updated 3/15/2005 5:45:15 PM ET 2005-03-15T22:45:15

When Monsanto Co. scrapped its plans last May to market its most-anticipated product in — genetically modified wheat — even biotechnology's most ardent supporters complained about the company's lackluster pipeline.

The lucrative European market, meanwhile, remains shut to the company's wares and Monsanto has posted losses for the past two quarters. The company also has agreed to pay $1.5 million in penalties for bribing an Indonesian government official, a scandal its opponents eagerly are exploiting to keep Monsanto's wares out of southeast Asia.

So why is the stock trading at historic highs?

Despite the high-profile resistance to genetically engineered products, biotech crops continue to sprout on more of the world's arable acreage every year. And despite its losses, Monsanto's financial forecasts for this year and next are rosy.

In 1996, about 4.3 million acres were under biotechnology cultivation; that number has swelled to some 200 million acres.

Wall Street has rewarded Monsanto chief executive Hugh Grant's risky decision two years ago to distance the company from its historic chemical-making roots and refashion the St. Louis fixture as a biotechnology outfit.

Monsanto is using its grip on the small but growing niche of genetically engineered agriculture to push into markets outside the United States, where it controls nearly the nation's entire soy crop and half the corn supply.

The company has also begun to tame a flourishing black market for its products in South America, while more of its cotton seed is bought and sown in India each year.

'Just the beginning'
With one-tenth of the world's high-value farmland growing biotech crops, "this is just the beginning," said Robb Fraley, the company's chief technology officer. "What gives me comfort is that we're seeing the momentum really across the world."

Wall Street has noticed. Monsanto's shares rose a blistering 93 percent for 2004 after a 49 percent jump the previous year.

Though the company has posted losses in the last two quarters, mostly associated with the bankruptcy of the chemical concern it spun off, it has boosted its financial forecast for the next two years. That's because its genetically engineered seed sales are booming — a 20 percent increase last quarter — and the company expects the growth to continue as it expands outside the United States.

Still, there's concern that that growth is driven by three products that benefit consumers little.

Promises unmet
Critics complain that Monsanto and its rivals have failed to deliver on the promise to revolutionize agriculture with plants genetically engineered to be healthier, drought-resistant and tastier.

Monsanto's best-selling seeds remain soy, corn and cotton genetically engineered to resist weed killers and bugs, and the prospects for introducing new biotech crops to the market are at least two years away.

"Monsanto has done a good job of cornering the biotech market, but it has a very narrow focus on a very few products," said Greg Jaffe, who wrote a report last month lamenting the industry's lackluster immediate future for the Washington D.C.-based Center for Science in the Public Interest. "They seem to be coasting on the products that they developed in the mid-1990s."

Addressing that concern, Monsanto last month agreed to pay $1 billion cash for Seminis Inc., the Oxnard, California-based supplier of more than 3,500 seed varieties to commercial fruit and vegetable growers, dealers, distributors and wholesalers in more than 150 countries.

It also has turned its attention to conquering the cotton sector — now dominated by Bayer CropScience and Delta and Pine Land — with its $300 million acquisition last month of the third largest U.S. cotton seed provider, Emergent Genetics.

More biotech approvals
On Tuesday, Monsanto said it got U.S. regulatory approval for its next-generation of Roundup-resistant cotton, which among other things allows growers to use the herbicide later in the season, reduces tillage and is less dependent on some spray equipment.

Monsanto expects the cotton to be offered in time for the 2006 growing season, with regulatory approval in other countries to follow later this year.

This month, India — a reluctant entrant in the world of biotech — approved cultivation of six varieties of genetically modified cotton based on Monsanto technology in its fertile northern region, thwarting anti-biotech activists. Monsanto's pest-resistant cotton is the only genetically engineered crop allowed in India.

In Brazil, meanwhile, lawmakers this month cleared the way for regulators to approve biotech crops , opening a big door for Monsanto to sell its popular modified soy seed in a country where farmers have used pirated versions of the company's Roundup Ready variety for years. Brazil's president, Luiz Inacio Lula da Silva, is expected to soon sign that into law.

The country's soy market has boomed over the past decade and the new law would double use of Monsanto's soy seeds in Brazil over the next several years to about 50 percent of the market.

Monsanto insists its inroads into Brazil are just a start.

"Where we are is still at the very beginning of the cycle," said Fraley, the company CTO, "like betting at the beginning of the computer revolution.".

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