monsanto - gs - apr 12

8/6/2019 Monsanto - GS - Apr 12

1/27

April 12, 2011

Americas: Agriculture

Equity Research

Farmers want RIB, are migrating to RR2 and are pre-buying fertilizer

Enthusiasm in the cornbeltWe hosted our annual conference call with three large Midwest farmers.Not surprisingly with near-term corn contracts nearly $8 per bushel, thetone was upbeat and enthusiastic. The call touched on a number of topicsincluding planting plans, new seed technology adoption, fertilizer usageand buying patterns, herbicides and agricultural equipment.

Monsanto contrition working, RIB in a bag is a game changerFor farmers, seed genetics and associated yields are a critical determinant

of success. Our farmers bought more Monsanto seed in 2011 and indicatedthat lower pricing this year, following too aggressive pricing in prior years,was a factor. However, within our small sample, adoption of SmartStaxremains mixed, with some showing early adoption and others waiting forproven yield performance. Importantly, there was a consensus amongthose on the call that Refuge in a bag (RIB, which the EPA approved onApril 11) will be a game changer for the 2012 planting season, and theadded convenience, ease of use and imbedded refuge compliance will be acatalyst for much more rapid adoption. We believe that earningsconsensus continues to underestimate the pricing and margin lift that MONwill get from mix shift to RIB in 2012.

Spring ground ready to go setting up potential for big yieldsGiven accommodating fall conditions last year, our farmers all noted thattheir soil heading into spring planting is in outstanding condition, or as onefarmer revealed, just about as close to perfect as weve had. Moisturelevels are good, the ground is flat and level, tiling systems were installed tooptimize yields and fertilizer application has been accomplished. While theweather remains a substantial and unpredictable driver of ult imate yields,we believe the foundation exists for yields to surprise to the upside.

Fertilizer markets remain hot, some pre-buying underwayOn the fertilizer side, the expectation is for continued upward momentumin pricing. In fact, coupling the strong farmer economics with concerns

about inflated fertilizer prices, some farmers have already purchased their2012 needs and put down phosphate and potash already for the 2012 crop.

Preferred agriculture input ideas: DAR, MON and CFOur 3 favorite ag input ideas are Buy-rated DAR and MON, and Sell-rated CF.

UPCOMING EVENTS

We cordially invite you to register for the Basic MaterialsConference (including paper/forest products, packaging,chemicals, and metals/mining) which will be held Tuesday,May 24 through Thursday, May 26, 2011 in NYC.

Please visit the conference website to registerand for additional details. We encourage you to register byWednesday, May 18.

Robert Koort, CFA(713) 654-8480 [email protected] Goldman Sachs & Co. The Goldman Sachs Group, Inc. does and seeks to do business withcompanies covered in its research reports. As a result, investors should

be aware that the firm may have a conflict of interest that could affectthe objectivity of this report. Investors should consider this report asonly a single factor in making their investment decision. For Reg ACcertification, see the end of the text. Other important disclosures followthe Reg AC certification, or go to www.gs.com/research/hedge.html.Analysts employed by non-US affiliates are not registered/qualified asresearch analysts with FINRA in the U.S.

Lindsay Drucker Mann, CFA(212) 357-4993 [email protected] Goldman Sachs & Co. Brian Maguire, CFA(713) 654-8483 [email protected] Goldman Sachs & Co. Luisa Hermann(713) 654-8482 [email protected] Goldman Sachs & Co.

The Goldman Sachs Group, Inc. Global Investment Research


2/27

April 12, 2011 Americas: Agriculture

Goldman Sachs Global Investment Research 2

Overview: Farmers excited, farm input markets robust

We hosted a conference call with three Midwest farmers on a variety of ag topics andcame away even more convinced that 2011has the potential to be a very profitableyear for farmers and producers of ag inputs. Our call touched on a number of subjects,including planting intentions, seeds, fertilizers, and ag equipment. The key takeawayis that the corn supply response we expected is underway and farmers are puttingmoney to work in order to ensure, to the best of their ability, that this years crop ismaximized.

Farmers shifted share to Monsanto in 2011 and value RIB highly

Everybody is pretty much switching to Roundup Ready 2 That was a direct quotefrom a farmer in central Illinois. All three of the farmers on the call agreed that MON hasfixed the problems with RR2 that occurred in 2009, which they attributed to geneticavailability and poor conditions that year, including white mold. One farmer (who plantsPioneer) believes that the seed treatment that MON bundled with RR2 is responsible forhalf of the yield bump, but even so he conceded that the RR2 traits do provide some yieldlift. While some soybean share shift to MON is likely at the margin, farmers indicated thatwholesale shifts are unlikely in any one year since farmers still identify with brands.Importantly, we do not believe MON needs to take significant share to exceed consensusestimates we believe that the benefits of a mix shift to higher yielding RR2 are sufficientand are underappreciated by consensus.

As soon as we get refuge in the bag and genetics behind those things, we'll be100% In our view, investors should not underestimate the value to farmers offered by acomplete RIB offering with 5% above and below ground refuge. While the low-tech natureof the product (simply mixing two seeds together in a bag) relative to the advanced biotechinnovations that MON usually touts may be underwhelming some, we consistently hearfrom farmers that they want it, and they want it today. Furthermore, the acceleratedtiming of EPA approval (April 11 th versus expectations for late May) is very important. Oneof the main reasons why both RR2 and SS underperformed in their launch year was thegenetics, not the traits (i.e., MON only sold the seeds on a handful of its hundreds ofgenetic platforms). We believe early approval should ensure that this will not be an issuefor RIB since MON should now have more than enough time to formulate nearly all of the~100 varieties of SS that it will offer in 2012 with a RIB option. We believe that thewidespread availability of RIB on a diverse range of genetic platforms will change the gamein 2012 and lead to market share gains for MON. However, even without dramatic sharegains, we believe that mix shift within existing MON customers to higher marginSmartStax RIB and/or TriplePro should be sufficient to drive upside to consensus 2012estimates. We expect 2012 EPS of $3.58 versus $3.36 for consensus.


3/27



Exhibit 1: Relative gross profit from MON corn seed offeringsSmartStax and TriplePro have significantly higher margins than baseline; RIB will be even higher

*Relative profitability is gross profit per acre relative to YieldGuard VT Triple (the baseline)

**SmartStax RIB relative profitability is a GS estimate, all others are published MON figures.

Source: Company data, Goldman Sachs Research estimates

Branded glyphosate does still justify a (slight) premium and resistance truly is anemerging threat As one farmer stated, once you get down so cheap [on glyphosateprice] I really think the average farmer's going to say, oh, I'm just going to use the goodstuff. That sums up Monsantos new Roundup pricing strategy to a tee, in our opinion,and from our farmer conversations and MONs just-reported 2Q2011 results, it appears tobe working. Separately, our farmers endorsed the need for dual-mode of action cropprotection that is currently being developed by MON, DD, and DOW. While the farmers onour call are not seeing dramatic evidence of glyphosate resistance on their farms, they arehearing about it in other regions and believe that it will be a much bigger issue in years tocome. One farmer stated his belief that dual-mode crop protection will be adopted prettyquickly by farmers once available.

Expect a loosening of tight corn balance in the back half of the year

Lean corn inventories a concern, but supply response on the way Our call withfarmers underpins our view that one of the tenets of US farming will again hold true in2011/12: corn is still king. Despite last years lackluster crop, which one farmer described asa disaster owing to excessive rains, farmers are returning to corn this year significantly,increasing acreage and optimizing yields at all costs through fertilizer application, seed andchemicals, and other advanced technologies. We repositioned our agriculture stocks a fewweeks ago with a view that 2011 would represent the peak for corn prices with modestrelief in 2012 for three primary reasons: 1) increased supply in the form of incrementalacres and farmer reinvestment, (2) feed demand weakening as profitability in cattle andchicken in particular come under pressure, something we suspect is already underway, and(3) a less supportive political backdrop, which will likely help loosen the tight balance. Thesupply response we envision, if our call with farmers is representative of the broader group,

is certainly well under way, with farmers eager to capitalize on historically high crop prices.Increased acreage represents the most obvious approach We see incremental acreageas the easiest path to increasing production.

Farmers intend to plant more corn acres - One Kansas farmer on ourcall, who typically plants 60% corn/40%soybeans, revealed he intends toplant 65% corn this year. The other farmers intend to plant near the highend of their historic crop mix in favor of corn.

Call with farmers supports USDA figures - This is consistent with therecent USDA Prospective Plantings report (Exhibit 2) that revealed USfarmers intend to increase planted corn acreage by 4 mn acres to 92 mn

Product Relative Profitability*SmartStax RIB 1.3x 1.4x**

SmartStax 1.2x 1.3x

TriplePro 1.1x 1.2xYieldGuard VT Triple 1.0x


4/27



acres versus 2010, with our models suggesting that farmers stand to earnnearly $530/acre of corn or almost $150/acre more than the alternativesoybeans. An Illinois farmer on our call who was previously skeptical ofthe market reaching 92 mn acres, now suggests that in the case of reallygood planting weather, he can envision such a scenario being reasonable.

USDA expecting significant acreage increase - In total, USDA expectsplanted acreage of the 8 major crops to increase by +9 mn acres to 254 mnacres. This would represent the single largest increase since 1996 when15 mn planted acres were added.

US policy response likely to alleviate some of the pressure . Over the past year therehas been a steady change in the tone coming out of Washington that suggests the tide hasshifted out of favor for corn, and we expect policy decisions on the horizon to help loosenthe balance.

Ethanol production ahead of mandate - Weekly ethanol production iscurrently running at an annualized rate of 13.5 bn gallons for 2011 (Exhibit4). Much of the domestic ethanol consumption is supported by theRenewable Fuel Standard (RFS), which requires 12.6 bn gallons of ethanolbe consumed in 2011.

Less supportive policy likely to limit marginal ethanol production While RFS2 is likely to remain in effect, expiration of the blender subsidy(Volumetric Ethanol Excise Tax Credit, or VEETC) at the end of the yearwould put 1 bn of discretionary ethanol gallons at risk. While somediscretionary blending will remain depending on the spread between cornand oil prices, we expect 100-200 mn bushels of corn to be freed up tocushion corn inventories.

Exhibit 2: USDA projects US farmers intend to plantsignificantly more acres this yearin million acres

Exhibit 3: Farmers stand to profit most by planting cornand cotton versus soybeans and wheatUS farmer margin ($/acre)

Source: USDA, Goldman Sachs Research estimates Source: Agrium, Goldman Sachs Research estimates

Weather still the determining factor As we transition into the US planting season,weather will be key in determining how much corn gets planted, yields that are achieved,and the quality of the harvested corn. One farmer commented that we can do everythingwe can do, but it still takes a little bit of weather to help us out.

Fall setup optimal for field preparation work - The farmers we spoke tocommented that current soil conditions are the best they have seen innearly a decade. In fact, the past fall (November-December 2010) was the5 th driest since 1990 (Exhibit 5), permitting farmers to till, perform

Crop 2006 2007 2008 2009 2010 2011F Change

Corn 78.3 93.5 86.0 86.4 88.2 92.2 4.0

Soybeans 75.5 64.7 75.7 77.5 77.4 76.6 -0.8

Wheat 57.3 60.5 63.2 59.2 53.6 58.0 4.4

Upland Cotton 14.9 10.5 9.3 9.0 10.8 12.3 1.5

Minor Feed Grains 14.1 15.5 15.8 13.6 11.4 11.4 0.0

Rice 2.8 2.8 3.0 3.1 3.6 3.0 -0.6

Total 8 Crops 242.9 247.5 253.0 248.8 245.0 253.6 8.6

0

100

200

300

400

500

600

C or n

S o y b e an s

C o t t on

Wh e a t

U S F a r m e r

C r o p

M a r g

i n s

( $ / a c r e

)

2011/12 5 year average


5/27



maintenance work that had been forgone in previous years, applyanhydrous ammonia, and even install tiling, a drainage system that helpsmaximize yields.

Spring weather critical to quality of harvest - Despite the positive setup,weather during the planting and harvesting season will ultimatelydetermine the productivity of the crop. The Goldman Sachs ECSCommodities team estimates that precipitation from May-July and trendyields explain nearly 96% of the variation in yields year-over-year.

Exhibit 4: Ethanol production currently on track toexceed RFS2 mandate by nearly 1bn gallonsmillion gallons per week

Exhibit 5: Fall 2010 was the 5 th driest Fall in 20 years,providing optimal conditions for field work in Midwestprecipitation in inches

Source: EIA, Goldman Sachs Research estimates Source: NOAA, Goldman Sachs Research estimates

DAR (Buy), MON (Buy), and CF (Sell) are favorite ideas in agriculture

Buy DAR In proteins, we believe DAR is best positioned to benefit from the current agbackdrop as (1) corn provides Midwest farmers with better returns than soybeans andtherefore potentially pulls additional acreage, and (2) cotton similarly trumps soybeans inthe South. Our analysis (Exhibit 6) shows that at current price levels (corn - $7.60/bu,soybeans - $13.80/bu, and cotton - $2.08/lb.), soybeans are uneconomical, in terms offarmer returns, compared to both corn and cotton. As forecast by USDA, we thereforeexpect soybeans to lose acreage to both corn and cotton.

220

230

240

250

260

270

280

0 6 / 0 4 / 1 0

0 7 / 0 2 / 1 0

0 7 / 3 0 / 1 0

0 8 / 2 7 / 1 0

0 9 / 2 4 / 1 0

1 0 / 2 2 / 1 0

1 1 / 1 9 / 1 0

1 2 / 1 7 / 1 0

0 1 / 1 4 / 1 1

0 2 / 1 1 / 1 1

0 3 / 1 1 / 1 1

P r o

d u c

t i o n

( m n . g a

l . / w e e

k )

0

5

10

15

20

25

30

35

40

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

P r e c

i p i t a

t i o n

( i n c h e s

)


6/27



Exhibit 6: Soybean prices not high enough to deteradditional acreage losses from cornMidwest farmer returns per acre

Exhibit 7: Current soybean prices also low relative tocotton pricesSouthern farmer returns per acre

Source: CBOT, Goldman Sachs Research estimates Source: CBOT, Goldman Sachs Research estimates

A combination of sustained demand growth and supply shortfall has led to exceptionallytight balances in soybeans, with current US stocks-to-use levels at 4.2%. Additionally, lastweeks USDA Grain Stocks report revealed soybean inventories as of March 1, 2011 at 1.25bn bushels, -3.8% below consensus estimates and -1.6% below stocks at the same time lastyear. We therefore see the soybean balance most at risk in 2011/12. The GS ECSCommodities team forecasts 3-, 6-, and 12-month soybean prices of $15.00, $15.75, and$15.75, respectively, approximately 14% above the futures curve.

DARs products are substitutes for corn and soybean, and therefore DARs profits arehighly levered to the price of soybeans. As shown in Exhibit 9, DARs profit per pound has

closely tracked the price of soybeans with an 80% R-squared.

Consistent with our outlook for sustained elevated soybean prices, we maintain our Buyrating (last close $15.23).

Exhibit 8: GS ECS forecasts for soybeans are 14% abovethe futures curveSoybean prices in $/bu.

Exhibit 9: DARs EBIT per pound strongly correlated withsoybean prices, R-sq 80%EBIT in $/.lb, soybean prices in c/bu.

Source: GS ECS Research estimates Source: Company data, CBOT, Goldman Sachs Research estimates

$0

$5

$10

$15

$20

$25

$0 $1 $2 $3 $4 $5 $6 $7 $8 $9 $10

S o y

b e a n

P r i c e

Corn Price

Corn Wins

Soybeans Win

CurrentPrices

$0

$5

$10

$15

$20

$25

$30

$35

$0.00 $0.50 $1.00 $1.50 $2.00 $2.50

S o y

b e a n

P r i c e

Cotton Price

Cotton Wins

Soybeans Win

CurrentPrices

8.00

9.00

10.00

11.00

12.0013.00

14.00

15.00

16.00

17.00

J an-1 0

M ar -1 0

M a y -1 0

J ul -1 0

S e p-1 0

N ov -1 0

J an-1 1

M ar -1 1

M a y -1 1

J ul -1 1

S e p-1 1

N ov -1 1

$ p e r

b u s

h e

l

GS Forecast

R = 0.80

-0.010

0.000

0.010

0.020

0.030

0.040

0.050

0 500 1,000 1,500

E B I T p e r p o u n d

( $ / l b )

Soybean prices (c/bu)


7/27



Buy MON We continue to believe MON is in the midst of turning around earningsmomentum and investor perception after a few very challenging years. The aggressivepricing in recent years, coupled with some launch year performance issues in soybeansand corn, led to market share challenges for MON. Combined with a large glyphosatedowncycle, the stock fell from more than $140 per share at its high point in mid-2008 to aslow as the mid-$40s in mid-2010. (Last close $67.17)

However, we believe MON has embraced a more conciliatory approach with farmers inorder to rebuild its market share momentum, which is working according to the farmersthat we spoke with. Price premiums for new technology have been reduced to tilt the valuecapture far more in favor of the farmer than in 2010. Furthermore, leaps forward in geneticavailability for the new technologies should also spur adoption. We expect, as supportedby comments from our farmers, MON will grow corn seed share slightly in 2011 beforegrowing more rapidly in 2012 as the SmartStax RIB product is launched. In our view, therecent comments by the company that most of its SS product line will be available as RIBare very encouraging since this should allow for a mix lift and drive seed earnings.

Exhibit 10: Number of RR2 varieties available, by yearIncreased genetic offering spurs adoption

Exhibit 11: MON triple-stacked corn mix, by yearSS RIB is a game changer that will improve share and mix

Note: Reduced refuge family includes SS, TriplePro, and DoublePro

Source: Company data Source: Goldman Sachs Research estimates

Sell CF - In fertilizers our bias is to avoid nutrients that are most sensitive to corn pricesand highlight our Sell CF rating on this front. As outlined above our call is for corn prices topeak in 2011. Our analysis of historic ammonia prices shows a very tight relationship with(1) the price of corn, (2) the price of natural gas, and (3) the rate of change in capacityutilization, as shown in Exhibit 12. We forecast ammonia prices will climb 25%-30% yoy in

2011, with corn averaging near $7.00/bu across the year and natural gas averaging$4.43/MMBtu. (Last close $135.43.)

The farmers on our call reported already buying forward anhydrous ammonia for Fall 2011applications for the 2012 crop at prices of $740/ton, a nearly $300 premium to our $450/tonCFR Gulf forecast, with much of the difference accounted for in transportation costs and aCornbelt premium. This compares with reported prices of $480-$650/ton, a premium toCFR Gulf prices of $340/ton. Farmers forward purchasing and upward anhydrous ammoniaprice momentum support our call for record profits for CF in 2011, where we see 15%upside to consensus estimates. However, we see 2011 as the peak with corn and nitrogenfertilizer prices rolling off in 2012. The farmers also talked about pre-applying P&K, withone farmer noting he has already put down more than half his 2012 P&K needs already.

80

>200

0

50

100

150

200

250

2009 2010 2011E

0

5

10

15

20

25

30

35

40

45

2009 2010 2011 2012 2013

A c r e s p

l a n t e

d

Triples Reduced Refuge Family SS RIB


8/27



This reflects an inability to store P&K on the farm, so they went ahead and applied extraproduct this past fall.

That said, we expect corn prices and therefore nitrogen prices to roll over in 2012 aspressure on domestic feed demand, supply expansion, and policy response shouldultimately converge to loosen the current balance. As the current $1-$2 risk premium iserased and corn prices return to a more appropriate $6.00 range, we forecast ammoniaprices moving lower -10% to $423/ton. We note that our $100/ton nitrogen profitexpectation for CF in 2012 is still nearly double the $55/ton profit it averaged from 2002-2010. See Positioning for ag inflection: CF, AGU Sell; POT Buy, Protein Neutral, publishedMarch 20, 2011.

Exhibit 12: Ammonia prices exhibit a strong correlationwith corn and natural gas pricesGulf ammonia price in $/st, R-sq 78%

Exhibit 13: Corn is the most nitrogen intensive of the fourmajor cropsNitrogen use by crop in tons/acre

Source: Fertweek, Goldman Sachs Research estimates Source: USDA, Goldman Sachs Research estimates

Edited transcript of conference call with Midwest farmers

GOLDMAN SACHS AGRICULTURE SERIES CONFERENCE CALL

Hosts: Bob Koort & Lindsay Drucker Mann

April 11, 2011

Farmer #1:

I farm in central Illinois. I farm with my wife and my son. We have about 3,000 acres ofcorn and soybeans. We have just a few Angus cows, but we are a cash grain operation.I'm close enough to Decatur that that's our primary market, going to ADM and Tate & Lylein Decatur.

We are close enough to use the river system if the bids are appropriate for us to do that.Our operation had moved to 90 % return corn in 2009. In 2010, we were 75 % corn due toweather and field conditions, and we're going to stay at about a 75 % corn/25 % soy beansfor 2011 also.

0100200300400500600700800

1 Q 0 0

4 Q 0 0

3 Q 0 1

2 Q 0 2

1 Q 0 3

4 Q 0 3

3 Q 0 4

2 Q 0 5

1 Q 0 6

4 Q 0 6

3 Q 0 7

2 Q 0 8

1 Q 0 9

4 Q 0 9

3 Q1 0

A m m o n

i a ( $ / s t )

predicted actual

R2 = 78%

0.00

0.01

0.02

0.03

0.04

0.05

0.06

0.07

Corn Cotton Wheat Soybeans

N i t r o g e n u s e

( t o n s

/ a c r e

)


9/27



We might adjust that depending on spring weather. It's raining here this morning. It's alittle too cold. I have one neighbor that planted a little bit, but the ground is still too coldand the way the weather looks, it may be a week from now before we get any more wheelsturning as far as in the field.

To give you an idea, on average yields, we generally expect about 210 bushels an acre oncorn and about 65 bushels an acre on soy beans, so we're in a pretty high yieldenvironment. In 2010, our yields were off because some of our fields just had too muchwater and we were down our overall average was about 180 bushels for 2010.

Farmer #2:

I farm northeast Kansas. It's not what you would traditionally think of Kansas. It's hilly.It's very fertile. It's about an hour north of the Kansas City Airport.

We farm here with my wife, and our son is taking over the operation. We farm 4,600 acreshere and all no till.

Our yields last year were 180 bushels per acre and we feel like that was down a little bit,

kind of like everyone else. Soy beans were 60 bushels per acre and that's a little above theaverage, so we're pretty representative of what happened across the country. The mix thatwe have here is 60 % corn and 40% soy beans.

We've been as high as 80% a couple of years ago and this year we'll be 65%. As far as2012 looks, we're already buying fertilizer for that and I think corn may rule thatyear just on prices, because I think the inputs are going to shock everybody unless they justdo a really good job of selling next year, because I'm afraid we're going to really behit with a high input cost in 2012 .

We ended the year with 10 % of our corn and about 30 % of our soy beans left to sell. I thinkthe soy beans haven't really gone up as much as we'd like them to because SouthAmerica's on right now and I think that'll probably come into play about the time we plantthe soy beans.

We have purchased our 2012 anhydrous at anywhere between $710-$730 per ton .We bought our P&K last year and while we were doing it I thought it was probably goingup, so we applied at least 50% of that, pre-applied it for the 2012 crop , so I justreally think that these prices are going to cost us down the road, not that it'll be bad, butit's going to scare some people away from planting corn just because of the costs.

I think that we probably will work towards 80 % corn. We're already feeling like we don'thave enough this year, but we had some disease problems due to five years of corn andour humidity, and really right now, there's some guys putting on anhydrous to increasetheir corn acres here.

So the market's probably working and if it goes up in the next couple of weeks any more

on new crops, I think that'll draw in some more corn acres , which will be good. Weneed to have enough corn so this thing doesn't go too high and scare everybody awayfrom using it.

Farmer #3:

I'm in central Illinois near Springfield, Illinois, about 20 miles south. We have a family farmhere of 2,200 acres, 75 % corn/25 % soy beans.

This last year was a real disappointment. Our normal yields on corn were running aroundthe 210 - 220 bushels per area, but this last year we really had a disaster because we hadan excessive amount of rain. We were less than 180 bushels per acre.


10/27



The soy beans ironically last year were 74 bushel average and I still don't understandthe logic of that because usually when you have excessive rain you do not have that goodof soy bean yield, and our soy bean yield is normally around the 64 bushel level .

I have pre-purchased about half of my fertilizer for next year , not because I reallywant, because the problem I got into in 2008 when I could buy the fertilizer early and I didbecause I knew it was going to go up and expected it to. But I had a little problem with ourlocal elevators being over the edge, about $40 million in margin calls and they didn't wantto sell any of the 2009 crop and I'm very concerned about that this year.

I'm still looking at how I can make that work. I do live close to two train loaders. Most ofthat corn goes to Herford, Texas to feed livestock, cattle especially, but the last couple ofyears it's kind of dwindled off a little bit because of the high price of corn and thesomewhat low price of cattle, but I see that the cattle prices are coming back, so maybethat'll change this year.

We ship a lot to the river. We're not that far away. There's also an ethanol plant in St.Louis, which is not that much farther away and with the bids it depends on where we gowith the grain for the most part.

I've been noticing that a lot of farmers have told me that they were through putting theiranhydrous on last fall, but I see a lot of anhydrous tanks running up and down theroad, so I'm anticipating that we will have the 92 plus million acres of corn thisyear . I hope so. We have a lot of people that depend on us and we want to make sure thatwe can supply the market.

Question:

Farmer #2, you and Farmer #3 mentioned something about pre-applying. I guess you'realready talking about putting stuff down that's going to be sucked up by the crop next year.Can you just give us a quick review of fertilizer application, when you do it, why you do it inthe fall versus the spring and does that lock you into planting corn, for instance, if you're

putting down your anhydrous? Just give us some sense around the timing and way youthink about putting down that fertilizer.

Farmer #1:

Well anhydrous, we try to do it in the fall. We're not totally locked in if we don't get it donein the fall. In the '09 crop we put probably half of it on in the spring, but that's prettystandard to try to get it on and then you are locked into corn because of the expense.

But, the P&K, the starter fertilizer, that just benefits the soy bean crop a little bit, but soybeans don't pull it out as much, in our area anyway. But what I was talking about, we don'tstore that. We don't have the storage for phosphate or potash so we just went

ahead and just put it on. It was quite a bit more expense added to the year, but we feel like it'll just carry over andbenefit the soy beans some and, you know, at least most of it will still be there for thenext crop .

Farmer #3:

Over here we put the anhydrous on in the fall mainly because we have a lot of what I callgumbo ground. It's heavy, mucky type soil. And if we try to do it in the spring, in general,now this year being an exception, but, in general, with the wet conditions we have itcompacts the ground and we don't get the results of the fertilizer that we would like if we


11/27



put it on in the spring, plus we're always about hurrying up and get the corn planted assoon as possible.

Question:

Farmer #3, I remember last year you guys talked a little bit about because of a wetter fallthat there were some ruts and maybe some tillage would be required in the spring. Didyou get through this past fall and now you're ready to hit the ground running or are therestill some issues around tillage requirements?

Farmer #3:

We were very fortunate. We got all of our fall work done last year. Actually the ground isworking and I'd like to hear the other two guys comment on this. But our ground isworking better than I have seen it work in ten years and it's flat and level andthat would help us with a higher yield .

Farmer #1:

I would agree with that. With our ground conditions between having a good fall in 2010 asfar as early harvest, dry conditions, we were able to get the tillage work we needed as wellas some of the compaction and problems from the prior two years, prior two falls, we wereable to correct not only what we did with tillage but also weather.

We had a lot of really cold weather, and a lot of rain as well as some snow over the winter,so all of that has helped, and Farmer #3 is right. I think probably clear across theMidwest the soil conditions will be better this year going into planting, whichcould lead to more acres.

I think I thought we'd have trouble getting to 92 million acres and I still think so unless we

have really good planting time weather and then a lot of folks, including ourselves, willput maybe a few percentage points more into corn and then you can always putyour nitrogen fertilizer on with the side dress application or do it some otherway.

Farmer #2:

I think our soil conditions are just about as close to perfect as we've had in a longtime. The wet spots that didn't have anything growing on them last year are all just perfect.Everybody's been out smoothing those up and really happy to see you can just get througha whole field at a time.

It's actually a little dry here as far as sub-soil. The tile lines are fairly dry. We've got goodmoisture to bring the crops up, but I really see everybody just really getting after it hereprobably midweek since it got cool. We didn't get the rain that Farmer #1 and Farmer #2did east of us, so we'll probably start just really wide open 100 % by Wednesday now.

I think we'll do some tomorrow maybe even today, but really the people I've talked toaround here all are trying to get into that early market, make sure the dryers are tuned upand be ready for that high priced corn where we're just, you know, sucking on fumes. Atleast, I'd say from July on, it's going to be a pretty hot market and everybody's looking atthat.


12/27



Farmer #1:

Before you move on, we probably did four year's worth of tile this last fall, projects wehaven't done before and I think that's helped as well.

Question:

Can you explain tiling?

Farmer #1:

The tile in the ground is basically used to drain the ponds of excess water; we've wanted toget that accomplished for the last three years but it's been too wet. This last fall was a dryone. We put tile in the ground, 4-6-8 inch and drain off wet spots, so we're about in asgood a condition going into spring as we ever have been .

Farmer #2:

On that note, my wife and I went up to Iowa last week and went clear to Mason City andmade a big circle and there is a huge amount of tile going into the ground and thatwill increase their yields year after year.

Farmer #1:

On the drainage, I would say one of the things that we're finding is you have to havedrainage where the ground's flat like where Farmer #3 and I are or even where Farmer #2has some slopes.

And it's become easier to justify. It's a big commitment because that cost is generallysomewhere around $600 or a little more per acre, but the land value's gone up enough to

justify it.

Question:

I just wanted to jump in with a question on how you think about maximizing your yieldsthis year. You talked a little bit about some of the disappointments on yields last year sowhat sorts of things have you done, can you do to maximize yields this growing season?Have you seen amongst the farm community that people have been taking strides to reallymaximize yields?

Farmer #3:

For the most part the fertilizer is your first limiting factor, but believe it or not, tiling is yoursecond limiting factor, and that's the reason we made such a big issue about that. Lastyear was just such a weird year.

We can do a lot of things out here on the farm and I'm sure the other two guys have done just the same things we've done on our farm with a lot of technology in GPS, making surewe have our seed evenly spaced, all those different things that we're trying to do and thefertility rate is specific to what we can do to maximize yields.

However, like last year, we had those nights that it just never did get cool and it just stayedhot and hot and hot, and the corn never really progressed like you would expect. We cando everything we can do, but it still it takes a little bit of weather to help us out.


13/27



However, we are probably setting in as good of a moisture as far as sub-soilmoisture goes that I can remember for a long time.

Farmer #1:

I think what you will see to maximize the yields, a lot more is being done on an acre-per-acre basis and that leads to technology that is helping with planting equipment andfertilizing equipment.

We do soil testing on every three acre grids and you can figure out fertility-wise what youneed to do. And there's equipment now that helps us with programs to do that and putspecifically what you need on each acre and you save money in regards to the fertilityexpense.

We've already talked about how the fertilizer costs have gone up and so have seed costs.So you can adjust seeding rates and one day we'll where you can probably adjust plantingby particular hybrid. You may carry more than one hybrid on the corn planter.

But a lot of money is being spent on technology like auto steer and global positioning,

things you can do to maximize each acre. And I think that's something that we're going tosee as we talk about higher yields, and the seed industry's helping us.

They're going to keep coming with seeds that'll handle the higher populations and have ahigher yield potential as we move along.

Farmer #2:

I think we're doing the same things you've heard about. We're beefing up our population just a little bit and doing all these things.

We probably push it as much as anybody. But now you're starting to see this highprice of corn and soybeans get the average guy to push it too .

Then you start seeing real results on this yield per acre. And, you know, we hear a lot andpeople dispute the yields that we say we can do. And I think that when you start pushingthat average farmer to do these things, that's when you really get your results on a lot ofacres.

Pretty soon, you know, they're looking back and saying oh well, I guess we were thinkingthat this isn't going to be as big a deal. So I really think that the average guy's looking atthis a lot harder than he was.

Question:

You mentioned the seeds and I guess most of the last decade we saw a lot of momentum

for Monsanto as Dekalb brand gained share and they took advantage of their traitstechnology.

Then maybe the last couple years, competition caught up and aggressive pricing causedsome consternation with farmers. Can each of you maybe give us your assessment todayof where you stand on your seed suppliers and what you see going forward in terms of anydifferent dynamics versus the last few years?

Farmer #2:

I think that farmers have benefited from this push and pull by competitors to get marketshare. I think that Pioneer jumped in there and saw some things that were to their benefit.


14/27



On the long term aspect, I don't know that Pioneer's done a lot except, you know, shufflesome things around and pushed some genetics. And people get really confused on howmuch biotech or how important it really is. I think it is important but you've got to have thegenetics to get in there and benefit from biotechnology.

And that's where I think Dekalb probably has the upper hand down the road . Our percentages have gone back, 2010 we were 50/50 and we're probably back to 60/40 nowDEKALB versus Pioneer. So I'm not sure if that plays out across the country but I think thepush and pulls really helped to keep prices in line.

Farmer #1:

I think what we've seen in my area is Monsanto just overran their headlights on thepricing and opened the door for the competitors.

It seems that with that there's been more of a move. In our own personal case, we movedaway from DEKALB. We'd been 100 % and we moved back to Channel [a Monsanto ownedcompany]. We knew some folks there, so it's still kind of under the Monsanto umbrella andit's worked excellently for us.

It looks like in our comparisons we've not given up anything in yield to the DEKALB corn.So we're kind of still in that Monsanto family and there's a lot of that going on in my area.Pioneer just isn't quite there on yield potential . And there are some differences ofopinion on the technologies.

Pioneer's going to have refuge in the bag but it's a 10 % refuge, so there's a concernwhether there will be a yield drop there. I think what is going to be really good is whenMonsanto gets refuge in a bag with their SmartStax Corn because they do have the 5 % refuge for the coming year. And that'll be a good one. It should be a plus for theMonsanto lines.

But they've still got to watch this price issue. They need a better way to price theirproducts than what they were trying to do previously. And we've talked with them aboutthat but there really has been a strong move I would say from Dekalb to those otherchannels and companies.

But Pioneer is not - really they gained a little market share last year but I thinkthey're going to lose it again a little bit for the 2011 crop from what I've heard.

Farmer #3:

I just want to point out at National Corn Growers we have a corn yield contest. And of the2,700 people who entered this year, they had a 300 bushel average. So the point is thetechnology is coming along. And if we ever had weather conditions just right, we couldhave one heck of a crop. And I'm hoping that it's this year.

Farmer #2:

Farmer #1 talked about 5% refuge. We did everything we could to get the most acres at a5% refuge. And that makes management easier, there's no problem with being spotchecked or being asked where your refuge is. As soon as it gets refuge in the bag andgenetics behind those things, we'll be 100%.


15/27



Question:

Last year you guys all seemed a little bit resistant to the SmartStax offering either from ayield standpoint; or maybe it was more of a pricing issue.

You also embraced the concept of refuge in a bag, so I'm wondering are any of youplanning to plant SmartStax this year? Did you have any trials last year? And more

broadly has Monsanto changed their behavior, their approach in terms of trying to positionthat product with you?

Farmer #2:

Well we didn't plant any SmartStax last year because of the genetics; also the pricing was alittle too high. But the genetics were the big thing. But this year I think Monsanto got theprice in line.

We've got some genetics offered this year that we think will get us the highest yield, whichis everything when we go to looking at corn. And so we probably will have 25%SmartStax and then a considerable amount of Double PRO, which has the 5% refuge also.

It just looks like it's going to increase our yield and reduce management effort for therefuge.

Farmer #3:

I did not use the SmartStax last year and I don't think I will this year . I'm justlooking at it again. The price did come down I will say that. We may have a little bit of atest plot but I think price was the issue for me .

Farmer #1:

That's the same way here. We did not have any SmartStax in 2010 crop due to the pricingas well as the genetics and we're still on hold on that. There is still the price differentialand we're using the Triple PRO. We will still need a 20 % refuge but we've learned how tomanage that and we will.

It'll be nicer and overall it will be a good thing when we get refuge in a bag. But we'vebeen in a scenario the past couple years where we have not really been giving up yield onthe refuge corn even though I'm a believer in the technology.

So maybe it's the particular year because Mother Nature can adjust a lot of things and wewant to get rid of as many of those variables as you can. So we'll use SmartStax sometimebut we may have - I think we have a few - just enough bags maybe a planter full to get acouple side by sides on our farm.

Question:

Farmer #1, I believe in your area it was where maybe Monsanto had the biggest problems.They had a couple numbers that just didnt work at all whether it was the genetics orsomething about the trait that year. Do you know from the folks around you - hasMonsanto brought out a bunch of new hybrids to maybe give farmers inspiration that theymight have a better performance in your area?


16/27



Farmer #1:

Well that's what they need to do definitely because there was only one hybrid that they hadin our area and to get the trait out there Dekalb pushed it and it was the wrong number forthe particular year.

And we had actually tried those genetics about two years prior when they came out with it.

It wasn't SmartStax but those same genetics. And we didn't like the looks of it and saidhey, if they're going to have it in that that made our decision easier to not use SmartStaxfor 2010.

But there were a good number of people that did use SmartStax, and were verydisappointed. The yields did not hold up at all. And it really was the genetics. It didn'thave anything to do with the trait, just the base genetics. And Monsanto has learned fromthat and as they've moved to use more genetic packages. And I'm sure it'll be fine.

But there will be some resistance for some folks. If they got hit hard enough, they'll say,hey, wait a minute. I'm not trying it on a big scale this year because of what happened in2010. And so it'll probably hurt their sales in my area some on the SmartStax.

Question:

The next question is pretty simple for all three of you guys. Can you tell us whether youspent more or less both in volumes and in dollars on fertilizer this year? And was thereany fertilizer that you spent more or less on like potash, DAP or, you know, anhydrousammonia or whatever you apply and the same for seeds?

Farmer #3:

I'll start on that one. On our anhydrous ammonia from previous years it's been all over theplace. But our price was $562 a ton of anhydrous ammonia . We normally put 150pounds on. Our DAP I want to say was $480 and our potash was $460 .

Now that is the stuff we applied the fall of 2010 for this coming crop season. The purchaseof fertilizer I just made for next year's was anhydrous was about $740. I think $460 stillremains the number on potash but I didn't buy any phosphorous.

Farmer #2:

We were lucky enough to get the prepay anhydrous for our 2011 crop and it was $480 and we actually got it on. We have less invested by quite a bit in our nitrogen and our Pand K but not near as much on, you know that area for phosphate and potash as we didwith nitrogen.

The seeds I think we're probably really close to the same for 2011 as we were in '10. It maybe just a little higher. But we are going to up the population by 1,000 or 2,000 and that'sgoing to add to our expenses. But overall we're looking at a very profitable year withaverage yields.

Farmer #1:

Well those guys in Kansas always get the bargains it seems like to me. We had our fallanhydrous for fall of 2010 purchased about $590 . We had to buy it ahead I think inAugust.


17/27



And weather conditions weren't right. We did not get it applied. And we got caught up inthat deal where they wanted to jump the price on us about 50 %. We negotiated that downand so we were somewhere in that $650 range too - we just finished putting our nitrogenon in fact.

And the prices they're talking are like Farmer #3, about $740 I think if I could purchasenow for the 2012 crop , P and K about the same as Farmer #3's as well. Our seed costactually is going to be down a little bit. We're going to probably be maybe 10 % lower thanwe were in 2010 crop.

And no opportunities at this point anyway to buy our seed for 2012 crop. But I think on ourfertilizers we're negotiating now and we'll probably - like I say, we'll be about where theother guys are it looks to me like.

Question:

Hey, Farmer #1, how are your seed costs down? Did pricing go down or did you changeyour mix?

Farmer #1:

Like on like pricing was down somewhat. Now like I already mentioned, we weren't pricingSmartStax. SmartStax, I don't remember how much it was down but I think it was downquite a bit. The refuge corn price was about the same but our Triple PRO that we wereusing actually came down by about 10 % and we use - that's probably the majority of whatwe have is Triple PRO. Maybe we did better negotiating, I don't know.

Question:

Can you talk a little bit about chemicals? You know, we saw a pattern develop where

branded glyphosate prices shot way ahead of generics. And then there's been an attemptmaybe to get those price points closer together. I know last year you spoke about somefolks in your area started being more tempted to use generics. Where do things sit now interms of price disparities? And is it still about a dollar, dollar and a half of an acre premiumversus generic so you would prefer to use the branded product when it comes toRoundup?

Farmer #3:

Well I'll start on that one. I do grow seed beans for Pioneer. And they insist you use highquality product, it's all part of our contract. And I really don't mind that. You know, I askeda gentleman, when we get the chemicals from overseas, do they pass FDA regulations

such as the chemicals we buy in this country?

And the answer was not really. So I don't know. I'd just as soon stick with the stuff thatreally works. It seems like we farm like a Cadillac anyway and I don't have any problems.The price was a little bit less this year.

I will say one thing. I have pre-purchased which I wouldn't normally do, my fungicide andthat's what we spray on corn usually about tassel time. And they had a discount on it ifyou bought it by March.

And I went ahead and pre-purchased that because when we do have the profitable levelslike we've been talking about because our fertilizer hasn't been that high and the grain


18/27



prices are right now, you try to maximize the most possible yields you can. And usuallythe fungicide helps you if you have any kind of disease package or it helps sustainability.

So from that standpoint, we have pre-purchased most chemicals. One thing I did want topoint out and I forgot. You were talking about seed corn. There is a little bit of a problemwith one of the seed companies that still has a little has a tendency to have a green snapin our area, and it's probably hurt them in sales. And other than that, we're pretty muchwith the same supplier we've been with for the past few years.

Farmer #2:

I think weed resistance issues have prompted putting pre-emergence chemicals down anddiscounting those as a package has really kept everybody thinking on the right track.

On the branded versus generic glyphosate, once you get down so cheap I reallythink the average farmer's going to say, oh, I'm just going to use the good stuff . Youknow, you got I don't know the exact number on what you could buy the generics fortoday but I think it's below probably 2 bucks an acre.

And I just don't know that the guys are looking that close at it. So we went with the totalpackage. We may change a little bit on what residual we use on our soybeans, but we'regoing to probably go with the whole package of the branded Roundup.

Like Farmer #2 mentioned, the whole thing about weed resistance and needing differentmodes of action is a big deal. We don't have really resistant weeds in our area, but theycould be coming and it's just a matter of stewardship. And so I think there are more folksin our area making sure that they do use another mode of action. And sometimes that'llbring the per-acre cost up a little bit for them.

Question:

With all the new biotech that's come out, have you seen a decrease in your insect pressureas a result of that? Are you able to kind of trace it back to the use of the new technologiesversus your non-treated seeds?

Farmer #1:

I think you're right. We have had less insect pressure. The most visible is the Europeancorn borer because we went through a number of years that in the summertime whenthose moths were out flying, anything driving down the road in the evening would beplastered, you know, your windshields, the front of your vehicles, and we haven't had thatfor several years.

Now, some of it could be a weather-related issue, but I do think definitely the biotech

control has definitely helped lower that pressure. But you always worry about, well, OK;maybe I can get along without this technology. And then boom, you have one of thoseyears.

On the root worm side, what we have seen interesting enough and it's counter to otherconventional wisdom, the continuous corn has helped reduce the corn root worm pressurebecause we treat those acres for root worm either with the biotech product or withchemicals.

And so we're controlling those root worms and we're in an area - and I think most areashave done this, the root worm adult will fly over and lay their seeds in the soy where youhave planted soybeans because there was no product there to control corn root worm. So


19/27



then those eggs are ready to hatch out, and then you'll have more pressure on the cornfollowing soybeans than you do continuous corn.

Farmer #3:

When we first started out the very first year with biotech , our yields on triple-stack cornwas about 27 to 28 bushel better than the non-biotech. And since oh, the second year,third year, especially, we had very similar yields between the refuge and the triple stackand in fact, we had a couple years where refuge out yielded it .

But again, just like Farmer #1 said, you never know when these insects will be flying in.And that's usually one of these summer events on a hot, dry, summer day and you have tobe prepared in advance. And really, it's kind of like crop insurance .

Farmer #2:

I agree with both these guys that the things we've been doing have decreased the pests wehave out there. I think there are a lot of people that are saying we have conventional seedsgrowing better because there's less pressure out there.

I've talked to several people around that should know, and they all say, don't take it forgranted. The bugs will come back quicker if you just quit using it all together. So I thinkmost people understand that.

We never treated corn borer before. We did not spray anything, any insecticides, and thenwe got clear away from using insecticide down the row. But, today, we just aren't seeing ahuge yield difference in our refuge acres due to the fact that I just don't think we have theinsect pressure out there. But once we have a big fly in of bugs and that happens, we'regoing to we're going to have a big problem.

One of the things that I've noticed, just on a lighter note I've been doing some field workcleaning up things and I've noticed a lot of cell-phone bore from our harvest crew where Ithink they were working on the cell phone when they should have been watching the row.We used to talk about cattle bore, you know, and now its cell phone bore.

Question:

I'm just curious about farm equipment. I know it's a small sample of three, but did youguys buy farm equipment that you might not have otherwise bought because business isgood? And then the second question is, with the price of corn over 750 a bushel, are youselling anything in the forward market?

Farmer #3: Well, I did buy a new combine and I did it for probably different reasons. They're going tocome out with a Tier 4 engine, which is going to add about 20 some-thousand dollars tothe price of a combine or a tractor this year. And we also traded up on some anhydrousequipment that was kind of needed to be repaired and replaced.

Yes, I have sold probably 45 % ahead on my corn. I wish it was at $7.50 per bushel, butunfortunately it is not. Markets are a very interesting thing, and if you look at them over aperiod of years you see highs and lows, and it just seems like the highs don't stay there aslong as the lows do.


20/27



So when you have a run-up like this it makes for a lot of consternation. You want to jumpin and sell ahead, and there are other means of protecting yourself like with options, forexample. But again, they are not the best.

Farmer #1:

Yes, on our farm, we did go ahead and update a couple of the tractors. We do somecustom harvest as well. So we get a new machine each year anyway. I think Farmer #3was right.

We actually replaced one of the tractors in particular to get in ahead of this Tier 4 enginething not only because of the cost, but also the concern about whether they were going tohave some problems with that. Although I would say the new equipment is more efficient.

You know we watch the Nebraska test, the new Deere tractors where their big front wheelassist tractor was the most efficient they'd ever had and those kind of things. So we'regaining efficiencies as well that we probably should talk a little bit more to the generalpublic about.

But there is that concern with the Tier 4 deal that's coming. I know in most of the industryyou have to have another tank and have another liquid you're dealing with besides justdiesel fuel, and that's not a good thing in my mind, so those concerns.

On the sales, yes, you know we use a shotgun approach with our sales. We sellpercentages along the way. And in these volatile times, I'm not as far along as Farmer #3is in the 2011 sales, but I think more of us are doing things like trying to set a floor price oruse some risk management.

And that takes spending a little money say, with options or something to get a floor price ina little below what is current. But you can still leave that top side open, because it'sgoing the weather is going to be huge this year as far as where the prices go either up ordown.

Farmer #2:

I think money in the bank speaks. It really did around our place. We built a new shop, anew leg and pit and it wasn't all done with cash but a big part of it was. We added anemployee. We had been using a custom harvester and we bought a new combine toreplace that, so we own our all of our - all of our harvest equipment.

[My son] has traded for a new tractor to be delivered in one of the new Tier whatevernumber that is of John Deere's for October/November delivery. He bought a sprayer, aplanter, a pick up. I think that we're pretty well set. If costs go up we can kind of ridethrough it.

We are sitting in pretty good shape with our yields but we haven't really touched the newcrop yet. We've got less than 10 % sold on corn and soybeans. And the first sale onsoybeans was $13.20 per bushel I think for that new crop. Beans, I'm really positive onwhat's going to show up if for the 2011 crop across the country. I think we're going tohave a very profitable year.

Question:

So the last two guys, you didn't sell much forward on the corn market?


21/27



Farmer #2:

Not for the 2012 2011 crop. We probably had too much sold for 2010. I think ouraverage when we get done selling the 2010 crop , what's left in the bin will be lessthan $5 , probably $4.90. And that's not $7 . I think you hear a lot in the market andnews and everything about how good these prices are, but you're not getting a lot offarmers to participate in that because they don't have a lot left.

Farmer #1:

You know, Farmer #2 is exactly right, and I think for our 2010 corn prices and we have justa little bit left, we're going to end up somewhere around a $5 a bushel average.

And any sale you've made previous to maybe two weeks ago, well, a few days ago, was asale you shouldn't have made. But you dont have a crystal ball and we have to have somerisk management.

And so that's what people like Grocery Manufacturer's Association and some of thelivestock groups, frankly, forget about. All they want to talk about is $7 and $8 corn. And

really, they probably bought a lot more at $4 than they did at above $7. And that's a thingthat's disappointing that they don't talk about. And I guess it's disappointing on my sidethat I didn't sell more over $7 and sold less in the $4s.

Farmer #2:

Well, you know, my question to a group over this past six months was who bought all ofthat $7 corn that they're complaining about because most of the good managers hedgedsome, I'm sure.

But when you have a group of cattle to be fed, if it's possible to buy corn that makes yourP&L look good, you buy it. So who bought all that $3.50 corn and $4 corn that wedelivered? I think that's the reason you're seeing these livestock people smiling a little bit.They just plain took advantage of that.

Question:

We've got a question on email about Roundup Ready 2 beans . I know last year, youtalked about the fact that one of you guys had a 10 % or 15 % improvement from the priorgeneration. Where do you stand now with Roundup Ready 2? Is that pretty well fullypenetrated through your fields or through your seed suppliers, and what are you seeing onyields? Did they correct the problems from a couple years ago?

Farmer #1:

We grow seed production for Monsanto and before they were actually introducedcommercially and saw a big yield bump that first year that 10 % , 15 %. They told usthat we'd have that and we did.

In this past year, we probably had a little bit of a yield improvement, but it was a hard alittle hard to tell because, frankly, we were all Roundup Ready 2 and that seems to be thetrend. Where there were problems that first introductory year was where they had a lot ofwhite mold. We had just a very little of that and it came in late enough it didn't hurt us onyield.

But we had a big soybean year in 2010, and Farmer #3 alluded to that. It's like wow; wewere in the 70s for average yields and had never been there before . And it all had


22/27



to do with rainfall. But I do think everybody is pretty much switching to the RoundupReady 2.

But I do think thats the one place where Pioneer has done pretty well in my area. Their Y-bean has had a yield improvement as well. I would say Pioneer's doing better on thesoybean side than they are corn side as far as competing right at the moment .

Farmer #3:

Since I grow Pioneer beans I can add some comments. I think half of the yield gains areprobably the Y-bean, but what they've started doing is adding a seed coat to protect inthe cold, wet weather. And as far as I'm concerned that's helped just about as much.

It just seems like if you have cold, wet springs and this last year those beans came out ofthe ground and were growing. It was dramatic because I had a neighbor who had a field,the same variety without the treated on it and there was almost 3 to 4 inches difference inthe heights of the beans. I was amazed .

Farmer #2:

We're going to have all Roundup Ready 2s this year , and I think they have fixed theproblem. They've gotten into the genetics and that was the key. But, you know, you'rehearing the banter just right here between Farmer #2 and us that's going on around thecountry.

The guys that like Pioneer like them, I don't think they've got the edge. I think they've gotthe yield right now, but down the road, you know, it'll probably continue and I think themarket share will probably stay close to the same or maybe increase a little bit towards R2s

just because of that technology.

Question:Do any of you see a dual mode of herbicide protection as a determining factor in switchingfrom one brand to another if one of these companies comes out first with the ability tohave a secondary herbicide?

Farmer #3:

Are you referring to the Dow Chemical herbicide?

Question:

Well, yes, I think everybody's got something. Dow has 2,4D, dicama from Monsanto,sulfonyl urea from DuPont. So everybody's coming out with two-pronged attacks. And I'm

just wondering is that enough to tip you towards one product or another?

Farmer #1:

You know, it might. I would think those products will be a big hit south of us, you know, ifyou get into Missouri and if you get on down to the southern tier.

It is not something here that folks are worrying a lot about, frankly. The issue we havemore is on the corn side of different technologies where we have continuous corn. Canyou rotate herbicides there to take care of volunteer corn that's coming?


23/27



But on the soybean side, it's not a huge deal for me, yet. But in, give it two or three years,and it could be and have a determining factor on market share.

Farmer #3:

I would say that we're probably just like Farmer #1. We don't have a problem with weedsthat have slipped by Roundup, but if we do, at least we will have a product that will beavailable. And I think with the Y-series Pioneer beans, everybody wants to use them, butthe price on seed beans have gone up dramatically, too, just so you know.

Farmer #2:

We don't have the problem yet, but [the weeds] are getting harder to kill. And I thinkeveryone's recognizing that and putting the residual down. I think you the guys east ofme in the in the Illinois area, especially, are working the ground going to soybeans,maybe and that's helping. But everybody's recognizing the fact that we need to have thatdual mode, so whatever comes along I think will be adopted pretty quickly.

Question:

Okay lastly, from investors in Europe, we hear a lot of talk about Syngenta competing. I'mnot sure I heard you mention them when you talked about your own particular farms. Butdo you see a lot of threat to Monsanto and Pioneer developing in your regions or do youhear from any of your neighbors that there's going to be more competition than justPioneer and DEKALB?

Farmer #2:

I think they're going to compete. I don't know that it's going to be a huge shift but, youknow, Syngenta's working really hard and a lot of farmers recognize that Syngenta hasreally stepped up to the plate on a lot of the defense with the public that we need as far asenvironmental things.

So I really think that it's probably yet to be decided on. And to me it's the genetics. Dothey have it? I think the things that they're offering and, you know, some of the thingsthey're offering for the ethanol industry's probably going to make a big part of that.

Farmer #3:

I would say that we watch these test plots in our area and there hasn't been anything that just really jumps out at you and that's what we're looking. But you never know from year

to year what kind of a problem we may have. And earworm, for example, if that becomesa big problem you could see a lot of switching to different varieties because of just theearworm problem, which we hardly talk about now.

Farmer #1:

In my area, Syngenta hasn't had much of a presence. I would say it's stable partiallybecause there was a large Golden Harvest presence on one side of my county. And theymaybe lost a little market share. They had a particular number that was real popular, but ithad more of the green snap issues. So they have some performance issues.


24/27



I would think it would be interesting to watch, especially around some of the dry-millethanol plants. And I think they're going to start out in Nebraska and Kansas with theiramylase corn. They could gain some market share there in particular, but, you know, we'recheering them on. We all want to see the competition.

So they aren't gaining market share here right now. There are some guys that really liketheir soybeans, so maybe in their soybean lineup. But on the corn side they've still gotsome work to do.

Rating and pricing informationCF Industries Holdings, Inc. (S/N, $135.43), Darling International Inc. (B/N, $15.23) andMonsanto Co. (B/A, $67.17)


25/27



Reg ACWe, Robert Koort, CFA and Lindsay Drucker Mann, CFA, hereby certify that all of the views expressed in this report accurately reflect our personalviews about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directlyor indirectly, related to the specific recommendations or views expressed in this report.

Investment ProfileThe Goldman Sachs Investment Profile provides investment context for a security by comparing key attributes of that security to its peer group andmarket. The four key attributes depicted are: growth, returns, multiple and volatility. Growth, returns and multiple are indexed based on compositesof several methodologies to determine the stocks percentile ranking within the region's coverage universe.The precise calculation of each metric may vary depending on the fiscal year, industry and region but the standard approach is as follows:Growth is a composite of next year's estimate over current year's estimate, e.g. EPS, EBITDA, Revenue. Return is a year one prospective aggregateof various return on capital measures, e.g. CROCI, ROACE, and ROE. Multiple is a composite of one-year forward valuation ratios, e.g. P/E, dividendyield, EV/FCF, EV/EBITDA, EV/DACF, Price/Book. Volatility is measured as trailing twelve-month volatility adjusted for dividends.

QuantumQuantum is Goldman Sachs' proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used forin-depth analysis of a single company, or to make comparisons between companies in different sectors and markets.

GS SUSTAINGS SUSTAIN is a global investment strategy aimed at long-term, long-only performance with a low turnover of ideas. The GS SUSTAIN focus listincludes leaders our analysis shows to be well positioned to deliver long term outperformance through sustained competitive advantage andsuperior returns on capital relative to their global industry peers. Leaders are identified based on quantifiable analysis of three aspects of corporateperformance: cash return on cash invested, industry positioning and management quality (the effectiveness of companies' management of theenvironmental, social and governance issues facing their industry).

Disclosures

Coverage group(s) of stocks by primary analyst(s)Compendium report: please see disclosures at http://www.gs.com/research/hedge.html. Disclosures applicable to the companies included in thiscompendium can be found in the latest relevant published research.

Company-specific regulatory disclosuresCompendium report: please see disclosures at http://www.gs.com/research/hedge.html. Disclosures applicable to the companies included in thiscompendium can be found in the latest relevant published research.

Distribution of ratings/investment banking relationships

Goldman Sachs Investment Research global coverage universe

Rating Distribution Investment Banking Relationships

Buy Hold Sell Buy Hold Sell

Global 32% 53% 15% 49% 41% 40%As of April 1, 2011, Goldman Sachs Global Investment Research had investment ratings on 3,191 equity securities. Goldman Sachs assigns stocks asBuys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell forthe purposes of the above disclosure required by NASD/NYSE rules. See 'Ratings, Coverage groups and views and related definitions' below.

Price target and rating history chart(s)Compendium report: please see disclosures at http://www.gs.com/research/hedge.html. Disclosures applicable to the companies included in thiscompendium can be found in the latest relevant published research.


26/27



Regulatory disclosures

Disclosures required by United States laws and regulationsSee company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report: manageror co-manager in a pending transaction; 1% or other ownership; compensation for certain services; types of client relationships; managed/co-managed public offerings in prior periods; directorships; for equity securities, market making and/or specialist role. Goldman Sachs usually makes amarket in fixed income securities of issuers discussed in this report and usually deals as a principal in these securities.The following are additional required disclosures: Ownership and material conflicts of interest: Goldman Sachs policy prohibits its analysts,professionals reporting to analysts and members of their households from owning securities of any company in the analyst's area of coverage.Analyst compensation: Analysts are paid in part based on the profitability of Goldman Sachs, which includes investment banking revenues. Analystas officer or director: Goldman Sachs policy prohibits its analysts, persons reporting to analysts or members of their households from serving as anofficer, director, advisory board member or employee of any company in the analyst's area of coverage. Non-U.S. Analysts: Non-U.S. analysts maynot be associated persons of Goldman Sachs & Co. and therefore may not be subject to NASD Rule 2711/NYSE Rules 472 restrictions oncommunications with subject company, public appearances and trading securities held by the analysts.Distribution of ratings: See the distribution of ratings disclosure above. Price chart: See the price chart, with changes of ratings and price targets inprior periods, above, or, if electronic format or if with respect to multiple companies which are the subject of this report, on the Goldman Sachswebsite at http://www.gs.com/research/hedge.html.

Additional disclosures required under the laws and regulations of jurisdictions other than the United StatesThe following disclosures are those required by the jurisdiction indicated, except to the extent already made above pursuant to United States lawsand regulations. Australia: This research, and any access to it, is intended only for "wholesale clients" within the meaning of the AustralianCorporations Act. Canada: Goldman Sachs & Co. has approved of, and agreed to take responsibility for, this research in Canada if and to the extent it

relates to equity securities of Canadian issuers. Analysts may conduct site visits but are prohibited from accepting payment or reimbursement by thecompany of travel expenses for such visits. Hong Kong: Further information on the securities of covered companies referred to in this research maybe obtained on request from Goldman Sachs (Asia) L.L.C. India: Further information on the subject company or companies referred to in thisresearch may be obtained from Goldman Sachs (India) Securities Private Limited; Japan: See below. Korea: Further information on the subjectcompany or companies referred to in this research may be obtained from Goldman Sachs (Asia) L.L.C., Seoul Branch. Russia: Research reportsdistributed in the Russian Federation are not advertising as defined in the Russian legislation, but are information and analysis not having productpromotion as their main purpose and do not provide appraisal within the meaning of the Russian legislation on appraisal activity. Singapore: Furtherinformation on the covered companies referred to in this research may be obtained from Goldman Sachs (Singapore) Pte. (Company Number:198602165W). Taiwan: This material is for reference only and must not be reprinted without permission. Investors should carefully consider theirown investment risk. Investment results are the responsibility of the individual investor. United Kingdom: Persons who would be categorized asretail clients in the United Kingdom, as such term is defined in the rules of the Financial Services Authority, should read this research in conjunctionwith prior Goldman Sachs research on the covered companies referred to herein and should refer to the risk warnings that have been sent to them byGoldman Sachs International. A copy of these risks warnings, and a glossary of certain financial terms used in this report, are available fromGoldman Sachs International on request. Brazil: Disclosure information in relation to CVM Instruction 483 is available athttp://www.gs.com/worldwide/brazil/gir/index.html. Where applicable, the Brazil-registered analyst primarily responsible for the content of thisresearch report, as defined in Article 16 of CVM Instruction 483, is the first author named at the beginning of this report, unless indicated otherwise atthe end of the text.

European Union: Disclosure information in relation to Article 4 (1) (d) and Article 6 (2) of the European Commission Directive 2003/126/EC is availableat http://www.gs.com/client_services/global_investment_research/europeanpolicy.html which states the European Policy for Managing Conflicts ofInterest in Connection with Investment Research.Japan: Goldman Sachs Japan Co., Ltd. is a Financial Instrument Dealer under the Financial Instrument and Exchange Law, registered with the KantoFinancial Bureau (Registration No. 69), and is a member of Japan Securities Dealers Association (JSDA) and Financial Futures Association of Japan(FFAJ). Sales and purchase of equities are subject to commission pre-determined with clients plus consumption tax. See company-specificdisclosures as to any applicable disclosures required by Japanese stock exchanges, the Japanese Securities Dealers Association or the JapaneseSecurities Finance Company.

Ratings, coverage groups and views and related definitionsBuy (B), Neutral (N), Sell (S) - Analysts recommend stocks as Buys or Sells for inclusion on various regional Investment Lists. Being assigned a Buyor Sell on an Investment List is determined by a stock's return potential relative to its coverage group as described below. Any stock not assigned asa Buy or a Sell on an Investment List is deemed Neutral. Each regional Investment Review Committee manages various regional Investment Lists to aglobal guideline of 25%-35% of stocks as Buy and 10%-15% of stocks as Sell; however, the distribution of Buys and Sells in any particular coveragegroup may vary as determined by the regional Investment Review Committee. Regional Conviction Buy and Sell lists represent investmentrecommendations focused on either the size of the potential return or the likelihood of the realization of the return.Return potential represents the price differential between the current share price and the price target expected during the time horizon associatedwith the price target. Price targets are required for all covered stocks. The return potential, price target and associated time horizon are stated in eachreport adding or reiterating an Investment List membership.Coverage groups and views: A list of all stocks in each coverage group is available by primary analyst, stock and coverage group athttp://www.gs.com/research/hedge.html. The analyst assigns one of the following coverage views which represents the analyst's investment outlookon the coverage group relative to the group's historical fundamentals and/or valuation. Attractive (A). The investment outlook over the following 12months is favorable relative to the coverage group's historical fundamentals and/or valuation. Neutral (N). The investment outlook over the following12 months is neutral relative to the coverage group's historical fundamentals and/or valuation. Cautious (C). The investment outlook over thefollowing 12 months is unfavorable relative to the coverage group's historical fundamentals and/or valuation.Not Rated (NR). The investment rating and target price have been removed pursuant to Goldman Sachs policy when Goldman Sachs is acting in anadvisory capacity in a merger or strategic transaction involving this company and in certain other circumstances. Rating Suspended (RS). GoldmanSachs Research has suspended the investment rating and price target for this stock, because there is not a sufficient fundamental basis fordetermining, or there are legal, regulatory or policy constraints around publishing, an investment rating or target. The previous investment rating andprice target, if any, are no longer in effect for this stock and should not be relied upon. Coverage Suspended (CS). Goldman Sachs has suspended


27/27


coverage of this company. Not Covered (NC). Goldman Sachs does not cover this company. Not Available or Not Applicable (NA). The informationis not available for display or is not applicable. Not Meaningful (NM). The information is not meaningful and is therefore excluded.

Global product; distributing entitiesThe Global Investment Research Division of Goldman Sachs produces and distributes research products for clients of Goldman Sachs, and pursuantto certain contractual arrangements, on a global basis. Analysts based in Goldman Sachs offices around the world produce equity research onindustries and companies, and research on macroeconomics, currencies, commodities and portfolio strategy. This research is disseminated inAustralia by Goldman Sachs & Partners Australia Pty Ltd (ABN 21 006 797 897) on behalf of Goldman Sachs; in Canada by Goldman Sachs & Co.regarding Canadian equities and by Goldman Sachs & Co. (all other research); in Hong Kong by Goldman Sachs (Asia) L.L.C.; in India by GoldmanSachs (India) Securities Private Ltd.; in Japan by Goldman Sachs Japan Co., Ltd.; in the Republic of Korea by Goldman Sachs (Asia) L.L.C., SeoulBranch; in New Zealand by Goldman Sachs & Partners New Zealand Limited on behalf of Goldman Sachs; in Russia by OOO Goldman Sachs; inSingapore by Goldman Sachs (Singapore) Pte. (Company Number: 198602165W); and in the United States of America by Goldman Sachs & Co.Goldman Sachs International has approved this research in connection with its distribution in the United Kingdom and European Union.European Union: Goldman Sachs International, authorized and regulated by the Financial Services Authority, has approved this research inconnection with its distribution in the European Union and United Kingdom; Goldman Sachs & Co. oHG, regulated by the Bundesanstalt frFinanzdienstleistungsaufsicht, may also distribute research in Germany.

General disclosuresThis research is for our clients only. Other than disclosures relating to Goldman Sachs, this research is based on current public information that weconsider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. We seek to update our research asappropriate, but various regulations may prevent us from doing so. Other than certain industry reports published on a periodic basis, the largemajority of reports are published at irregular intervals as appropriate in the analyst's judgment.Goldman Sachs conducts a global full-service, integrated investment banking, investment management, and brokerage business. We haveinvestment banking and other business relationships with a substantial percentage of the companies covered by our Global Investment ResearchDivision. Goldman Sachs & Co., the United States broker dealer, is a member of SIPC (http://www.sipc.org).Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients and ourproprietary trading desks that reflect opinions that are contrary to the opinions expressed in this research. Our asset management area, ourproprietary trading desks and investing businesses may make investment decisions that are inconsistent with the recommendations or viewsexpressed in this research.

We and our affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or short positions in,act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this research.This research is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would beillegal. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs ofindividual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, ifappropriate, seek professional advice, including tax advice. The price and value of investments referred to in this research and the income from themmay fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur.Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments.

Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for all investors.Investors should review current options disclosure documents which are available from Goldman Sachs sales representatives o

monsanto - gs - apr 12

Documents