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Monsanto Co. (MON): How you can reap what it sows

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This was a banner year for corn yields, and the rising demand of corn for ethanol production has also kept the price of corn high. At the same time, however, there is some consensus among experts that in the coming years, the amount of farmland currently devoted to corn production will become lower as more acres are planted with soybeans instead.

How can you, the investor, find the opportunity here? The answer lies in finding a company that helps farmers get more corn out of less acres, and Goldman Sachs (and I!) think that Monsanto Company (NYSE: MON), the world's leading producer of bioengineered seeds for the commercial farming market, is just that company.

Monsanto maintains its position as market leader by staying well ahead of its competition in the research and development of seed technology that create crops that are high yield, resistant to herbicide and bug resistant -- creating a product so advanced that many of the company's competitors choose to work with Monsanto, either via co-development deals or straight licensing of the technology, instead of trying to compete against it.
There is also hope that Monsanto's new SmartStax technology could help encourage the EPA to reduce its refuge acreage requirements (founded on the same principle that guided a similar change in cotton guidelines). This would allow farmers to plant more bug resistant seeds on more acres, which, for areas with heavy bug pressure, will result in substantial increases to their crop yields-and encourage them to buy more of Monsanto's products to do so. The SmartStax technology won't be available until 2010, but you can clearly see that Monsanto has enough tricks up its sleeve to keep its competitive advantage in the long run.

Above and beyond its seed technology, however, Monsanto is also dedicated, through its Agricultural Productivity division, to helping farmers get more out of the land they have while using fewer resources to do so on a wider scale. Through green pesticides, products to increase livestock yield and various solutions to invasive weed control, the company continues to seek new solutions to the problems of a world that will need to feed increasing amount of people from a limited amount of arable land.

So while there are those consumers who don't like genetically modified foods, there is clearly both an environmental and financial demand for Monsanto's products -- demand that should continue to grow for some time.

Type of Stock: Monsanto Company is the world's largest producer of seeds, including high-value-added, genetically enhanced seeds for soybeans, cotton, corn and other crops. Monsanto also produces a variety of agricultural productivity products.

Price Target: I believe that this one could easily hit $110 -- or higher by the end of 2008.

Hilary Kramer, author of the newly released Ahead of the Curve, is a financial editor and money coach for AOL and an authority on investing.
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Last updated: July 06, 2009: 10:52 AM

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