The Wall Street Journal
By KAREN RICHARDSON
Original Publish Date: June 25, 2008
The salad days of organic salad are wilting in favor of high-tech tomatoes.
As global food shortages threaten to ignite social and economic instability from Nigeria to India, the popular aversion to genetically modified foods is turning into more of a luxury for the wealthy than a practical option for the masses.
This trend is evident in the share price and earnings growth of Monsanto, the world leader in agricultural biotechnology by market share. Its stock has soared 22% this year, trading at a breathless 37 times estimated 2008 per-share earnings. On Wednesday, the company is expected to report a third-quarter profit of $1.39 a share, up 35% from a year earlier.
Gourmets' fears of "frankenfoods" that make corn taste like cardboard seem to be taking a back seat to the growing global demands of feeding emerging middle classes in developing countries with limited natural resources.
Monsanto's seeds produce insect-resistant, drought-tolerant crops. It has pledged to double crop yields by 2030 for corn, soybeans and cotton and to reduce the need for water, land and energy by 30%, an effort to position itself as a solution to concerns about mounting strain on the globe's natural resources.
The firm is in a strong position. Farmers who want to raise their yields of corn for feed or ethanol have to pay the price, while buyers of that corn have to eat it. Monsanto has already increased its earnings outlook several times this year because of demand and higher prices.
It stands in stark contrast to Whole Foods Market, the supermarket for all things organic. It is a price taker that can't easily pass higher costs to its customers. From 2001 to the end of 2006, the company's earnings grew an average annual rate of 25%. In 2007, earnings were down more than 10%, and they're falling further.
I know Monsanto is raking in the cash, but I wonder which farmers fare better these days: organic, conventional, or gmo? The organic/natural/non-gmo stuff is moving at my local grocers as well. Many of my neighbors are becoming informed. You can't beat Walmart and Target for price--very close to conventional. A negligible difference, IMO. No high-tech tomatoes in this household! Many of the conventional do lack all taste if you have any.
IMO, Monsanto's growth is largely due to an increase in the cost of Roundup which is required to grow their crops. I personally continue to buy organic, and find it available more and more at my local grocer and even Walmart, so I can skip the higher prices and longer drive to Whole Foods. If anything, I find my access to cheaper organics and gmo free foods growing much to my delight. Even Walmart, Publix, Target, etc, etc, have hopped on the bandwagon. The day we never thought would come is here at last. 20 years ago, I had to drive 20 miles for Organics. No more, natural foods are everywhere and expanding their markets.The price is coming down nicely, as well.
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