monsanto 01-18-05

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ROBERT T. FRALEY, PH.D.Chief Technology Officer and Executive Vice President

MYSTIC RESEARCH FACILITY INVESTOR PRESENTATIONJanuary 2005

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Forward-Looking Statements

Certain statements contained in this presentation, such as statements concerning the company's anticipated financial results, current and future product performance, regulatory approvals, currency impact, business and financial plans and other non-historical facts are "forward-looking statements." These statements are based on current expectations and currently available information. However, since these statements are based on factors that involve risks and uncertainties, the company’s actual performance and results may differ materially from those described or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, among others: the company's exposure to various contingencies, including those related to Solutia Inc., litigation, intellectual property, regulatory compliance (including seed quality), environmental contamination and antitrust; fluctuations in exchange rates and other developments related to foreign currencies and economies; increased generic and branded competition for the company's Roundup herbicide; the accuracy of the company’s estimates and projections, for example, those with respect to product returns and grower use of our products and related distribution inventory levels; the effect of weather conditions and commodity markets on the agriculture business; the success of the company’s research and development activities and the speed with which regulatory authorizations and product launches may be achieved; domestic and foreign social, legal and political developments, especially those relating to agricultural products developed through biotechnology; the company’s ability to successfully market new and existing products in new and existing domestic and international markets; the company’s ability to obtain payment for the products that it sells; the company's ability to achieve and maintain protection for its intellectual property; the effects of the company's accounting policies and changes in generally accepted accounting principles; the company's ability to fund its short-term financing needs; general economic and business conditions; political and economic conditions due to threat of future terrorist activity and related military action; and other risks and factors detailed in the company's filings with the U.S. Securities and Exchange Commission. Undue reliance should not be placed on these forward-looking statements, which are current only as of the date of this release. The company disclaims any current intention to revise or update any forward-looking statements or any of the factors that may affect actual results, whether as a result of new information, future events or otherwise.

The trademarks identified in italics in this presentation are owned by Monsanto Company and its wholly-owned subsidiaries.

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We Track the Next Generation of Products Through the Pipeline

The pipeline product examples in this section are shown in reverse chronological order, beginning with the products that are closest to potential commercial launch and tracking deeper into the research phases.

We sort projects in the pipeline in categories by those that offer benefits to farmers, processors or consumers.

Farmer benefits are those that increase productivity or reduce cost by increasing yield, improving protection from weeds, insects and disease, or increasing tolerance to heat, drought, and other stress.

Processor benefits create better value in food and feed nutrition for food and feed processors.

Consumer benefits are advantages such as increased protein, improved oils, improved fatty-acid balance, or carbohydrate enhancements that help make food healthier for consumers.

The heart of Monsanto’s research and development is our product pipeline. Our pipeline is an engine for discovering and developing the next generation of commercial products. We take our ideas through five phases — from early discovery work through four pre-commercial preparation stages.

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Pipeline Phases

Produce bulk seed for potential sale.

Develop plans for commercialization.

Respond to regulatory processes as appropriate.

PHASE IVPre-Launch

AVERAGE DURATION12 to 36 months

AVERAGE PROBABILITY OF SUCCESS90 percent

Demonstrate the performance of the hybrid or variety developed through conventional breeding; or Demonstrate the efficacy of a biotechnology trait in elite germplasm.

Develop and submit regulatory data as appropriate

PHASE IIIAdv. Development


AVERAGE PROBABILITYOF SUCCESS75 percent

For conventional breeding, we conduct field trials of plants bred from parents with the desired traits.

For biotechnology products, we conduct lab and field-testing of genes in plants to select the product candidates that can be commercialized and can meet regulatory requirements.

PHASE IIEarly Development


AVERAGE PROBABILITYOF SUCCESS50 percent

For conventional breeding products, we breed plants from parents with desired traits.

For biotechnology products, we test gene configurations in plants to screen for desired performance.

We determine which leads show the most promise for application to target plants.

PHASE IProof of Concept



This is where R&D begins. We conduct high-throughput screening of genetic databases to identify valuable plant traits to be used in conventional breeding and valuable genes that can be used to improve plants through biotechnology.

We apply screens to broad categories of interest, identifying multiple leads that are then investigated.

DISCOVERY

AVERAGE DURATION 24 to 48 months


Time estimates are based on our experience; total development time for any particular product can be shorter or longer than the time estimates here

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GENOMICS

CONVENTIONAL BREEDING

MOLECULAR BREEDING

CROP ANALYTICS

BIOTECHNOLOGY

Monsanto uses its scientific capabilities in a number of arenas to develop new products. These capabilities form a toolkit used throughout our product pipeline, as each tool can be used on its own or in combination to help study, test and refine new traits, germplasm and other characteristics in plants.

Our Technology Platforms

Genomics involves the mapping of the genes of plants to understand their structure and the role they play in how the plant functions.

Conventional breeding is the process of cross-pollinating plants with desirable qualities to develop improved plants in successive generations

Molecular breeding involves the use of DNA markers for genes in combination with physical measurement of traits to manage plant breeding programs. Molecular breeding significantly accelerates the efficiency in bringing new varieties to market.

Crop analytics involves the application of advanced analytical methods and technologies to identify the composition of food and feed traits.

Biotechnology is the application of scientific knowledge to transfer beneficial genetic traits to enhance plants’ growth or to provide nutritional or other benefits to farmers, food and feed processors, or consumers.

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Roundup Ready CornRoundup Ready Corn 2YieldGard Corn Borer Insect-Protected CornYieldGard Rootworm Insect-Protected CornYieldGard PlusYieldGard Plus with Roundup ReadyYieldGard Corn Borer with Roundup ReadyYieldGard Rootworm with Roundup Ready

Roundup Ready Cotton

Bollgard Insect-Protected Cotton

Bollgard II Insect-Protected Cotton

Bollgard and Roundup Ready Cotton

Roundup Ready Canola

Roundup Ready Soybeans

DISCOVERY

PHASE 1

PHASE 2

PHASE 3

PHASE 4

LAUNCHED

GENOMICS CONVENTIONAL BREEDING

MOLECULAR BREEDING

CROP ANALYTICS BIOTECHNOLOGY

Farmer Benefits

Products Launched

1996

1999

1997

1996

2003

1997

1998

1997

2003

2004

2005

1998

2003

CORN

COTTON

CANOLA

SOYBEANS

2001

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Product Pipeline

Grain yieldEnvironmental stress toleranceInsect controlRoundup Ready herbicide toleranceDisease resistance

Drought-tolerant cornDrought-tolerant soybeansDrought-tolerant cottonHigher-yielding cornHigher-yielding soybeans

Second-generation YieldGardCorn Borer

Second-generation Roundup ReadySoybeans

Roundup Ready Flex CottonSecond-generation Roundup Ready/

YieldGard Rootworm CornBreeding: Elite germplasm

DISCOVERY

PHASE 1

PHASE 2

PHASE 3

PHASE 4

LAUNCH

Farmer Benefits


MOLECULAR BREEDING


DISCOVERY PLATFORMS

2006Pending Regulatory Approval

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Protein enhancementsLipid enhancements

Feed corn with balanced proteinsFeed corn with increased amino acids

Improved-oil soybeans for processing

Improved-protein soybeans for feed

High-lysine corn

Processor Preferred elite germplasm in key crops, including:

– High-fermentable starch corn for ethanol

– High-extractable starch corn

DISCOVERY

PHASE 1

PHASE 2

PHASE 3

PHASE 4

LAUNCH

Processor Benefits

Product Pipeline


MOLECULAR BREEDING


DISCOVERY PLATFORMS

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Improved-protein soybeans for food

Protein enhancementsLipid enhancementsCarbohydrate enhancementsBioactive compounds

Omega-3 soybeans for food usesZero Saturated Fat + Mid-Oleic +

Low-Linolenic soybeans

Mid-Oleic + Low-Linolenic soybeans

Vistive Low-Linolenic Soybeans

DISCOVERY

PHASE 1

PHASE 2

PHASE 3

PHASE 4

LAUNCH

Consumer Benefits

Product Pipeline


MOLECULAR BREEDING


DISCOVERY PLATFORMS

2005

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FOCUS: CORN

Corn Presents the Most Attractive Global Opportunity Across Key Agricultural Producers

UNITED STATES

HARVESTED ACRES 71.5M AC

PRODUCTION 11.7B BU

ARGENTINA

HARVESTED ACRES 6M AC

PRODUCTION 660M BU

BRAZIL


PRODUCTION 1.6B BU

EUROPE


PRODUCTION 2B BU

ASIA


PRODUCTION 6B BU

Source: U.S.D.A. Foreign Agricultural Service

11

0

5

10

15

20

25

2003 U.S. CROP VALUE

(IN

BIL

LIO

NS

)

FOCUS: CORN

Corn Continues to be Most Profitable Large-Acre Crop for U.S. Farmers

Source: USDA, NASS, Crop Production, 2003 Summary, Jan 2004; USDA, ERS, Outlook Reports, Jan 2004

CORNSOYBEANS

WHEATOATS

BARLEYSORGHUM

$23.3

$17.5

$7.8

$1.0 $0.8 $0.2

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FOCUS: CORN

Corn Seeds and Traits is Growing Contributor to Monsanto Gross Profit

$0

$100

$200

$300

$400

$500

$600

$700

2002 2003 2004

GROSS PROFIT

DO

LLA

RS

(IN

MIL

LIO

NS

)

CORN SEEDS AND TRAITSSOYBEANS SEEDS AND TRAITS

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KEY MARKET ACRES

AVAILABLE MARKET

PERCENT PENETRATED

ASI BRAZIL ARGENTINA

80M 30M 6M

2% 35% 49%

LICENSEDBRANDU.S.

33%14%

FARMER BENEFITS

Industry’s Most Diverse Genetic Pool Creates New Opportunities

CornBreeding

6-to-8 year process undertaken to accelerate breeding:

Late 1990s: Acquired 36 major corn breeding programs (12 countries X average of 3 companies per country)

Early 2000s: Crossed genetic lines across acquired companies

Today: Launching new hybrids from inter-company crosses

DISCOVERY PHASE IProof of Concept



PHASE IVPre-Launch

LAUNCH

GENOMICS

MOLECULAR BREEDING

CROP ANALYTICS

BIOTECHNOLOGY


1CONTRIBUTING

PLATFORMS

WHAT IS IT?

THE MOST ADVANCED

GERMPLASM CREATES THE

BEST-YIELDING NEW CORN

HYBRIDS FOR FARMERS

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KEY MARKET ACRES

AVAILABLE MARKET

PERCENT PENETRATED

ASI BRAZIL ARGENTINA

80M 30M 6M

2% 35% 49%

LICENSEDBRANDU.S.

33%14%

FARMER BENEFITS

Industry’s Most Diverse Genetic Pool Created New Opportunities

Field TrialResults

All categories of Monsanto’s elite corn germplasm out-yielded competitors’ germplasm across 2004 field trials

Up Next: Launch 37 new products in our brands




PHASE IVPre-Launch

LAUNCH

2CREATING VALUE

• Value is measured in market share gains; Monsanto’s U.S. branded seed gained 4 points in 3 years

• Elite, high-yielding germplasm refreshes product portfolio at the high end of pricing

• Our highest priced conventional hybrid is about $100/unit or $36/acre

2004 BRANDED CORN GERMPLASM YIELD VS COMPETITORS

RELATIVE MATURITIES (DAYS)

BU

SH

ELS

/AC

RE

MONSANTOCOMPETITORS

150

160

170

180

190

200

210

220

95 100 105 110 115

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KEY MARKET ACRES

AVAILABLE MARKET

PERCENT PENETRATED

U.S. BRAZIL ARGENTINA

4M 1M 4M

0% 0% 0%

High Lysine Corn

Lower cost of animal feed ration – lysine – which cannot be produced by animals, so must be obtained through feed

Improved amino acid balance

Increased total energy




PHASE IVPre-Launch

LAUNCH

1

PROCESSOR BENEFITS

High Lysine Enhances Animal Feed, Shifts Value to Seed

CONTRIBUTING PLATFORMS

GENOMICS

MOLECULAR BREEDING

CROP ANALYTICS

BIOTECHNOLOGY


WHAT IS IT?

CORN WITH ENHANCED LEVELS

OF A LIMITING AMINO ACID FOR

ANIMAL FEED

16

KEY MARKET ACRES

AVAILABLE MARKET

PERCENT PENETRATED


4M 1M 4M

0% 0% 0%

Field and Feeding Trial Update

U.S. regulatory packages submitted

Field trials conducted in U.S. and Argentina this year; Evaluating over 12 hybrid genotypes in this year’s program

Excellent performance demonstrated in feeding trials to date

Up Next: Regulatory review




PHASE IVPre-Launch

LAUNCH

2CREATING VALUE

• Market value for feed-grade lysine in roughly $1 billion annually*

• Value shared with Cargill through 50/50 Renessen joint venture

0

200

400

600

800

1000

1200

1400

1600

1800

LYSINE TOTALS IN TESTING

SOUTH AMERICA

FRE

E L

YS

INE

(P

PM

)

U.S.

TARGET

CONTROL WITH GENE

PROCESSOR BENEFITS

High Lysine Enhances Animal Feed, Shifts Value to Seed

* Source: CEH Market Research

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KEY MARKET ACRES

AVAILABLE MARKET

PERCENT PENETRATED


TBD TBD TBD

0% 0% 0%

Feed Corn with Improved Amino Acids

Increased levels of lysine over first-generation High-Lysine Corn could displace more supplements used in animal feed

Second generation improves the overall amino acid balance in corn, creating more available “energy” in feed




PHASE IVPre-Launch

LAUNCH

1

PROCESSOR BENEFITS

Second-Generation High-Lysine Corn Could Further Replace Feed Supplements


GENOMICS

MOLECULAR BREEDING

CROP ANALYTICS

BIOTECHNOLOGY


WHAT IS IT?

SECOND-GENERATION CORN

WITH ENHANCED LEVELS OF LYSINE FOR ANIMAL FEED

18

0

1000

2000

3000

4000

5000

KEY MARKET ACRES

AVAILABLE MARKET

PERCENT PENETRATED


TBD TBD TBD

0% 0% 0%

Field and Feeding Trial Update

Early field trials conducted in 2004; Lead event candidates identified

Up Next: Test lead events in commercially relevant germplasm




PHASE IVPre-Launch

LAUNCH

2CREATING VALUE

• Market value for feed-grade lysine in roughly $1 billion annually*

• Value shared with Cargill through 50/50 Renessen joint venture

LYSINE TOTALS IN TESTING

EVENT 1

FRE

E L

YS

INE

(P

PM

)

EVENT 2

TARGET

* Source: CEH Market Research

PROCESSOR BENEFITS

Second-Generation High-Lysine Corn Could Further Replace Feed Supplements

19

KEY MARKET ACRES

AVAILABLE MARKET

PERCENT PENETRATED


30-40M 15M 4M

0% 0% 0%




PHASE IVPre-Launch

LAUNCH

Second-Generation YieldGard Corn Borer

Broad control solution for fall armyworm and corn earworm for global expansion

Durability solution for insect resistance management

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FARMER BENEFITS

Second-Generation YieldGard Corn Borer Controls More Insects


GENOMICS

MOLECULAR BREEDING

BIOTECHNOLOGY


WHAT IS IT?

SECOND-GENERATION CORN

BORER CONTROL, WITH EXPANDED

INSECT AND ENHANCED IRM

DURABILITY

CROP ANALYTICS

2ND-GEN YIELDGARD CORN BORERCONTROLCONTROL 2ND-GEN YIELDGARD

CORN BORER

FALL ARMY WORM CONTROL

CORN EARWORM CONTROL

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KEY MARKET ACRES

AVAILABLE MARKET

PERCENT PENETRATED


30-40M 15M 4M

0% 0% 0%CREATING VALUE 2

Field Trial Update

2004 field trials conducted in Puerto Rico, Argentina and U.S.

Excellent control in high infestations levels

Up Next: Tests in 2006 field season to validate performance in multiple inbred backgrounds




PHASE IVPre-Launch

LAUNCH

• Value reflects enhanced insect control and insect resistance management. Lifts the value of the YieldGard Corn Borer trait.

FARMER BENEFITS

Second-Generation YieldGard Corn Borer Controls More Insects

CORN EARWORM FEEDING DAMAGE IN TRIALS

0

2

4

6

8

10

12

EA

R D

AM

AG

E (

CM

)

2ND-GENERATION YIELDGARD CORN BORER EVENTS

YIELDGARD CORN BORER COMPETING

PRODUCT

CONTROL

21

KEY MARKET ACRES

AVAILABLE MARKET

PERCENT PENETRATED


TBD TBD TBD

0% 0% 0%

FARMER BENEFITS

Drought Stress Tolerance Will Be a Family of Traits in Pipeline

Drought-TolerantCorn

Yield protection on all acres to protect against water deficits

Yield enhancement on all acres through improved water use

Cost savings on irrigated acres

GENOMICS

MOLECULAR BREEDING

CROP ANALYTICS

BIOTECHNOLOGY


1CONTRIBUTING

PLATFORMS




PHASE IVPre-Launch

LAUNCH

WHAT IS IT?

HYBRIDS PROTECTED FROM ENVIRONMENTAL STRESS CREATED

FROM WATER SHORTAGE

22

KEY MARKET ACRES

AVAILABLE MARKET

PERCENT PENETRATED


TBD TBD TBD

0% 0% 0%

Field TrialUpdate

Two gene leads obtained positive results with more than one transformed event

Up Next: Test stacking; continue with lead events




PHASE IVPre-Launch

LAUNCH

CREATING VALUE

• Pricing depends on choice of market

• Stacking with weed and insect control enhances the margin opportunity

• Irrigation currently costs $50 to $100 per acre

0

5

10

15

20

25

30

YIE

LD I

NC

RE

AS

E (

BU

/AC

)

EVENT 1 EVENT 2 EVENT 30

2

4

6

8

10

12

14

16

18

EVENT 1 EVENT 2 EVENT 3

YIELD INCREASE IN TWO GENE TRIALS

3 EVENTS: GENE 1 3 EVENTS: GENE 2

GERMPLASM 1 GERMPLASM 2

FARMER BENEFITS

Drought Stress Tolerance Will Be a Family of Traits in Pipeline

23

KEY MARKET ACRES

AVAILABLE MARKET

PERCENT PENETRATED


TBD TBD TBD

0% 0% 0%

FARMER BENEFITS

Improving Nitrogen Use Can Boost Yields

Higher-Yielding Corn

Increased yield achieved through enhanced nitrogen uptake and utilization

Potential to reduce fertilizer inputs

GENOMICS

MOLECULAR BREEDING

CROP ANALYTICS

BIOTECHNOLOGY


1CONTRIBUTING

PLATFORMS




PHASE IVPre-Launch

LAUNCH

WHAT IS IT?

HYBRIDS THAT CAN BETTER USE

AVAILABLE NITROGEN IN THE

SOIL

ROOT TOLERANCE TO LOW NITROGEN

WITH GENECONTROL

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FOCUS: CORN

Value Shift Continues…

Source: U.S. 1996-2003 Doane Agrotrak & Seed Studies; 2008 Monsanto Estimate

CROP CHEMICALS GERMPLASM BIOTECH TRAITS

1996 $7.5 BILLION

2003$8.4 BILLION

2008F $9.2 BILLION

$3.0

$0.1

$4.5$3.5

$1.3

$3.6

$3.8

$2.7

$2.6

INDUSTRY VALUE SHIFT FROM CROP CHEMICALS TO SEEDS AND TRAITS IS WELL UNDER WAY

25

FOCUS: CORN

… To Food, Feed and Yield

CROP CHEMICALS

YIELDGARD CORN BORERROUNDUP READY CORNYIELDGARD ROOTWORM

VALUE SHIFT

HIGH-LYSINE CORNFEED CORN WITH INCREASED AMINO ACIDS

VALUE SHIFT

ANIMAL NUTRITION

1996 VALUE SHIFT TO SEED

OMEGA-3 CORN FOR FEED

VALUE SHIFT

HUMAN HEALTH

DROUGHT-TOLERANT CORN

HIGHER-YIELDING CORN

VALUE SHIFT

WATER & SOIL

NUTRIENTS

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