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Monsanto Place and Price Analysis

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Submitted By pvest41
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Monsanto Place and Price Analysis
Fundamentals of Marketing and Sales
BUS3030
Pamela Vest

PLACE

Distribution Channels
Monsanto, an agriculture company, creates, produces, and provides genetically modified seeds to farmers around the world. With the issues of agriculture, Monsanto is working to produce more, conserve more, and improving lives (Monsanto, 2014). As the world’s population grows and not enough of land suitable for agriculture, farmers must produce more. Farmer’s crops yield more, and are reducing water, nutrients, and energy by using the Monsanto seeds.
Monsanto creates genetically modified seeds in labs, by taking two good parents and breeds them to produce an offspring plant that is suitable for a certain agricultural area. With manufacturing plants, seed production facilities, and research centers scattered around the world, Monsanto distribution channels are focused around the geographic area near these facilities. Monsanto produces the seeds in their plants and must produce and distribute enough to meet the weekly high demands of farmers. With the precise timing the production and distribution plans due to the high demand, make for a more credible business approach. Monsanto manufacturing plants lack the storage spaces for the seeds, resulting in Monsanto having to use Public Storage facilities. Once at the public storage facilities, seeds are then delivered to distributor warehouse, and then they are delivered to retailers, whole sellers, trade partners, then to farmers. Bulk terminals do not deliver to warehouses, but straight to the retailers from the plants. Placement Strategy With the seasons, farmers are in demand for certain products and certain times. Monsanto not only has to consider the seasons, but must also consider the active ingredients. With products having to be made a least 6 months before the farmers growing season, Monsanto must remain ahead of the seasons and produce enough of seeds as to keep the profits benefiting the company. In the U.S., active ingredients and finish goods are usually produced simotaniasly. The headquarters develop forcasts and are used throughout the production and distrubition season. If the forcast fails to predict a market effect for that season, distribution sent to the wrong site, products will not be enough or worse yet, excess products could be produced. Seeing these could be affects, it is important that the forecast is developed, planned, and followed precisely.
Storage is limited at the production plants, so a loose process is used, which ships to all points to where the product might be sold. Such as, if corn is not grown in a certain area, Monsanto will not seed corn seeds to the agricultural area that is not used or suitable for growing corn. Monsanto must stay ahead of the season as to be sure they have enough seeds for the farmers the next growing season. With this come precise planning, production, and shipping to the needed areas. Planning and time is very important when it comes to the production of the seeds. Without it, farmers could be without the seeds that are needed for that season, or the wrong seeds being delivered.
Due to sterile seeds, and threats of lawsuits, farmers are stuck in a vicious circle of having to purchase the seeds year after year, as a way to keep their crops growing at a higher yield while using less during the growing season.Without these GM seeds, the crops would yield less while using more resources. With the nationally placed plants and retailers, farmers can easily obtain the seeds recommended for their geographic and agricultural needs. Farmers do not find any availability issues when it comes to Monsanto seeds.

PRICING
Pricing Strategy
Monsanto pricing is based on the value of the products compared to other seed products. To make farmers more profitable by using Monsanto seeds than a competitor’s product, the seeds are annually priced. The goal for Monsanto is to give farmers more for their dollar than the competitor products, provide farmers with the best seeds that yield a higher crop, and agronomic solutions.
Tangible and intangible benefits are considered with determining the value of the seeds. The factors of tangible involve the money farmers save on inputs that the seeds reduce the need for, such as chemicals, labor, equipment, fuel, water etc.) Along with the income from the yield increase. Intangible factors include financial risks, exposure to chemicals reduced, and convince. These benefits do differ between regions and the pricing is taken into consideration. Data from field testing conduced in cooperation from the farmers is collecting and used to quantify benefits. With this data, it is analyzed and used to price the products as a way to deliver more value to farmers than the products of the competitor’s.
Commodity prices fluctuate daily, so Monsanto uses the Chicago Board of Trade as a rolling average of prices for corn and soybean and with the cotton New York Exchange is used. Rolling average is used to look at a measurement of long term change such as the prices from this year to last year.
Farmers have a choice every season when it comes to seeds, herbicide systems, and trait technologies. With the realization of this, Monsanto prides itself with being transparent in the prices and the way they price. After all, for Monsanto to be successful the farmers must also be successful.
In 2011, Monsanto changed its pricing strategy in order to remain the key manufacturer and supplier. Monsanto conducted discussion with 1,200 growers and with the concern of weak sale of corn and soybean sales drove them to the decision to lower prices. With is strategy, Monsanto expected the profit to increase from 13 percent to 17 perfect (Kasky, 2010).
In 2014, Monsanto bought the Climate Corporation and is selling detailed weather and soil information to farmers. With this data, farmers are able to plan, rack, and harvest crops which make farmers more productive. Monsanto new product line, drought resistant corn and cotton are engineered to resist drought and still yield the same amount of corn during the harvest.
The pricing strategy is based on the advantage that Monsanto has over the first generation of products, natural seeds. Monsanto products are legally protected by US patents which gives the company justification for pricing their products slightly above the market price. Due to the patents, farmers are not allowed to save second generation seeds for replanting a second crop. With this stipulation on the seeds from the crops, farmers are forced to continue to buy new seeds each year for additional crops. With Monsanto, they are the largest seed supplier in the world; farmers are limited to the availability to purchase seeds.
“Our pricing has the flexibility built in to ensure the grower captures the greatest return from his seed investment, irrespective of market volatility,” Chief Executive Officer Hugh Grant (Monsanto, 2014). Monsanto Monopoly | 80% US corn | 93% US soybean | 1676 number of patents, seeds, and plant owned by Monsanto | 282 Million of acres worldwide grow Monsanto seeds | 151.4 million of acres grow Monsanto in the US | 95% of the US GE corn seed market contains the Monsanto traits | 89% of the US GE cotton seed market contains the Monsanto traits |

Pricing Comparison
Due to fewer choices, the prices for Monsanto seeds are priced higher depending on the geographic areas. Monsanto, DuPont, Syngeta, and Dow own 80% of the Corn US market and 70% of the soybean business along with controlling more than 50% of the world seed supply. With the purchase of smaller seed companies, Monsanto has dominated the seed industry. With this strategy, Monsanto gives farmers less to choose from and can charge a higher price for the products.
In 2010, soybean prices were $70 per bag, a percent of 143 increases from 2001. As of today, there is a 325 percent increase with soybean and corn seeds.
With Monsanto, geographic locations are taken into effect as to seeds being made available. Such as, in South Africa it is virtually impossible to obtain non-GE soy seeds, but Monsanto seeds are readily available. Over 85% of soybean and corn seeds are GE seeds, with over half having the Monsanto trait, figure 1 (Newman, 2010).

Figure [ 1 ]

Pricing Analysis
As Monsanto continues to purchase major and small seed companies, they are eliminating the choices that farmers have as to who to obtain seeds from. With the competition eliminated, Monsanto can price their seeds higher and the farmers are forced to purchase due to no other company to buy from. With the prices for seeds continue to climb, Monsanto continues to profit. However, some farmers do purchase the seeds due to the seeds producing higher yielding crops for the growing season. Monsanto is on a mission to feed the world and I believe that they will succeed.
Farmers are forced to continue to purchase seeds from Monsanto each growing season due to the patents that is in effect. With these patents, farmers are not able to save seeds for the next growing season. Farmers in violation of these patents are taken to court and sued for violation of infringement. Farmers are not able to fight the company due to limited financial funds, so they normally settle out of court.
Monsanto targets areas in the world that purchase their non-Monsanto seeds locally, such as El Salvador. The U.S. government has been pushing El Salvador to engage in a 5-year contract with Monsanto for the past two years. Salvadoran farmers are protesting a placed stipulation in a $277 million US aid package that requires the farmers to purchase Monsanto GM corn and bean seeds rather than allowing them to purchase their seeds locally (Clark, 2014). So, depending on the geographic locations and available seeds in that area depends on the price of the seeds. Controversy surrounds Monsanto with claims of taking advantage of the situation to gain power and profit.
With such actions as these, Monsanto is gaining control of the world’s food supply and dominating the seed industry. As they gain control, and eliminate competition farmers worldwide are forced to pay high prices for these seeds.
A decade ago the price for a 50-pound bag of soybean seeds were $11.00, today it is rose to $56.00. This is due to no choice or competition in the seed market.

References
Clark, M. (2014). The US Wants To Force GMO Seeds On Salvadoran Farmers, But They're Resisting: Report. Retrieved 2014, from http://www.ibtimes.com/us-wants-force-gmo-seeds-salvadoran-farmers-theyre-resisting-report-1623064
Graves, S., Gutierrez, C., Pulwer, M., Sidhu, H., & Weihs, G.Retrieved 2014, from http://web.mit.edu/sgraves/www/papers/monsanto.pdf
Kasky, J. (2010). Monsanto to Cut Soybean, Corn Seed Prices to Help Boost Profit About 15% - Bloomberg. Retrieved August 12, 2014, from http://www.bloomberg.com/news/2010-04-07/monsanto-will-lower-modified-seed-prices-to-help-boost-profit-by-about-15-.html
Monsanto. (2014). A Sustainable Agriculture Company. Retrieved August 11, 2014, from http://www.monsanto.com/pages/default.aspx
Newman, W. (2010). Rapid Rise in Seed Prices Draws U.S. Scrutiny - NYTimes.com. Retrieved 2014, from http://www.nytimes.com/2010/03/12/business/12seed.html?pagewanted=all&_r=0
Roseboro, K. (2013). The GMO Seed Monopoly: Fewer Choices, Higher Prices | Food Democracy Now. Retrieved 2014, from http://www.fooddemocracynow.org/blog/2013/oct/4/the_gmo_seed_monopoly_fewer_choices_higher_prices…...

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