Monsanto Sales Take a Hit as Farmers Set to Plant Less Corn

(Bloomberg) -- Monsanto Co. is feeling the effects of the shrinking U.S. corn crop.

The world's largest seed company on Thursday reported disappointing sales and earnings for its fiscal second quarter as it sold less corn in the U.S. That was partly due to the expected drop in planted acres in the U.S. this season, as well as the impact of lower commodity prices in Brazil, it said in a statement.

The results would have been worse except for a lower tax rate that “really helped them out,” said Chris Perrella, an analyst with Bloomberg Intelligence. Higher prices for its glyphosate weedkiller and Intacta genetically modified soybeans also supported profits.

U.S. farmers, the biggest producers of corn, are set to plant 88 million acres this year, the Department of Agriculture projected in a report last week, down from 90.2 million in 2017. The reduction follows several years of bumper crops, a glut of grain and depressed commodity prices. The weak crop markets mean a competitive pricing environment, which is keeping a lid on profits, Perrella said.

“Corn was really the miss,” he said. “Everything else was on track.”

This may be Monsanto's final quarterly earnings. The company isn't holding a conference call with analysts to provide additional details about the quarter's performance, or providing a full-year earnings forecast, as it waits for a $66 billion takeover by Bayer AG to close. The St. Louis-based company reiterated that pretax income growth for the fiscal year, on a stand-alone basis, will increase.

Monsanto said it's confident the Bayer bid will get regulatory approval and be completed in the second calendar quarter. Still, there's still a possibility the deal could close later in the year, or not at all, said Matt Arnold, an analyst at Edward Jones & Co.

Monsanto rose 0.3 percent to $117.05 at 10:34 a.m. in New York. Bayer is offering $128 per share in cash.

Profit excluding one-time items was $3.22 a share in the three months through February, compared with the $3.29 average of 12 analysts' estimates compiled by Bloomberg. Revenues declined 1.1 percent to $5.02 billion, missing the lowest estimate in the survey.

To contact the reporter on this story: Lydia Mulvany in Chicago at lmulvany2@bloomberg.net.

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Patrick McKiernan

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