Monday, March 31, 2008

Corn Acres to Drop; Soybeans to climb; Monsanto Might Smash Some Face

It might be another year of high corn prices because farmers are going to plant 7.6 million less acres of corn. However, it looks like it will be a banner year of soybeans:

Nationwide, soybean acreage is expected to jump 18 percent, to 74.8 million acres. This is an increase of 11.2 million acres from 2007 and is just 1 percent below 2006’s record high.

Acreage increases are expected in nearly every state, with the largest growth in Iowa, up 1.25 million acres, and Nebraska, up 1.2 million. Increases of at least 800,000 acres are anticipated in Indiana, Minnesota and South Dakota, while Kansas, New York and Pennsylvania are expected to plant their largest soybean crops in history.

I guess this is bad news for companies that make fertilizer since corn seems to use far more Potash and Nitrogen then Soybeans do.

However it should be great news for Monsanto since they have an almost monopoly position in bioengineered soybean seeds. In fact there may even be a soybean seed shortage in some parts of the country.

This may be great for margin expansion since Monsanto may have some strong pricing power if they crank out those seeds in a timely manner. Soybeans are planted in May so we won't get any sense of these numbers on Monsanto's bottom line until after that. In any case I am hoping for a pullback below the $100 mark so I can get long Monsanto.

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