OVERVIEW

Background
Monsanto Company, along with its subsidiaries, is a leading global provider of agricultural products for farmers. Our seeds, biotechnology trait products, and herbicides provide farmers with solutions that 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. We also provide other seed companies with genetic material and biotechnology traits for their seed brands. Through our Agricultural Productivity segment, we manufacture ROUNDUP brand herbicides and other herbicides and provide lawn-and-garden herbicide products for the residential market.
In the fourth quarter of 2008, we entered into an agreement to divest the Dairy business. This transaction was consummated on Oct. 1, 2008. As a result, financial data for this business has been presented as discontinued operations and has been recast and prepared in compliance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Accordingly, the Statements of Consolidated Operations have been conformed to this presentation. The Dairy business was previously reported as part of the Agricultural Productivity segment. See Note
21 - Discontinued Operations - for further details.
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, 2008. Financial information for the first six months of fiscal year 2009 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 (loss) per share" and "per share" mean diluted earnings (loss) per share. Unless otherwise noted, all amounts and analyses are based on continuing operations. Unless otherwise indicated, trademarks owned or licensed by Monsanto or its subsidiaries are shown in all capital letters. 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 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, cash flows, financial position, or comprehensive income, as determined in accordance with U.S. GAAP.
EBIT is defined as earnings (loss) before interest and taxes. Earnings is intended to mean net income as presented in the Statements of Consolidated Operations under GAAP. EBIT is the primary 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 19 - Segment Information - for a reconciliation of EBIT to net income for the six months ended Feb. 28, 2009, and Feb. 29, 2008.

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 provided or required by investing activities. We believe that free cash flow is useful to investors and management as a measure of the ability of our business to generate cash. This cash can be used to meet business needs and obligations, 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 $308 million in the three-month comparison and $908 million in the six month comparison. In second quarter 2009, net sales improved primarily as a result of increased sales of corn and soybean seed and traits in the United States partially offset by a decrease in sales of ROUNDUP and other glyphosate-based herbicides in most regions. We recorded an after-tax charge of $107 million ($162 million pretax), or $0.19 per share, associated with the acquisition of Aly Participacoes Ltda. (Aly). In first half 2009, net sales increased primarily as a result of increased sales of corn and soybean seed and traits in the United States combined with higher sales of ROUNDUP and other glyphosate-based herbicides in Brazil. Net income in first half 2009 was $2.96 per share, compared with $2.48 per share in first half 2008.
Financial Condition, Liquidity, and Capital Resources - In first half 2009, net cash provided by operating activities was $1,495 million, compared with $1,877 million in the prior-year first half. This decrease is primarily due to the increase in inventory during the first half of 2009 which was partially offset by higher net income. Net cash required by investing activities was $359 million in first half 2009 compared to $404 million in first half 2008 as higher spending on capital and acquisitions was more than offset by proceeds from the sale of the Dairy business. Free cash flow was $1,136 million in first half of 2009 compared with $1,473 million in the prior-year first half. Outlook - We plan to continue to 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 yields and improving the ways they can produce food, fiber and feed. We use the tools of modern biology to make seeds easier to grow, to allow farmers to do more with fewer resources, and to produce healthier foods for consumers. Our current research and development (R&D) strategy and commercial priorities are focused on bringing our farmer customers second-generation traits, on delivering multiple solutions in one seed ("stacking"), 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, and on continued patent and legal rights to offer our products.
We plan to improve and to grow our vegetable seeds business. We have applied our molecular breeding and marker capabilities to our library of vegetable germplasm. In the future, we will continue to focus on accelerating the potential growth of these new businesses and executing our business plans. ROUNDUP herbicides remain the market leader. We have experienced increased demand in recent years and have increased our average selling prices. We are implementing strategies to meet the future demand for ROUNDUP. We are focused on managing the costs associated with our agricultural chemistry business as that sector matures globally. Our selective acetochlor herbicide products face increasing competitive pressures and a declining market, in part because of the rapid penetration of ROUNDUP READY corn in the United States.
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,

                 MONSANTO COMPANY   SECOND QUARTER 2009 FORM 10-Q



RESULTS OF OPERATIONS



                                                       Three Months Ended,                                Six Months Ended,
                                             Feb. 28,        Feb. 29,                          Feb. 28,        Feb. 29,
                                               2009            2008         % Change             2009            2008         % Change

Net Sales                                   $    4,035      $    3,727              8 %       $    6,684      $    5,776             16 %
Gross Profit                                     2,521           2,211             14 %            4,071           3,250             25 %
Operating Expenses:
Selling, general and administrative
expenses                                           522             529             (1 )%           1,072             985              9 %
Research and development expenses                  265             219             21 %              517             418             24 %
Acquired in-process research and
development                                        162               -             NM                162               1             NM

Total Operating Expenses                           949             748             27 %            1,751           1,404             25 %

Income from Operations                           1,572           1,463              7 %            2,320           1,846             26 %
Interest expense                                    26              32            (19 )%              49              66            (26 )%
Interest income                                    (18 )           (38 )          (53 )%             (43 )           (70 )          (39 )%
Solutia-related income                               -            (204 )           NM                  -            (187 )           NM
Other expense - net                                 32               1             NM                 58               3             NM

Income from Continuing Operations Before
Income Taxes and Minority Interest               1,532           1,672             (8 )%           2,256           2,034             11 %
Income tax provision                               440             552            (20 )%             616             657             (6 )%
Minority interest expense (income)                   1              (1 )           NM                  3               6            (50 )%

Income from Continuing Operations                1,091           1,121             (3 )%           1,637           1,371             19 %
Discontinued Operations:
Income from operations of discontinued
businesses                                           1              11            (91 )%              19              19              -
Income tax provision                                 -               3             NM                  8               5             60 %

Income on Discontinued Operations                    1               8            (88 )%              11              14            (21 )%

Net Income                                  $    1,092      $    1,129             (3 )%      $    1,648      $    1,385             19 %

Diluted Earnings per Share:
Income from continuing operations           $     1.97      $     2.00             (2 )%      $     2.94      $     2.45             20 %
Income on discontinued operations                    -            0.02             NM               0.02            0.03            (33 )%

Net Income                                  $     1.97      $     2.02             (2 )%      $     2.96      $     2.48             19 %

NM = Not Meaningful

Effective Tax Rate (continuing
operations)                                         29 %            33 %                              27 %            32 %
Comparison as a Percent of Net Sales:
Gross profit                                        62 %            59 %                              61 %            56 %
Selling, general and administrative
expenses                                            13 %            14 %                              16 %            17 %
Research and development expenses
(excluding acquired IPR&D)                           7 %             6 %                               8 %             7 %
Total operating expenses                            24 %            20 %                              26 %            24 %
Income from continuing operations before
income taxes and minority interest                  38 %            45 %                              34 %            35 %
Net income                                          27 %            30 %                              25 %            24 %

Second Quarter Fiscal Year 2009

The following explanations discuss the significant components of our results of operations that affected the quarter-to-quarter comparison of our second quarter income from continuing operations:
Net sales increased 8 percent in second quarter 2009 from the same quarter a year ago. Our Seeds and Genomics segment net sales improved 20 percent, and our Agricultural Productivity segment net sales declined 16 percent. The following table presents the percentage changes in second quarter 2009 worldwide net sales by segment compared with net sales in the

prior-year quarter, including the effect volume, price, currency and acquisitions had on these percentage changes: