News Column

MONSANTO CO /NEW/ - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

June 25, 2014

OVERVIEW

Background

Monsanto Company, along with its subsidiaries, is a leading global provider of agricultural products for farmers. Our seeds, biotechnology trait products, herbicides and precision agriculture tools provide farmers with solutions that help improve productivity, reduce the costs of farming and produce better foods for consumers and better feed for animals. We manage our business in two segments: Seeds and Genomics and Agricultural Productivity. Through our Seeds and Genomics segment, we produce leading seed brands, including DEKALB, Asgrow, Deltapine, Seminis and De Ruiter, and we develop biotechnology traits that assist farmers in controlling insects and weeds and precision agriculture to assist farmers in decision making. We also provide other seed companies with genetic material and biotechnology traits for their seed brands. Through our Agricultural Productivity segment, we manufacture Roundup and Harness brand herbicides and other herbicides. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with Monsanto's consolidated financial statements and the accompanying notes. This Report on Form 10-Q should also be read in conjunction with Monsanto's Report on Form 10-K for the fiscal year ended Aug. 31, 2013. Financial information for the first nine months of fiscal year 2014 should not be annualized because of the seasonality of our business. The notes to the consolidated financial statements referred to throughout this MD&A are included in Part I - Item 1 - Financial Statements - of this Report on Form 10-Q. Unless otherwise indicated, "Monsanto," the "company," "we," "our" and "us" are used interchangeably to refer to Monsanto Company or to Monsanto Company and its consolidated subsidiaries, as appropriate to the context. Unless otherwise indicated, "earnings per share" and "per share" mean diluted earnings per share. Unless otherwise indicated, trademarks owned or licensed by Monsanto or its subsidiaries are shown in special type. Unless otherwise noted, all amounts and analyses are based on continuing operations. Unless otherwise indicated, references to "Roundup herbicides" mean Roundup branded herbicides, excluding all lawn-and-garden herbicides, and references to "Roundup and other glyphosate-based herbicides" exclude all lawn-and-garden herbicides. Non-GAAP Financial Measures MD&A includes financial information prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP), as well as two other financial measures, EBIT and free cash flow, that are considered "non-GAAP financial measures." Generally, a non-GAAP financial measure is a numerical measure of a company's financial performance, financial position or cash flows that exclude (or include) amounts that are included in (or excluded from) the most directly comparable measure calculated and 34 -------------------------------------------------------------------------------- Table of Contents MONSANTO COMPANY THIRD QUARTER 2014 FORM 10-Q presented in accordance with GAAP. The presentation of EBIT and free cash flow information is intended to supplement investors' understanding of our operating performance and liquidity. Our EBIT and free cash flow measures may not be comparable to other companies' EBIT and free cash flow measures. Furthermore, these measures are not intended to replace net income (loss), cash flows, financial position, or comprehensive income (loss), as determined in accordance with GAAP. EBIT is defined as earnings (loss) before interest and taxes. Earnings (loss) is intended to mean net income (loss) attributable to Monsanto as presented in the Statements of Consolidated Operations under GAAP. EBIT is an operating performance measure for our two business segments. We believe that EBIT is useful to investors and management to demonstrate the operational profitability of our segments by excluding interest and taxes, which are generally accounted for across the entire company on a consolidated basis. EBIT is also one of the measures used by Monsanto management to determine resource allocations within the company. See Note 21- Segment Information - for a reconciliation of EBIT to net income for the three and nine months ended May 31, 2014, and May 31, 2013. We also provide information regarding free cash flow, an important liquidity measure for Monsanto. We define free cash flow as the total of net cash provided or required by operating activities and net cash provided or required by investing activities. Free cash flow does not represent the residual cash flow available for discretionary expenditures. We believe that free cash flow is useful to investors and management as a measure of the ability of our business to generate cash. Once business needs and obligations are met, this cash can be used to reinvest in the company for future growth or to return to our shareowners through dividend payments or share repurchases. Free cash flow is also used by management as one of the performance measures in determining incentive compensation. See the "Financial Condition, Liquidity and Capital Resources - Cash Flow" section of MD&A for a reconciliation of free cash flow to net cash provided by operating activities and net cash required by investing activities on the Statements of Consolidated Cash Flows. Executive Summary Consolidated Operating Results - Net sales increased $2 million in the three-month comparison and $566 million, or 4 percent, in the nine-month comparison. The primary contributor to the increase in third quarter 2014 was an increase in soybean and other seeds and traits, offset by a decrease in corn seeds and traits. The increase in soybean seed and traits was driven by higher volumes and improved germplasm and trait mix in the US and the increase in other seeds and traits was primarily due to the recent BioAg Alliance with Novozymes. The decrease in corn seed and traits was driven by lower volumes in the US and Europe. The primary contributor to the increase in the first nine months of 2014 was an increase in Roundup and other glyphosate-based herbicides and soybean seed and traits. The increase in Roundup and other glyphosate-based herbicides was due to an increase in the average net selling price. The increase in soybean seed and traits was driven by increased licensed trait revenue in the United States and the launch of Intacta RR2 PRO, primarily in Brazil. Net income attributable to Monsanto Company in the first nine months of 2014 was $5.45 per share, compared with $5.05 per share in the first nine months of 2013. Financial Condition, Liquidity and Capital Resources - In the first nine months of 2014, working capital was $7,306 million compared with $7,327 million in the first nine months of 2013, a decrease of $21 million, and compared with $5,741 million at Aug. 31, 2013, an increase of $1,565 million. For a detailed discussion of the factors affecting the working capital comparison, see the "Working Capital and Financial Condition" section of the "Financial Condition, Liquidity and Capital Resources" section in this MD&A. In the first nine months of 2014, net cash provided by operating activities was $371 million compared with $786 million in the first nine months of 2013. Net cash required by investing activities was $1,734 million in the first nine months of 2014 compared with $387 million in the first nine months of 2013. Free cash flow was an outflow of $1,363 million in the first nine months of 2014 compared with an inflow of $399 million in the first nine months of 2013. For a detailed discussion of the factors affecting the free cash flow comparison, see the "Cash Flow" section of the "Financial Condition, Liquidity and Capital Resources" section in this MD&A. At May 31, 2014, our debt-to-capital ratio was 18 percent compared with 14 percent at May 31, 2013, and Aug. 31, 2013, an increase of 4 percentage points. The increases were primarily driven by the $1 billion debt issuance that occurred in November 2013, offset by the increase in shareowners' equity as a result of earnings. We expect to incur a significant amount of indebtedness related to our share repurchase program. For additional discussion see the "Capital Resources and Liquidity" section of the "Financial Condition, Liquidity and Capital Resources" section in this MD&A. 35 -------------------------------------------------------------------------------- Table of Contents MONSANTO COMPANY THIRD QUARTER 2014 FORM 10-Q Outlook - We plan to continue to innovate and improve our products in order to maintain market leadership and to support near-term performance. We are focused on applying innovation and technology to make our farmer customers more productive and profitable by protecting and improving yields and improving the ways they can produce food, fiber, feed and fuel. We use the tools of modern biology and technology in an effort to make seeds easier to grow, to allow farmers to do more with fewer resources, and to help produce healthier foods for consumers. Our current R&D strategy and commercial priorities are focused on bringing our farmer customers second- and third-generation traits, on delivering multiple solutions in one seed ("stacking"), on providing yield and productivity tools and on developing new pipeline products. Our capabilities in biotechnology and breeding research are generating a rich product pipeline that is expected to drive long-term growth. The viability of our product pipeline depends in part on the speed of regulatory approvals globally, continued patent and legal rights to offer our products, general public acceptance of the products and the value they will deliver to the market. Roundup herbicides remain the largest crop protection brand globally. We have oriented the focus of Monsanto's crop protection business to strategically support Monsanto's Roundup Ready crops through our weed management platform that delivers weed control offerings for farmers. We are focused on managing the costs associated with our agricultural chemistry business as that sector matures globally. See the "Outlook" section of MD&A for a more detailed discussion of some of the opportunities and risks we have identified for our business. For additional information related to the outlook for Monsanto, see "Caution Regarding Forward-Looking Statements" at the beginning of this Report on Form 10-Q, Part II - Item 1A - Risk Factors below and Part I - Item 1A of our Report on Form 10-K for the fiscal year ended Aug. 31, 2013. New Accounting Pronouncements - See Note 2 - New Accounting Standards - for a description of recently issued and adopted accounting pronouncements, including the dates of adoption and impacts on our results of operations, financial position and cash flows, as applicable. 36 -------------------------------------------------------------------------------- Table of Contents MONSANTO COMPANY THIRD QUARTER 2014 FORM 10-Q RESULTS OF OPERATIONS Three Months Ended Nine Months Ended (Dollars in millions, except per share amounts) May 31, 2014 May 31, 2013 Change May 31, 2014 May 31, 2013 Change Net Sales $ 4,250$ 4,248 - % $ 13,225$ 12,659 4 % Cost of goods sold 1,919 1,986 (3 )% 5,884 5,930 (1 )% Gross Profit 2,331 2,262 3 % 7,341 6,729 9 % Operating Expenses: Selling, general and administrative expenses 655 632 4 % 1,869 1,773 5 % Research and development expenses 427 392 9 % 1,240 1,097 13 % Total Operating Expenses 1,082 1,024 6 % 3,109 2,870 8 % Income from Operations 1,249 1,238 1 % 4,232 3,859 10 % Interest expense 42 37 14 % 135 123 10 % Interest income (17 ) (19 ) (11 )% (64 ) (69 ) (7 )% Other expense, net 3 (4 ) (175 )% 84 35 140 % Income from Continuing Operations Before Income Taxes 1,221 1,224 - % 4,077 3,770 8 % Income tax provision 341 292 17 % 1,165 1,017 15 % Income from Continuing Operations Including Portion Attributable to Noncontrolling Interest 880 932 (6 )% 2,912 2,753 6 % Discontinued Operations: Income from operations of discontinued businesses - - NM 22 17 NM Income tax provision - - NM 9 6 NM Income from Discontinued Operations - - NM 13 11 NM Net Income $ 880$ 932 (6 )% $ 2,925$ 2,764 6 % Less: Net income attributable to noncontrolling interest 22 23 NM 29 33 NM Net Income Attributable to Monsanto Company $ 858$ 909 (6 )% $ 2,896$ 2,731 6 % Diluted Earnings per Share Attributable to Monsanto Company: Income from continuing operations $ 1.62$ 1.68 (4 )% $ 5.43$ 5.03 8 % Income from discontinued operations - - NM 0.02 0.02 NM Net Income Attributable to Monsanto Company $ 1.62$ 1.68 (4 )% $ 5.45$ 5.05 8 % NM = Not Meaningful Effective Tax Rate 28 % 24 % 29 % 27 % Comparison as a Percent of Net Sales: Cost of Goods Sold 45 % 47 % 44 % 47 % Gross Profit 55 % 53 % 56 % 53 % Selling, general and administrative expenses 15 % 15 % 14 % 14 % Research and development expenses 10 % 9 % 9 % 9 % Total operating expenses 25 % 24 % 24 % 23 % Income from continuing operations before income taxes 29 % 29 % 31 % 30 % Net income attributable to Monsanto Company 20 % 21 % 22 % 22 % 37

-------------------------------------------------------------------------------- Table of Contents MONSANTO COMPANY THIRD QUARTER 2014 FORM 10-Q Third Quarter Fiscal Year 2014 The following explanations discuss the significant components of our results of operations that affected the quarter-to-quarter comparison of our third quarter income from continuing operations: Net sales increased $2 million in third quarter 2014 from the same quarter a year ago. Our Seeds and Genomics segment net sales decreased $14 million, and our Agricultural Productivity segment net sales increased $16 million in the three-month comparison. The following table presents the percentage changes in third quarter 2014 worldwide net sales by segment compared with net sales in the prior-year quarter, including the effects of volume, price and currency: Third Quarter 2014 Percentage Change in



Net Sales vs. Third Quarter 2013

Volume(1) Price(2) Currency Total Seeds and Genomics Segment (3)% 4% (1)% -% Agricultural Productivity Segment (5)% 8% (2)% 1% Total Monsanto Company (4)% 5% (1)% -%



(1) Includes the effects of unit volume change and some effects of mix.

(2) Includes the effects of unit price/cost change and some effects of mix.

Cost of goods sold for the total company decreased $67 million in the three-month comparison. Cost of goods sold as a percent of net sales for the total company decreased 2 percentage points to 45 percent. Our Seeds and Genomics segment cost of goods sold as a percent of net sales decreased 2 percent percentage points to 39 percent, and our Agricultural Productivity segment cost of goods sold as a percent of net sales decreased 2 percentage points to 61 percent. The following table represents the percentage changes in third quarter 2014 worldwide cost of goods sold by segment compared with cost of goods sold in the prior-year quarter, including the effects of volume, costs and currency: Third Quarter 2014 Percentage Change in Cost of Goods Sold vs. Third Quarter 2013 Volume(1) Costs(2) Currency Total Seeds and Genomics Segment 1% (2)% (2)% (3)% Agricultural Productivity Segment (4)% 3% (1)% (2)% Total Monsanto Company (1)% -% (2)% (3)%



(1) Includes the effects of unit volume change and some effects of mix.

(2) Includes the effects of unit price/cost change and some effects of mix.

Gross profit increased $69 million in the three-month comparison. Gross profit as a percent of net sales for the total company increased 2 percentage points to 55 percent in the third quarter 2014. Our Seeds and Genomics segment gross profit as a percent of net sales increased 2 percentage points to 61 percent, and our Agricultural Productivity segment gross profit as a percent of net sales increased 2 percentage points to 39 percent. For a detailed discussion of the factors affecting net sales, cost of goods sold and gross profit comparison, see the "Seeds and Genomics Segment" and the "Agricultural Productivity Segment" sections. Operating expenses increased $58 million in third quarter 2014 compared to the prior-year comparable quarter. In the third quarter 2014, selling, general and administrative (SG&A) increased $23 million primarily due to increased investment in additional growth platforms, including the acquisition of The Climate Corporation, and increased activity related to administrative functions. In the third quarter 2014, R&D increased $35 million primarily because of The Climate Corporation acquisition, breeding expansion and increased investment in our product pipeline. As a percent of net sales, SG&A expenses remained consistent at 15 percent, and R&D expenses increased 1 percentage point to 10 percent for the third quarter of 2014. Income tax provision was $341 million in third quarter 2014, an increase of $49 million over the prior-year quarter, primarily as a result of lower discrete tax benefits and the increase in pretax income. The effective tax rate increased to 28 percent from 24 percent in third quarter 2013. We recorded a discrete tax benefit of $12 million during third quarter 2014, primarily as a result of adjustments to Ex-US unrecognized tax benefits. We recorded a discrete tax benefit of $93 million during third quarter 2013. The majority of this benefit resulted from the favorable resolution of tax matters, including legacy matters of $11 million. 38 -------------------------------------------------------------------------------- Table of Contents MONSANTO COMPANY THIRD QUARTER 2014 FORM 10-Q Without the impact of discrete tax adjustments, our effective tax rate for third quarter 2014 would have been lower than the third quarter 2013 rate primarily due to foreign tax credits. First Nine Months of Fiscal Year 2014 The following explanations discuss the significant components of our results of operations that affected the nine-month comparison of our first nine months of fiscal years 2014 and 2013 income from continuing operations: Net sales increased $566 million in the first nine months of 2014 from the same period a year ago. Our Seeds and Genomics segment net sales increased $209 million, and our Agricultural Productivity segment net sales increased $357 million. The following table presents the percentage changes in the first nine months of 2014 worldwide net sales by segment compared with net sales in the prior-year first nine months, including the effects of volume, price and currency: First Nine Months 2014



Percentage Change in Net Sales vs. First Nine Months 2013

Volume(1) Price(2) Currency Total Seeds and Genomics Segment (2 )% 6 % (2 )% 2 % Agricultural Productivity Segment 1 % 11 % (2 )% 10 % Total Monsanto Company (1 )% 7 % (2 )% 4 %



(1) Includes the effects of unit volume change and some effects of mix.

(2) Includes the effects of unit price/cost change and some effects of mix.

Cost of goods sold decreased $46 million in the first nine months of 2014 from the same period a year ago. Cost of goods sold as a percent of net sales for the total company decreased 3 percentage points to 44 percent. Our Seeds and Genomics segment cost of goods sold as a percent of net sales decreased 2 percentage points to 37 percent, and our Agricultural Productivity segment cost of goods sold as a percent of net sales decreased 5 percentage points to 61 percent. The following table represents the percentage changes in the first nine months of 2014 worldwide cost of goods sold by segment compared with cost of goods sold in the first nine months of prior-year, including the effects of volume, costs and currency: First Nine Months 2014 Percentage Change



in Cost of Goods Sold vs. First Nine Months 2013

Volume(1) Costs(2) Currency Total Seeds and Genomics Segment 1 % (2 )% (2 )% (3 )% Agricultural Productivity Segment 1 % 3 % (1 )% 3 % Total Monsanto Company 1 % - % (2 )% (1 )%



(1) Includes the effects of unit volume change and some effects of mix.

(2) Includes the effects of unit price/cost change and some effects of mix.

Gross profit increased $612 million in the first nine months of 2014. Gross profit as a percent of net sales for the total company increased 3 percentage points 56 percent in the first nine months of 2014. Our Seeds and Genomics segment gross profit as a percent of net sales increased 2 percentage points to 63 percent, and our Agricultural Productivity segment gross profit as a percent of net sales increased 5 percentage points to 39 percent. For a detailed discussion of the factors affecting net sales, cost of goods sold and gross profit comparison, see the "Seeds and Genomics Segment" and the "Agricultural Productivity Segment" sections. Operating expenses increased $239 million in the first nine months of 2014 from the prior-year comparable period. In the nine-month comparison, SG&A expenses increased $96 million primarily because of our increased investment in additional growth platforms, including the acquisition of The Climate Corporation, and increased activity related to administrative functions. R&D expenses increased $143 million due to The Climate Corporation acquisition, breeding expansion and increased investment in our product pipeline. As a percent of net sales, SG&A expenses remained consistent at 14 percent, and R&D remained consistent at 9 percent. Other expense - net increased $49 million in the first nine months of 2014. The increase was primarily the result of current period foreign currency losses largely related to the Argentine peso. 39 -------------------------------------------------------------------------------- Table of Contents MONSANTO COMPANY THIRD QUARTER 2014 FORM 10-Q Income tax provision was $1,165 million in the first nine months of 2014, an increase of $148 million from the prior-year comparable period, primarily as a result of lower discrete tax benefits and the increase in pretax income. The effective tax rate increased to 29 percent from 27 percent in the prior year comparable period. We recorded a discrete tax benefit of $18 million during the first nine months of 2014, primarily as a result of deferred tax adjustments and adjustments to Ex-US unrecognized tax benefits. The first nine months of 2013 included several discrete tax adjustments resulting in a tax benefit of $140 million. The majority of this benefit resulted from the favorable resolution of tax matters, including legacy matters of $11 million, a capital loss from a deemed liquidation of a subsidiary, and the retroactive extension of the R&D credit pursuant to the enactment of the American Taxpayer Relief Act of 2012 on January 2, 2013. Without the impact of discrete tax adjustments, our effective tax rate for the first nine months of 2014 would have been lower than the 2013 rate primarily due to foreign tax credits. SEEDS AND GENOMICS SEGMENT Three Months Ended Nine Months Ended (Dollars in millions) May 31, 2014 May 31, 2013 Change May 31, 2014 May 31, 2013 Change Net Sales Corn seed and traits $ 1,303$ 1,559 (16 )% $ 5,771$ 5,978 (3 )% Soybean seed and traits 816 658 24 % 1,903 1,566 22 % Cotton seed and traits 401 385 4 % 587 630 (7 )% Vegetable seeds 221 216 2 % 597 571 5 % All other crops seeds and traits 299 236 27 % 506 410 23 % Total Net Sales $ 3,040$ 3,054 - % $ 9,364$ 9,155 2 % Gross Profit Corn seed and traits $ 751 $ 859 (13 )% $ 3,654$ 3,628 1 % Soybean seed and traits 498 398 25 % 1,205 911 32 % Cotton seed and traits 304 295 3 % 424 466 (9 )% Vegetable seeds 107 93 15 % 271 282 (4 )% All other crops seeds and traits 195 170 15 % 299 252 19 % Total Gross Profit $ 1,855$ 1,815 2 % $ 5,853$ 5,539 6 % EBIT(1) $ 898 $ 920 (2 )% $ 3,057$ 2,980 3 %



(1) EBIT is defined as earnings before interest and taxes. Interest and taxes

are recorded on a total company basis. We do not record these items at the

segment level. See Note 21 - Segment Information and the "Overview -

Non-GAAP Financial Measures" section of MD&A for further details.

Seeds and Genomics Financial Performance - Third Quarter Fiscal Year 2014 Net Sales for the Seed and Genomics segment decreased $14 million in the third quarter of fiscal year 2014 compared to the third quarter of fiscal year 2013. The net sales decrease of $256 million in corn seed and traits was driven by lower volumes in the United States and Europe. Volume declined in the United States due to lower planted acres while volume in Europe was slightly down for the quarter due to higher delivery volume in the second quarter as supply was less constrained than in the prior year. The net sales increase of $158 million in soybean seed and traits was driven by higher volumes and improved germplasm and trait mix in the U.S. Net sales in all other crop seeds and traits increased by $63 million primarily due to the recent BioAg Alliance with Novozymes. Cost of goods sold in the Seeds and Genomics segment primarily represents field growing, plant processing and distribution costs. Cost of goods sold decreased $54 million to $1,185 million in the third quarter 2014 compared to $1,239 million in the third quarter 2013. The decrease was primarily the result of lower volumes and lower costs in the corn seed and trait business in the United States offset by increased volumes in the soybean seed and trait business in the United States. Gross profit for the Seeds and Genomics segment increased $40 million in the third quarter of fiscal year 2014 compared to the third quarter of fiscal year 2013. Gross profit as a percent of net sales for the segment increased 2 percentage points to 61 percent in the third quarter of 2014 compared to the third quarter of 2013. Gross profit for soybean seed and traits increased 25 percent due to the increase in sales volume and trait mix in the United States discussed above. Gross profit for corn seed and traits decreased by 13 percent compared to the 16 percent decrease in net sales due to lower volumes and lower cost of goods in the United States. 40 -------------------------------------------------------------------------------- Table of Contents MONSANTO COMPANY THIRD QUARTER 2014 FORM 10-Q Seeds and Genomics Financial Performance - First Nine Months Fiscal Year 2014 Net Sales for the Seed and Genomics segment increased $209 million in the first nine months of fiscal year 2014 compared to the first nine months of fiscal year 2013. The net sales increase of $337 million in soybean seed and traits was driven by increased licensed trait revenue, volume growth and improved germplasm and trait mix in the United States and the launch of Intacta RR2 PRO, primarily in Brazil. The net sales decrease of $207 million in corn seed and traits was primarily driven by lower volumes in the United States and Latin America and unfavorable foreign currency changes, offset by increases in pricing in the United States and volume growth in Europe. Net sales in all other crop seeds and traits increased by $96 million primarily due to the recent BioAg Alliance with Novozymes. Cost of goods sold in the Seeds and Genomics segment primarily represents field growing, plant processing and distribution costs. Cost of goods sold decreased $105 million, or 3 percent, to $3,511 million in the first nine months of 2014 compared to $3,616 million in the first nine months of 2013. The decrease was primarily the result of lower costs in the corn seed and traits business due to lower volumes in the United States and Latin America and lower unit costs in the United States. Gross profit for the Seeds and Genomics segment increased $314 million in the first nine months of fiscal year 2014 compared to the first nine months of fiscal year 2013. Gross profit as a percent of net sales for the segment increased 2 percentage points to 63 percent in the first nine months of fiscal year 2014 compared to the first nine months of fiscal year 2013. Gross profit for soybean seed and traits increased 32 percent, compared to the 22 percent increase in net sales, primarily due to the increase in trait revenue in the United States and Brazil. Gross profit for corn seed and traits increased 1 percent compared to the 3 percent decrease in net sales primarily due to lower costs in the United States. AGRICULTURAL PRODUCTIVITY SEGMENT Three Months Ended Nine Months Ended (Dollars in millions) May 31, 2014 May 31, 2013 Change May 31, 2014 May 31, 2013 Change Net Sales Agricultural productivity $ 1,210$ 1,194 1 % $ 3,861$ 3,504 10 % Total Net Sales $ 1,210$ 1,194 1 % $ 3,861$ 3,504 10 % Gross Profit Agricultural productivity $ 476 $ 447 6 % $ 1,488$ 1,190 25 % Total Gross Profit $ 476 $ 447 6 % $ 1,488$ 1,190 25 % EBIT(1) $ 313 $ 284 10 % $ 1,071 $ 810 32 %



(1) EBIT is defined as earnings before interest and taxes. Interest and taxes

are recorded on a total company basis. We do not record these items at the

segment level. See Note 21 - Segment Information - and the "Overview - Non-GAAP Financial Measures" section of MD&A for further details. Agricultural Productivity Financial Performance - Third Quarter Fiscal Year 2014 Net sales in our Agricultural Productivity segment increased $16 million in the third quarter of 2014 from the third quarter of 2013 primarily due to increased sales of Roundup and other glyphosate-based herbicides in Latin America and Europe during the three-month period. This improvement was due to an increase in the average net selling price of Roundup and other glyphosate-based herbicides partially offset by the lower sales volume of Roundup and other glyphosate-based herbicides and lawn and garden herbicides. Sales volumes of Roundup and other glyphosate-based herbicides declined in our global supply business in the United States. Sales volumes of our lawn and garden herbicides decreased due to a decline in weather conditions in the United States compared to the third quarter of fiscal year 2013. Cost of goods sold in the Agricultural Productivity segment primarily represents material, conversion and distribution costs. Cost of goods sold decreased $13 million, or 2 percent, in the third quarter of 2014 to $734 million compared to $747 million in the third quarter of 2013. Roundup and other glyphosate-based herbicides cost of goods sold declined from the lower sales volume of our Roundup and other glyphosate-based herbicides partially offset by higher priced raw materials when compared to the third quarter of 2013. The net sales and cost of goods sold discussed above resulted in $29 million higher gross profit in the third quarter of 2014 compared to the third quarter of 2013. Gross profit as a percent of net sales for the Agricultural Productivity segment increased 2 percentage points to 39 percent in 2014 primarily due to the increased average net selling price discussed above. 41 -------------------------------------------------------------------------------- Table of Contents MONSANTO COMPANY THIRD QUARTER 2014 FORM 10-Q Agricultural Productivity Financial Performance - First Nine Months Fiscal Year 2014 Net sales in our Agricultural Productivity segment increased $357 million in the nine-month period primarily due to increased sales of Roundup and other glyphosate-based herbicides in the United States, Latin America and Europe. This improvement was due to an increase in the average net selling price of Roundup and other glyphosate-based herbicides. The average net selling price for Roundup and other glyphosate-based herbicides increased as sales shifted to higher priced branded products in the first nine months of fiscal year 2014 compared to the first nine months of fiscal year 2013. Cost of goods sold in the Agricultural Productivity segment primarily represents material, conversion and distribution costs. Cost of goods sold increased $59 million, or 3 percent, in the first nine months of 2014 to $2,373 million compared to $2,314 million in the first nine months of 2013. Roundup and other glyphosate-based herbicides cost of goods sold increased as fiscal year 2014 sales shifted to branded products, which are more costly to produce. In addition, the cost of goods sold for Roundup and other glyphosate-based herbicides increased from higher priced raw materials when compared to the first nine months of 2013. These cost increases were partially offset by the lower sales volume of Roundup and other glyphosate-based herbicides in our global supply business in the United States when compared to the first nine months of 2013. The net sales and cost of goods sold discussed above resulted in $298 million higher gross profit in the first nine months of 2014. Gross profit as a percent of net sales for the Agricultural Productivity segment increased 5 percentage points to 39 percent in 2014 primarily due to the increased average net selling price discussed above. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES



Working Capital and Financial Condition

As of As of Aug. 31, (Dollars in millions, except current ratio) May 31, 2014 May 31, 2013 2013 Cash and Cash Equivalents(1) $ 1,898$ 2,921 $ 3,668 Trade Receivables, Net(1) 4,229 3,610 1,715 Inventory, Net 3,552 2,884 2,947 Other Current Assets(2) 1,558 1,726 1,747 Total Current Assets $ 11,237$ 11,141$ 10,077 Short-Term Debt, including current portion of long-term debt $ 162 $ 169 $ 51 Accounts Payable 780 745 995 Accrued Liabilities(3) 2,989 2,900 3,290 Total Current Liabilities $ 3,931$ 3,814 $ 4,336 Working Capital(4) $ 7,306$ 7,327 $ 5,741 Current Ratio(4) 2.86:1 2.92:1 2.32:1



(1) May include restrictions as a result of variable interest entities. See the

Statements of Consolidated Financial Position and Note 5 - Variable Interest Entities - for more information. (2) Includes short-term investments, miscellaneous receivables, deferred tax assets and other current assets.



(3) Includes income taxes payable, accrued compensation and benefits, accrued

marketing programs, deferred revenues, grower production accruals,

dividends payable, customer payable and miscellaneous short-term accruals.

(4) Working capital is total current assets less total current liabilities;

current ratio represents total current assets divided by total current

liabilities.

May 31, 2014, compared with Aug. 31, 2013: Working capital increased $1,565 million, or 27 percent, between Aug. 31, 2013, and May 31, 2014, primarily because of the following factors: Trade receivables, net increased $2,514 million primarily due to normal

ongoing sales activity because of the seasonality of our business and the

timing of sales of receivables related to customer financing programs.

Inventory, net increased $605 million between respective periods primarily

because of a higher production plan for corn seeds compared to lower sales

volume, rebuilding corn and soybean seed inventory following the drought

in fiscal year 2013, and increased soybean seed inventory due to the

launch of Intacta RR2 PRO.

Accounts payable decreased $215 million due to timing of payments.

Accrued liabilities decreased $301 million between respective periods due

to the following fluctuations:

Dividends payable decreased $227 million due to the timing of dividend declarations and payments.

42 -------------------------------------------------------------------------------- Table of Contents MONSANTO COMPANY THIRD QUARTER 2014 FORM 10-Q Deferred revenues decreased $190 million between respective periods primarily because of seasonality and collections in crop protection that we have yet to deliver. Accrued marketing programs decreased $140 million between respective periods primarily because of the seasonality of our business and the timing of payouts. Accrued compensation and benefits decreased $85 million due to the payment of annual employee incentive awards during the first quarter of fiscal year 2014, offset by current year incentive accruals. These decreases in accrued liabilities were offset primarily by the following increase: Income taxes payable increased $309 million due to the seasonality of our U.S. business and timing of tax payments. These increases to working capital between May 31, 2014, and Aug. 31, 2013, were partially offset by the following factors: Cash and cash equivalents decreased $1,770 million between respective



periods primarily because of cash used for the upfront payment to

Novozymes for the BioAg Alliance, the increase in treasury stock purchases

and dividend payments, and increased capital expenditures.

Other current assets decreased $189 million between respective periods due

to the following factor:

Short-term investments decreased $254 million due to less



commercial

paper investment given our recent strategic investment



activity and

funding of operations. May 31, 2014, compared with May 31, 2013: Working capital decreased $21 million between May 31, 2013, and May 31, 2014, primarily because of the following factors: Cash and cash equivalents decreased $1,023 million between respective periods primarily due to the upfront payment to Novozymes for the BioAg Alliance, increased treasury stock purchases and dividend payments, and increased capital expenditures.



Other Assets decreased $168 million between respective periods primarily

due to the following fluctuation:

Short-term investments decreased $143 million due to less



commercial

paper investment given our recent strategic investment



activity and

funding of operations. These decreases to working capital between May 31, 2014, and May 31, 2013, were offset by the following factors: Trade receivables, net increased $619 million due to increased sales activity and the timing of sales of receivables related to customer financing programs.



Inventory, net increased $668 million primarily because of a higher

production plan for corn seeds compared to lower sales volume, rebuilding

corn and soybean seed inventory following the drought in fiscal year 2013,

and increased soybean seed inventory due to the launch of Intacta RR2 PRO.

Customer Financing Programs: We participate in various customer financing programs in an effort to reduce our receivable risk and to reduce our reliance on commercial paper borrowings. As of May 31, 2014, the programs had $15 million in outstanding balances and we received $40 million of proceeds during the nine-month period under these programs. Our future maximum payout under the programs, including our responsibility for our guarantees with lenders, was $72 million as of May 31, 2014. See Note 4 - Customer Financing Programs - for further discussion of these programs. Cash Flow Nine Months Ended (Dollars in millions) May 31, 2014 May 31, 2013 Net Cash Provided by Operating Activities $ 371$ 786 Net Cash Required by Investing Activities (1,734 ) (387 ) Free Cash Flow(1) (1,363 ) 399 Net Cash Required by Financing Activities (420 ) (739 ) Effect of Exchange Rate Changes on Cash and Cash Equivalents 13 (22 ) Net Decrease in Cash and Cash Equivalents (1,770 ) (362 ) Cash and Cash Equivalents at Beginning of Period 3,668



3,283

Cash and Cash Equivalents at End of Period $ 1,898$ 2,921 43

-------------------------------------------------------------------------------- Table of Contents MONSANTO COMPANY THIRD QUARTER 2014 FORM 10-Q (1) Free cash flow represents the total of net cash provided or required by operating activities and provided or required by investing activities (see the "Non-GAAP Financial Measures" section in MD&A for a further discussion). Operating: The decrease in cash provided by continuing operations in the first nine months of 2014 compared to the first nine months of 2013 was primarily due to working capital changes, offset by an increase in net income for the first nine months of 2014 compared to the first nine months of 2013. Investing: The increase in cash required by investing activities in the first nine months of 2014 compared to the first nine months of 2013 was primarily due to the acquisition of The Climate Corporation, our collaboration with Novozymes and an increase in capital expenditures, as detailed below. Financing: The decrease in cash required by financing activities in the first nine months of 2014 compared to the first nine months of 2013 was primarily due to the $1 billion debt issuance that occurred in November 2013, as discussed below, offset by increased treasury stock purchases, increased dividends, and a reduction in short-term borrowings due to higher borrowings in the prior year to support ex-U.S. operations. Capital Resources and Liquidity As of As of Aug. 31, (Dollars in millions, except debt-to-capital ratio) May 31, 2014 May 31, 2013 2013 Short-Term Debt $ 162$ 169 $ 51 Long-Term Debt 3,049 2,054 2,061 Total Monsanto Company Shareowners' Equity 14,662 13,869 12,559 Debt-to-Capital Ratio(1) 18 % 14 % 14 %



(1) Debt-to-Capital ratio represents short-term and long-term debt divided by

total Monsanto Company shareowners' equity, short-term and long-term debt.

A major source of our liquidity is operating cash flows, which can be derived from net income. This cash-generating capability and access to long-term investment grade debt financing markets provides us with the financial flexibility we need to meet operating, investing and financing needs. We believe our sources of liquidity will be sufficient to sustain operations and to finance anticipated investments. To the extent that cash provided by operating activities is not sufficient to fund our cash needs, we believe short-term commercial paper borrowings can be used to finance these requirements. We had no commercial paper borrowings outstanding at May 31, 2014. On June 25, 2014, Monsanto announced a two year $10 billion share repurchase program that is in addition to the remaining $1.1 billion share repurchase authorization. We expect to incur significant additional long-term and short-term debt, in addition to our cash resources, to fund the share repurchases. We have a $2 billion credit facility agreement with a group of banks that provides a senior unsecured revolving credit facility through April 1, 2016. As of May 31, 2014, we did not have any borrowings under this credit facility and we were in compliance with all debt covenants. In November 2013, we issued $1 billion senior notes with a group of banks, primarily to fund the acquisition of The Climate Corporation, as discussed below, and for general business purposes. Our debt-to-capital ratio increased 4 percentage points compared with the May 31, 2013 and Aug. 31, 2013 ratios, primarily because of the debt issuance, as discussed above, offset by the increase in shareowners' equity as a result of earnings. We held cash and cash equivalents and short-term investments of $1,898 million and $3,922 million at May 31, 2014, and Aug. 31, 2013, respectively, of which $1,180 million and $2,319 million was held by foreign entities, respectively. Our intent is to indefinitely reinvest the approximately $3.3 billion of undistributed earnings of our foreign operations that existed as of August 31, 2013. If needed, we would be able to access funds equivalent to the amount of existing foreign cash, cash equivalents and short-term investments without incurring any income taxes or remittance taxes. 44 -------------------------------------------------------------------------------- Table of Contents MONSANTO COMPANY THIRD QUARTER 2014 FORM 10-Q Dividends: In the first nine months of fiscal year 2014, we declared the following dividends: To Shareowners of Record as



Quarter Ending Declaration Date Dividend Payable Date of:

May 31, 2014June 6, 201443 centsJuly 25, 2014July 3, 2014

Feb. 28, 2014Jan. 28, 201443 centsApril 25, 2014April 4, 2014

Feb. 28, 2014Dec. 9, 201343 centsJan. 31, 2014Jan. 10, 2014

Capital Expenditures: We expect fiscal year 2014 capital expenditures to be in the range of $1 billion to $1.2 billion compared with $741 million in fiscal year 2013. The primary driver of this increase compared with 2013 is expected global seed manufacturing expansions and additional investment in one of our technology research facilities. 2014 Collaboration: In February 2014, we entered into a collaborative agreement with Novozymes to launch the BioAg Alliance. The BioAg Alliance will focus on the next wave of microbial solutions by bringing together Novozymes' capabilities for discovering, developing and producing microbial solutions with Monsanto's discovery programs, and advanced development, testing and commercial capabilities. Value from commercialization will be shared 50-50 between both companies. Monsanto paid Novozymes an aggregate upfront cash payment of $300 million for recognition of Novozymes ongoing business and capabilities in microbials and for Novozymes' ability to supply alliance products. 2014 Acquisitions: In November 2013, Monsanto acquired 100 percent of the outstanding stock of The Climate Corporation, a San Francisco, California based company. The Climate Corporation is a leading data analytics company with core capabilities around hyper-local weather monitoring, weather simulation and agronomic modeling which has allowed them to develop risk management tools and agronomic decision support tools for growers. The acquisition combined The Climate Corporation's expertise in agriculture risk-management with Monsanto's R&D capabilities, and is expected to further enable farmers to significantly improve productivity and better manage risk from variables that could limit agriculture production. The total fair value of the acquisition was $932 million and the total cash paid for the acquisition was $917 million (net of cash acquired). The fair value was primarily allocated to goodwill and intangibles. The primary item that generated goodwill was the premium paid by the company for the right to control the acquired business and technology. 2013 Acquisitions: In August 2013, Monsanto acquired certain assets and manufacturing capabilities of Dieckmann GmbH & Co.KG, a business based in Germany which specializes in the breeding of oilseed rape and rye seeds. The acquisition, which qualifies as a business under the Business Combinations topic of the ASC, is expected to complement Monsanto's existing activities in the breeding, production and marketing of oilseed rape in Europe. The total fair value and cash paid for the acquisition was $30 million. The fair value of the acquisition was primarily allocated to goodwill and intangibles. In June 2013, Monsanto acquired 100 percent of the outstanding stock of GrassRoots Biotechnology, Inc., a business based in Durham, North Carolina, that is focused on gene expression and other agriculture technologies. The acquisition of the company, which qualifies as a business under the Business Combinations topic of the ASC, is expected to complement Monsanto's existing research platforms. The total fair value and cash paid for the acquisition was $15 million (net of cash acquired). The fair value of the acquisition was primarily allocated to goodwill and intangibles. In March 2013, Monsanto acquired substantially all of the assets of Rosetta Green Ltd., a business based in Israel which specializes in the identification and use of unique genes to guide key processes in major crops including corn, soybeans and cotton. The acquisition of the company, which qualifies as a business under the Business Combinations topic of the ASC, is expected to complement Monsanto's existing research platforms. The total fair value and cash paid for the acquisition was $35 million. The fair value of the acquisition was primarily allocated to goodwill and intangibles. In January 2013, Monsanto acquired select assets of Agradis, Inc., a business focused on developing sustainable agricultural solutions. The acquisition, which qualifies as a business under the Business Combinations topic of the ASC, is intended to support Monsanto's efforts to provide farmers with sustainable biological products to improve crop health and productivity. The total cash paid and the fair value of the acquisition was $85 million, and the purchase price was primarily allocated to goodwill and intangibles. 2014 Contractual Obligations: There have been no significant changes to the contractual obligations table as disclosed in our Annual Report on Form 10-K for the year ended Aug. 31, 2013. Off-Balance Sheet Arrangements 45 -------------------------------------------------------------------------------- Table of Contents MONSANTO COMPANY THIRD QUARTER 2014 FORM 10-Q Under our Separation Agreement with Pharmacia, we are required to indemnify Pharmacia for certain matters, such as environmental remediation obligations and litigation. To the extent we are currently managing any such matters, we evaluate them in the course of managing our own potential liabilities and establish reserves as appropriate. However, additional matters may arise in the future, and we may manage, settle or pay judgments or damages with respect to those matters in order to mitigate contingent liability and protect Pharmacia and Monsanto. See Note 20 - Commitments and Contingencies and Part II - Item 1 - Legal Proceedings - for further information. We have entered into various customer financing programs which are accounted for in accordance with the Transfers and Servicing topic of the ASC. See Note 4 - Customer Financing Programs - for further information. We are in the process of making a significant expansion of our Chesterfield, Missouri, facility. In December 2013, we executed the first of a series of incentive agreements with the County of St. Louis, Missouri. Under these agreements we have transferred our Chesterfield, Missouri, facility to St. Louis County and received Industrial Revenue Bonds in the amount of up to $470 million which enables us to reduce our cost of constructing and operating the expansion by reducing certain state and local tax expenditures. We immediately leased the facility back from the County of St. Louis and have an option to purchase the facility upon tendering the Industrial Revenue Bonds we received to the County. The payments due to us in relation to the Industrial Revenue Bonds and owed by us in relation to the lease of the facilities qualify for the right of offset under ASC 210, Balance Sheet, on our Statements of Consolidated Financial Position, and as a result we will not include the Industrial Revenue Bonds or the lease obligation on our Statements of Consolidated Financial Position as an asset or liability, respectively. The Chesterfield facilities and the expansion is being treated as being owned by Monsanto. It is anticipated that we will execute certain additional incentive agreements in the future with the State of Missouri in connection with such expansion to provide additional benefits. OUTLOOK We believe we have achieved an industry-leading position in the areas in which we compete in both of our business segments. However, the outlook for each part of our businesses is quite different. In the Seeds and Genomics segment, our seeds and traits business is expected to expand via our investment in new products. In the Agricultural Productivity segment, we expect to deliver competitive products in a more steady-state business. We believe that our company is positioned to deliver value-added products to growers enabling us to grow our gross profit in the future. We expect to see strong cash flow in the future, and we remain committed to returning value to shareowners through vehicles such as investments that expand the business, dividends and share repurchases. We will remain focused on cost and cash management, both to support the progress we have made in managing our investment in working capital and to realize the full earnings potential of our businesses. We plan to continue to seek additional external financing opportunities for our customers as a way to manage receivables for each of our segments. Outside of the United States, our businesses will continue to face additional challenges related to the risks inherent in operating in emerging markets. We will continue to consider, assess and address these developments and the challenges and issues they place on our businesses. We believe we have taken appropriate measures to manage our credit exposure, which has the potential to affect sales negatively in the near term. In addition, volatility in foreign currency exchange rates may negatively affect our profitability, the book value of our assets outside the United States, and our shareowners' equity. We continuously monitor the potential currency devaluation in Venezuela and currency volatility in Argentina and the potential impact on future periods. Seeds and Genomics Our capabilities in plant breeding and biotechnology research and development are generating a rich and balanced product pipeline that we expect will drive long-term growth. We plan to continue to invest in the areas of seeds, genomics, biotechnology, precision agriculture and biologicals and to invest in technology arrangements that have the potential to increase the efficiency and effectiveness of our R&D efforts. We believe that our seeds and traits businesses will have near-term growth opportunities through a combination of improved breeding and continued growth of stacked and second- and third-generation biotech traits. 46 -------------------------------------------------------------------------------- Table of Contents MONSANTO COMPANY THIRD QUARTER 2014 FORM 10-Q We expect advanced breeding techniques combined with improved production practices and capital investments will continue to contribute to improved germplasm quality and yields for our seed offerings, leading to increased global demand for both our branded germplasm and our licensed germplasm. We plan to improve the overall performance of our vegetable seeds business, which has a portfolio focused on 21 crops. While sales growth near term could be tempered in certain regions experiencing political or economic instability, the business integration into a global platform, along with a number of process improvements, are expected to continue to improve our ability to develop and deliver new innovative products to our customer base. We plan to continue to pursue strategic acquisitions in our seed businesses to grow our branded seed share, expand our germplasm library, and strengthen our global breeding programs. We expect to see continued competition in seeds and genomics. We believe we will have a competitive advantage because of our global breeding capabilities and our multiple-channel sales approach in the United States for corn and soybean seeds. Commercialization of second- and third-generation traits and the stacking of multiple traits in corn, soy and cotton are expected to increase penetration in approved markets, particularly as we continue to price our traits in line with the value growers have experienced. We experienced an increase in competition in biotechnology as more competitors launched traits in the United States and internationally. Acquisitions may also present mid-to-longer term opportunities to increase penetration of our traits. In Brazil, we expect to continue to operate our business model of collecting on the sale of certified seeds, a point-of-delivery payment system (Roundup Ready soybeans and Intacta RR2 PRO soybeans) and our indemnification collection system (Bollgard cotton), to capture value on all of our Roundup Ready soybeans and Bollgard cotton crops grown there. Following an adverse ruling from a panel of five judges in the Brazilian Superior Court of Justice denying our term correction for the first generation Roundup Ready patent term to 2014, we continue to defer collection of royalties for first generation Roundup Ready soybeans in Brazil until a final decision is reached by the courts. Growers can agree to gain royalty-free use of first generation Roundup Ready for the 2013-2014 seasons in exchange for a waiver of any claim for refunds for past payments by signing a new Grower License Agreement with a reciprocal release governing Monsanto's technology. Almost all of the major grower unions in Mato Grosso (a key soybean state in Brazil) have committed to promote the new Grower License Agreements with their membership. The Supreme Court of Brazil has granted certiorari of the patent term correction case. Longer term, income is expected to grow in Brazil as farmers choose to plant more of our approved traits in soybeans, corn and cotton. The agricultural economy in Brazil could be impacted by global commodity prices, particularly for corn and soybeans. We continue to maintain our strict credit policy, expand our grain-based collection system and focus on cash collection and sales, as part of a continuous effort to manage our risk in Brazil against such volatility. Our international traits businesses, in particular, probably will continue to face unpredictable regulatory environments that may be highly politicized. We operate in volatile, and often difficult, economic and political environments. Growth in India's cotton germplasm and traits business continues to be impacted by government controlled pricing and uncertainties in the regulatory approval process for new trait introductions. Efforts to secure an orderly system in Argentina to support the introduction of new technology products are underway. To achieve this, we are pursuing grower and grain handler agreements to ensure we will be compensated for providing the technology. The majority of grain handlers have enrolled in the point of delivery system and we are selling Intacta RR2 PRO in Argentina in this dual-path business model. Intacta RR2 PRO technology has been fully approved by Argentina and export markets. We intend to broaden our commercial launch in Argentina to cover the main production areas. We also intend to finalize the last steps of the business model approach to enable farmer payments on new and legally saved seed. We do not plan to collect on first generation Roundup Ready soybeans in Argentina. 47 -------------------------------------------------------------------------------- Table of Contents MONSANTO COMPANY THIRD QUARTER 2014 FORM 10-Q In May 2013, the USDA announced an investigation into alleged glyphosate-resistant volunteer wheat reported on a single field on an Oregon farm, and we are cooperating in the investigation. The USDA noted that glyphosate-tolerant wheat does not present a public health or food safety concern as the FDA completed its assessment of the product in 2004. The consultative process at the FDA was completed and the agency concluded that this product is as safe as non-GM wheat currently on the market. Initial development of glyphosate-tolerant wheat was discontinued in 2005 under stringent stewardship procedures which were in compliance with USDA regulations. The USDA has reported that there is no indication that the genetically modified wheat product is found in U.S. wheat supplied to domestic or export markets. The USDA's investigation remains ongoing and the agency has indicated that civil and criminal penalties could be imposed if circumstances warranted. Lawsuits which assert numerous legal claims have been filed against the company and have been consolidated in the Federal District Court of Kansas. Monsanto properly discontinued the development of the glyphosate-tolerant wheat event in 2005, has meritorious legal arguments against liability and will vigorously represent its interests in this matter. Agricultural Productivity Our Agricultural Productivity businesses operate in markets that are competitive. Gross profit and cash flow levels will fluctuate in the future based on global business dynamics including market supply, demand and manufacturing capacity. We expect to maintain our brand prices at a slight premium over generic products and we believe our Roundup herbicide business will continue to be a sustainable source of cash and gross profit. We have oriented the focus of Monsanto's crop protection business to strategically support Monsanto's Roundup Ready crops through our weed management platform that delivers weed control offerings for farmers. In addition, we expect our lawn-and-garden business will continue to be a solid contributor to our Agricultural Productivity segment. Global glyphosate producers have the capacity to supply the market, but global dynamics including demand, environmental regulation compliance and raw material availability can cause fluctuation in supply and the price of those generic products. We expect the fluctuation in global capacity will impact the selling price and margin of Roundup brands and our third party sourcing opportunities. The staff of the SEC is conducting an investigation of financial reporting associated with our customer incentive programs for glyphosate products for the fiscal years 2009 and 2010, and we have received subpoenas in connection therewith. It is not reasonably possible to assess the outcome of the investigation at this time, but potential outcomes could include the filing of an enforcement proceeding and the imposition of civil penalties as well as non-monetary remedies, which may require the Company to incur future costs. We continue cooperating with the investigation. Other Information As discussed in Note 20 - Commitments and Contingencies - and Part II - Item 1 - Legal Proceedings, Monsanto is involved in a number of lawsuits and claims relating to a variety of issues. Many of these lawsuits relate to intellectual property disputes. We expect that such disputes will continue to occur as the agricultural biotechnology industry evolves. Third parties, including non-governmental organizations, have challenged the validity or enforceability of patents issued to the company regarding our biotechnology products. For additional information related to the outlook for Monsanto, see "Caution Regarding Forward-Looking Statements" at the beginning of this Report on Form 10-Q, Part II - Item 1A - Risk Factors below and Part I - Item 1A of our Report on Form 10-K for the fiscal year ended Aug. 31, 2013. CRITICAL ACCOUNTING POLICIES AND ESTIMATES In preparing our financial statements, we must select and apply various accounting policies. Our most significant policies are described in Part II - Item 8 - Note 2 - Significant Accounting Policies - to the consolidated financial statements contained in our Report on Form 10-K for the fiscal year ended Aug. 31, 2013. In order to apply our accounting policies, we often need to make estimates based on judgments about future events. In making such estimates, we rely on historical experience, market and other conditions, and on assumptions that we believe to be reasonable. However, the estimation process is by its nature uncertain given that estimates depend on events over which we may not have control. If market and other conditions change from those that we anticipate, our financial condition, results of operations or liquidity may be affected materially. In addition, if our assumptions change, we may need to revise our estimates or take other corrective actions, either of which may have a material effect on our financial condition, results of operations or liquidity. The estimates that have a higher degree of inherent uncertainty and require our most significant judgments are outlined in Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our Report on Form 10-K for fiscal year ended Aug. 31, 2013. Had we used estimates different from any of those contained in such Report on Form 10-K, our financial condition, profitability or liquidity for the current period could have been materially different from those presented in this Form 10-Q. 48



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