Monsanto Cotton BusinessInvestor’s TourJune 25, 2004

Dr. Randy DeatonDirector, Global Cotton Business

Key Messages

• Leader in developing technology for cotton farmers• First-mover advantage

– Proven technology– Established brands/market approach– Knowledge of market needs

• Strategies in place to continue growth of business– Second generation products– Introduction of germplasm component thru Cotton States– Continued global expansion– Future products in development

Product Offerings Through 2002

• Introduced in 1996• Largest agricultural product introduction ever• Planted on 5.7M* acres in 2003 (43% of total)

• Introduced in 1997• Planted on 9.9M acres in 2003 (74% of total)• The “standard” in herbicide tolerance traits

– future Monsanto and competitive products must consider stacking with Roundup Ready® to succeed

• Introduced in 1997• Represents 95% of Bollgard® sales and 55%

of Roundup Ready® sales in 2003

*Source: Monsanto estimates

Market Approach

• Open architecture - licenses with almost all cotton seed companies

• Thorough distribution/dealer coverage using agency approach– No inventory costs– Grower fee set by Monsanto

• Grower licenses– Detailed information on product sales and customers– Market value pricing

No one has been able to duplicate Monsanto’s success in marketing cotton traits.

Second generation products

• Advantages over Bollgard®

– Improved control of target insects– Improved spectrum of insects controlled– Improved IRM characteristics – could lead to improved

refuge requirements for growers

• Introduced in 2003 with premium pricing• Expect most growth to occur as second-generation

Roundup Ready® is introduced

Second Generation Products

• Advantages over Roundup Ready®

– Wider window in which Roundup® can be applied over-the-top – Improved weed control and flexibility

• Planned introduction as early as 2006 pending regulatory approvals

• Anticipate rapid adoption

is highly anticipated:

• By cotton growers

• By the cotton industry

• By Monsanto

Cotton StatesMonsanto’s Germplasm Initiative

• Provides growers additional, innovative sources for seed with Monsanto traits

• Provides independent and university breeders opportunity to access market and to do so with Monsanto’s traits

• Provides germplasm licensees the opportunity for new revenue in seed and traits without large R&D investment

• Provides Monsanto new outlets for our traits and gives us access to germplasm for future R&D innovations

Cotton StatesBusiness Model

• Modeled after Monsanto’s Corn States business• How business works

– Access germplasm• License from third parties• Develop in-house

– Identify “winners” through extensive testing program– Introduce Monsanto traits– License germplasm with Monsanto traits to third-parties on

“win-win” terms– Third-parties licensees create their own seed brands,

inventory and sales• Established practice for corn and soy, but new for

cotton

Cotton States2003 Trial Results (top 11 of 29 tested)

0

200

400

600

800

1000

1200

1400

Yiel

d (lb

lint

/acr

e)

Varieties

CS1CS2CS3CS4CS5CS6CS7CS8CS9CS10CS11DP 555 BRST 4892 BRFM 966

Cotton StatesPlanned Timeline

First sales of Cotton States material in CA

Seed production of broad-acre germplasm

Commercialize -BGII/RRF products

Increase share

20062004 2005 2007

Rapid Market Share Gains

0%2%4%6%8%

10%12%14%16%

1999 2000 2001 2002 2003

Not Uncommon - e.g. FiberMax® Market Share

Conventional w/MON traits

*Source: USDA

ChinaBollgard 1997

Existing MarketsUnited StatesBollgard 1996RR 1997Bollgard II 2003

ArgentinaBollgard 1998RR 2001

South AfricaBollgard 1998RR 2000

Australia Ingard 1996RR 2000Bollgard II 2003

MexicoBollgard 1996RR 2000

IndiaBollgard 2002

ColombiaBollgard 2001RR 2004

New Markets

Brazil

Egypt

French WestAfrica

Pakistan

Future opportunities pending in next 4+ years.

New Innovations

• QTL’s – “mining nature’s genes”– Yield– Quality– Abiotic and biotic tolerances

• Drought tolerance• Lygus/stinkbug resistance

Strong IP Position in Key Markets

• Existing patents give substantial IP protection to existing/future products

• Patents pending for Bollgard II® and Roundup Ready®

Flex that would provide protection through 2020+ in key markets– Notable decision recently with synthetic Bt patent by U.S.

PTO

Competition

• Bollgard® competitors– WideStrike™ by Dow in 2005?– VipCot™ by Syngenta in 2006+?– DeltaMax in ???

• Roundup Ready® competitors – BXN® by Bayer in 1995

• Stoneville dropping BXN® after this year– Liberty Link™ by Bayer in 2004– Glyphosate tolerance by Syngenta/Dupont/DeltaMax in

2008+?• Monsanto pipeline products – none as visible as

these

Hurdles for “Me-Too” Competitors

• Monsanto’s:– second gen products with superior performance and value– established brands and market approach

• Regulatory uncertainties (esp. IRM disadvantages)• IP uncertainties• Lack of interest by seed companies

– Limited R&D dollars to invest in new traits– Aversion to inventory risk– Lack of financial incentives

Summary

• Planned growth through:– continued innovation– capitalizing on first-mover

advantage• Cotton States key component

of business strategy• Well positioned to manage

future business uncertainties