Monsanto Canada is cutting 10 percent of its workforce as part of a company-wide reorganization.
The 39 jobs eliminated at the Canadian subsidiary are part of a broader termination of seven to nine percent of the company’s global workforce, driven in a large part by slumping sales of Roundup herbicide, say industry analysts.
“Roundup continues to deteriorate and we expect more of the same in the next two years as prices slip and market share ebbs,” said a report issued by American equity research firm Credit Suisse.
Read Also
Russian wheat exports start to pick up the pace
Russia has had a slow start for its 2025-26 wheat export program, but the pace is starting to pick up and that is a bearish factor for prices.
Sales of the herbicide fell 12 percent from 409 million litres in 2002 to 360 million in fiscal 2003.
“As a result of these factors the firm is cutting its Roundup-related overhead and lowering its year-end inventories in the field,” concluded the authors of the report.
On the flip side Monsanto continues to capitalize on the “significant lead” it has amassed in the production and sale of genetically modified crops, pouring more money into development of those controversial commodities.
It is moving beyond GM crops that offer agronomic benefits and into those that have consumer appeal. Monsanto is already field-testing GM products with enhanced protein or oil content, slated to be introduced in 2007.
“Management continues to be most excited about the development of GMO crops that will contain their own, internally generated omega-3 oils,” the Credit Suisse report said.
Omega-3 fatty acids, found in fish oil and flax, can lower cholesterol and prevent heart disease.
That doesn’t mean crops touting agronomic benefits have been forgotten. Work on drought-tolerant lines continues, but new varieties are five years away from commercialization.
The report also mentions that the company may soon be able to make inroads into what has been a closed market for GMOs. The authors expect that the European Union will accept Roundup Ready corn no later than 2005.
According to Credit Suisse, the seed and biotechnology segment of Monsanto’s business accounted for 39 percent of the parent company’s earnings before interest, taxes and depreciation allowance in 2003, compared to six percent the previous year.
That booming segment is compensating for declining sales of agricultural chemicals, resulting in a steady bottom line. Unusual expenditures aside, 2003 net income was at the same level the company has averaged over the previous five years.
“This is a change that we’re making from a position of strength,” said Jordan, referring to the layoffs.
She said the company will continue to “support and sustain” its agricultural chemical division but she doesn’t expect Monsanto to expand work in that area.
“It’s a declining sector.”
Poor returns in that segment don’t have anything to do with consumer concerns over herbicide use. It’s because chemical production is expensive and it is hard to come up with formulations that are significantly different than what is already being sold, said Jordan.
Any new products introduced by Monsanto are likely to be in the seed and biotechnology side of the business with the exception of a new Roundup formulation due out in spring 2004.
Products will be marketed by a reorganized sales staff. Instead of working in regions, they will be split into two teams – one to sell Roundup and the other to sell seed technology.
“Successful companies anticipate the future. They have a strategy and they have a plan and that’s what we’re doing today,” Jordan said.
