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For Monsanto, It's All About the Yield

The company has had its high-profile problems in the past few years, but it's still the seed king.

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 Monsanto (MON) has built a formidable position in the biotech seed industry, dominating a market it essentially created in the late 1990s. While the firm has had its share of slip-ups in the recent past, fiscal 2011 was a bounce-back year. We think Monsanto will maintain its pole position by focusing on products and innovations that increase crop yields. Selling seeds that increase yields means that Monsanto can charge more for its products and grab a share of the value created when farmers are able to produce more food on the same amount of land--a theme that will be ever more important as the world population marches higher.

Its Breeding Is Leading
While investors and the market usually focus on the biotech aspects of the seed industry, Monsanto's conventional and molecular breeding apparatus is a significant source of the company's wide economic moat. Monsanto claims the world's largest breeding bank, or germplasm, and spends as much of its research and development budget on conventional and molecular breeding as it does on higher-profile biotech traits.

Jeffrey Stafford does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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