What’s Driving Monsanto Company (MON)’s Growth?

In addition to corn, the other area investors need to keep an eye on is international growth, particularly in Latin America. Worldwide demand is experiencing a structural change that’s being driven by population growth, increasing incomes, and protein demand. That’s despite the fact that there is less arable land required to meet this increased demand. While fertilizer solutions like Potash Corp./Saskatchewan (USA) (NYSE:POT) are important, they are only half of the equation.

According to Potash Corp./Saskatchewan (USA) (NYSE:POT), fertilizers can be attributed to about half of the world’s food production; however, other factors such as weed control and crop varieties are also very important to boost yields. This is especially true in markets like Latin America that are looking for increased yields while keeping costs down. While that desire is creating robust fertilizer demand — this year the company is off to a record start with very strong potash shipments — it’s also been a big driver in yield-enhancing seeds like those Monsanto produces.

With the combination of its strength in corn and international growth opportunities, Monsanto believes it can easily grow this year’s earnings by more than 20% while also expecting to deliver earnings growth in the mid-teens next year. That’s enough to deliver nearly $2 billion in free cash flow this year, with more of the same likely in 2014. That corn-fed growth should keep investors very happy.

The article What’s Driving Monsanto’s Growth? originally appeared on Fool.com and is written by Matt DiLallo.

Matt DiLallo has the following options: Long Jan 2015 $70 Calls on Monsanto, Short Jan 2015 $70 Puts on Monsanto, and Short Oct 2013 $97.5 Calls on Monsanto. The Motley Fool has no position in any of the stocks mentioned.

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