity in its Luling, LA, plant, which supplies formulated agricultural Roundup. The added supply from the plant was expected to hit distributors during the past few months, according to Monsanto. With the new marketing push, the company is attacking the quality of the glyphosate made in China, calling Roundup “superior to the Chinese generics in the market” in a recent press release.
“Monsanto is investing to help U.S. farmers have a reliable supply of Roundup brand agricultural herbicides that is competitively priced and superior to generic imports,” North American Crop Protection Lead Glenn Stith said in a press release.
If the strategy works, Monsanto is poised to bolster profits on the success of its various Roundup Ready seed technologies, which have achieved widespread acceptance in the Americas. Almost all of the soybeans planted in the U.S. and Argentina are Roundup Ready, as well as about half of the soya in Brazil. “And the Roundup Ready technology is gaining acceptance in emerging markets, too, including India,” says Dean Hendrickson, global lead for non-branded glyphosate for Monsanto.
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