Products may be sold under different brand names in different countries.

COMPETITION

The global markets for our products are highly competitive. We expect competition to intensify with the continued development and commercialization of new technologies and products, including biotechnology traits.

We compete with numerous multinational companies globally and with hundreds of companies regionally. Most of our seed competitors are also licensees of our germplasm and/or biotechnology traits. In certain countries, we also compete with government-owned seed companies. Growers who save seed from one year to the next also affect competitive conditions. Product performance (in particular, crop yield), customer service, intellectual property and price are important elements of market success. In addition, distributor, retailer and grower relationships have been important in the United States and many other countries.

Our traits compete as a system with agricultural chemicals and, to lesser degree, traits developed by other companies. Other agrichemical and seed marketers produce chemical and seed products that compete with our Roundup Ready and insect-control systems. Competition for the discovery of new agricultural traits based on biotechnology and/or genomics is likely to come from major global agrichemical companies, state-funded programs and academic institutions. Enabling technologies may also come from academic researchers and an array of biotechnology research companies. The primary factors underlying the competitive success of traits are performance and commercial viability, timeliness of introduction, value, governmental approvals, public acceptance, and environmental characteristics.

Competitive success in crop protection products depends on price, product performance, the quality of solutions offered to growers, market coverage, and the service provided to distributors, retailers and growers. We have five to 10 major global competitors for our agricultural herbicide products. Competition from local or regional companies may also be significant.

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For additional information on competition for Roundup herbicide, see Item 7 under the headings: “MD&A — Outlook — Agricultural Productivity,” which is incorporated by reference herein.

Our lawn-and-garden herbicides compete on the basis of product performance. We have fewer than five significant national competitors and a larger number of regional competitors in the United States. We are the only supplier of bovine somatotropin in the United States. The largest market for our lawn-and-garden herbicides and our bovine somatotropin products is the United States.

DISTRIBUTION OF PRODUCTS; CUSTOMERS

We have a worldwide distribution and sales and marketing organization for our seeds and traits and crop protection operations. We market our branded germplasm and traits to growers through distributors, independent retailers and dealers, agricultural cooperatives and agents. We also license a broad package of our germplasm and trait technologies to seed companies that do business in the United States and certain international markets, which then market these products to growers.

We sell our crop protection products through distributors, independent retailers and dealers, agricultural cooperatives, and, in some cases outside the United States, directly to growers. We also sell certain of the intermediates of our crop protection products to other major agricultural chemical producers.

We sell and ship our Posilac bovine somatotropin directly to U.S. dairy farmers. Outside the United States, we rely on a single exclusive distributor for these products. We deliver our swine genetics products directly to swine producers, who pay for the use of the genetics in upfront fees and/or royalties.

We market our lawn-and-garden herbicide products through The Scotts Company (Scotts). For additional information, see Item 7, under the heading “MD&A - Agricultural Productivity Segment — Our Agreement with The Scotts Company,” which is incorporated herein by reference.

While no single customer (including affiliates) represents more than 10 percent of our consolidated net sales, our three largest U. S. agricultural distributors and their affiliates represented, in aggregate, 13 percent of our worldwide net sales and 25 percent of our U.S. net sales in the 12-month period ended Aug. 31, 2004. During this period, one major U.S. distributor and its affiliates represented approximately 12 percent of the net sales for our Agricultural Productivity segment, and approximately 17 percent of the net sales for our Seeds and Genomics segment.

EMPLOYEE RELATIONS

On Oct. 15, 2003, we announced plans for strategic actions that reduced the size of our global workforce by eight percent for a net reduction in work force of five percent in fiscal 2004. As of Aug. 31, 2004, Monsanto had approximately 12,600 employees worldwide. Relations between Monsanto and its employees are satisfactory.

ENVIRONMENTAL MATTERS

Our operations are subject to environmental laws and regulations in the jurisdictions in which we operate. Some of these laws restrict the amount and type of pollutants that can be released from our operations into the environment. Other laws, such as the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq. (Superfund), can impose liability for the entire cost of cleanup on any former or current site owners or operators or parties who sent waste to these sites, without regard to fault or the lawfulness of the original disposal activity. These laws and regulations may be amended from time to time and may become more stringent. We are dedicated to long-term environmental protection and compliance programs that reduce and monitor emissions of hazardous materials into the environment, as well as to the remediation of identified existing environmental concerns. Consistent with a consent order with the State of Idaho, we have embarked on a multiyear project to design and install state-of-the-art air emission control equipment at the P4 Production, LLC facility at Soda Springs, Idaho. P4 Production, LLC is 99 percent owned by, and is operated by, Monsanto. While the costs of our compliance with environmental laws and regulations cannot be predicted with certainty, such costs are not

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expected to have a material adverse effect on our earnings or competitive position. Because of our investment in the Soda Springs project, our capital expenditures for environmental control facilities should be higher than normal in the next few years. Current estimates indicate that total company-wide capital expenditures for environmental compliance will be approximately $25 million in fiscal year 2005 and $16 million in fiscal year 2006.

In addition to potential liability for our own manufacturing locations and off-site disposal and formulation facilities, under the terms of our Sept. 1, 2000, Separation Agreement with Pharmacia (Separation Agreement), we were required to indemnify Pharmacia for any liability it may have for environmental remediation or other environmental responsibilities primarily related to Pharmacia’s former agricultural or chemical businesses. This includes, but is not limited to, environmental liabilities that Solutia Inc. (Solutia), the former chemicals business of Pharmacia, assumed from Pharmacia in connection with its spinoff on Sept. 1, 1997, to the extent that Solutia fails to pay, perform or discharge those liabilities. It is reasonably possible that this indemnification could have a material adverse effect on our financial position, profitability and/or liquidity. For additional information relating to Solutia and related risks to Monsanto’s financial position, profitability and/or liquidity, see “Relationships Among Monsanto Company, Pharmacia Corporation, Pfizer Inc. and Solutia Inc.” in this section and Item 8 — Note 22 - Commitments and Contingencies.

For information regarding certain environmental proceedings, see Item 3 — Legal Proceedings. See information regarding remediation of waste disposal sites and reserves for remediation, appearing in Item 8 — Note 22, which is incorporated herein by reference.

INTERNATIONAL OPERATIONS

See information appearing in Item 7 under the heading “MD&A — Cautionary Statements: Risk Factors Regarding Forward-Looking Statements — Operations Outside the United States” and information appearing in Item 8 — Note 23 - Segment and Geographic Data, which is incorporated herein by reference. More than 45 percent of Monsanto’s sales, 37 percent of our Seeds and Genomics segment’s sales, and 51 percent of our Agricultural Productivity segment’s sales were made outside the United States during fiscal year 2004.

PATENTS, TRADEMARKS, LICENSES, FRANCHISES AND CONCESSIONS

Monsanto has a broad portfolio of patents in the United States and many foreign countries that provide intellectual property protection for its products and processes.

We routinely obtain patents and/or plant variety protection for our commercial varietal products, and for the parents of our commercial hybrid products. We also routinely obtain registration for our commercial products in registration countries, such as Plant Variety Protection Act Certificates in the United States, and equivalent plant breeders’ rights in other countries. Monsanto’s insect-protection traits (including YieldGard Corn Borer and YieldGard Corn Rootworm traits in corn seed and Bollgard trait in cotton seed) are protected by patents that extend until at least 2011. Based on patent applications filed in 2002 and 2001, it is anticipated that the Bollgard II insect-protection trait will be patent-protected in the United States, and in other areas in which patent protection is sought, through 2022. Monsanto’s herbicide tolerant products ( Roundup Ready traits in soybean, corn, canola and cotton seeds) are protected by U.S. patents that extend until at least 2014.

Patents protecting the active ingredient in Roundup herbicide expired in the United States in 2000, and have expired in all other countries. Monsanto has several patents on its glyphosate formulations and manufacturing processes in the United States and other countries, some of which extend beyond 2015. Posilac bovine somatotropin is protected by a United States patent that expires in 2008 and by corresponding patents in other countries, most of which expire in 2005. Other patents protect various aspects of bovine somatotropin manufacture in the United States and expire at varying dates ending March 2012; corresponding patents in other countries have varying terms.

Monsanto also holds licenses from other parties relating to certain products and processes. We have obtained various licenses in order to protect certain of our technologies used in the production of Roundup Ready seeds, and certain of our technologies relating to pipeline products, from claims of infringement of patents of others. These licenses last for the lifetimes of the applicable patents, after which no licenses will be required to use the respective patented technologies. Monsanto holds numerous licenses in connection with its genomics program, for example: a perpetual license to certain genomics

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technologies for use in the areas of plant agriculture and dairy cattle; perpetual licenses to patents expiring from 2018 to 2023 for classes of proprietary genes for the development of commercial traits in crops; perpetual licenses to functional characterizations of the company’s proprietary genes; and perpetual licenses to certain genomics sequences and certain genomics technologies. Monsanto has obtained perpetual licenses to chemicals used to make Harness and Maverick herbicides, and to manufacturing technology for Posilac bovine somatotropin. Monsanto also has a license to chemicals for its halosulfuron herbicides, including Permit, Manage and Sempra ; the license expires in 2005 and is not expected to be extended.

We own a considerable number of established trademarks in many countries under which we market our products. Monsanto owns trademark registrations and files trademark applications for the names and many of the designs used on its branded products. Important company trademarks include Roundup (for herbicide products), Roundup Ready, Bollgard and YieldGard (for traits), DEKALB and Asgrow (for agricultural seeds) and Posilac (for dairy productivity products).

P4 Production, LLC holds (directly or by assignment) numerous phosphate leases, which were issued on behalf of or granted by the United States, the State of Idaho and private parties. None of these leases taken individually is material, although the leases in the aggregate are significant because elemental phosphorus is a key raw material for the production of glyphosate-based herbicides. The phosphate leases have varying terms, with leases obtained from the United States being of indefinite duration subject to the modification of lease terms at 20-year intervals.

A considerable number of Monsanto’s patents and licenses are currently the subject of litigation; see Item 3 — Legal Proceedings.

PRINCIPAL EQUITY AFFILIATES

In September 1998, we entered into an agreement (as amended from time to time, the Renessen Agreement) to form the Renessen LLC joint venture (Renessen) with Cargill, Incorporated (Cargill). This joint venture combines our seed assets and technology capabilities with Cargill’s global grain processing, marketing and risk management infrastructure to develop and commercialize enhanced grain products in the processing and animal feed markets, and to increase returns on those products by greater participation in the value chain. Renessen began operations in January 1999. Cargill and we each have a 50 percent interest in Renessen. A governance board on which Cargill and we have equal representation manages Renessen. With respect to Renessen, Cargill and we: (1) have committed to make equal contributions to fund the Renessen business plan that Cargill and we review and approve annually; (2) have granted Renessen a worldwide, fully paid-up, non-exclusive, non-royalty-bearing right and license to Cargill’s and our respective patents and other intellectual property needed for Renessen to pursue the approved business plan; (3) receive rights to use intellectual property developed by Renessen in other specified areas; and (4) have the opportunity to provide specified services to Renessen on a cost-paid or cost-plus-margin basis. Renessen’s products under development include grains designed to enhance processing efficiency and grain products designed to deliver better nutrition in animal feed. Pursuant to the Renessen Agreement, we perform the bulk of Renessen’s upstream research and development (R&D) activities. For the year ended Aug. 31, 2004, we charged Renessen $45 million for R&D expenses. The expenses that were charged to Renessen are not included in the $511 million of research and development expenses reflected in our Statement of Consolidated Operations for the year ended Aug. 31, 2004. Our equity affiliate expense related to Renessen was $36 million in the year ended Aug. 31, 2004, $26 million in the eight-month transition period ended Aug. 31, 2003, and $41 million in each of the 12-month periods ended Dec. 31, 2002 and 2001, all of which is reflected in other expense — net in our Statement of Consolidated Operations. See information regarding Renessen in Item 8 — Note 25 — Equity Affiliates.

RAW MATERIALS AND ENERGY RESOURCES

We are a significant purchaser of basic and intermediate raw materials. Our major raw materials and energy requirements are typically purchased through long-term contracts. We do not depend on any one outside supplier for a significant amount of any raw material requirements, but a few major suppliers provide us certain important raw materials. The markets for many key raw materials are extremely tight and forecasted to remain so for the next few years. Although some additional capacity does exist, pricing is substantially higher than under current contracts. Energy is available as required, but pricing is subject to market fluctuations from time to time.

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We produce directly, or contract with third-party growers for the production of, corn seed, soybean seed, oilseed rape varieties, wheat seed, sunflower seed and sorghum seed in growing locations throughout the world. The availability and cost of seed primarily depends on seed yields, weather conditions, grower contract terms, commodity prices and global supply and demand. We manage commodity price fluctuations through the use of futures contracts and other hedging mechanisms. We attempt to minimize the risks related to weather by producing seed at multiple growing locations, where practical.

Different catalysts are used in various intermediate steps in the production of glyphosate. These are produced by two major catalyst manufacturers using our proprietary technology at various sites globally. These suppliers have additional capacity at other manufacturing locations. We purchase most of our global supply of elemental phosphorus, a key raw material for the production of Roundup herbicide, from P4 Production, LLC.

We are seeking U.S. Food and Drug Administration (FDA) approval to manufacture the finished dose formulation of Posilac bovine somatotropin at our facility in Augusta, Georgia. Sandoz GmbH, a wholly owned subsidiary of Novartis, manufactures and is our sole supplier of the finished dose formulation until we receive such approval. In second quarter fiscal year 2004, we notified our customers that supplies of Posilac would be temporarily limited while Sandoz completes corrections and improvements at its facility in response to issues raised by the FDA. This limitation has temporarily reduced volumes of Posilac available for sale and required us to allocate available supplies. We expect the supply of Posilac to be limited well into 2005 with incremental increases in supply occurring over time. This allocation is expected to have a material adverse effect on Posilac revenues as long as it continues. For additional information regarding our Posilac supply, see Item 7 under the heading “MD&A - Agricultural Productivity Financial Performance for Fiscal Year 2004.”

RESEARCH AND DEVELOPMENT

Monsanto’s expenses for research and development were $511 million for the fiscal year 2004; $313 million for the eight-month transition period ended Aug. 31, 2003; and $506 million and $544 million for calendar years 2002 and 2001, respectively.

SEASONALITY AND WORKING CAPITAL

For information on seasonality and working capital practices, see information in Item 7, under the heading “MD&A — Financial Condition, Liquidity, and Capital Resources,” incorporated herein by reference.

RELATIONSHIPS AMONG MONSANTO COMPANY, PHARMACIA CORPORATION, PFIZER INC. AND SOLUTIA INC.

Prior to Sept. 1, 1997, a corporation that was then known as Monsanto Company (Former Monsanto) operated an agricultural products business (the Ag Business), a pharmaceuticals and nutrition business (the Pharmaceuticals Business) and a chemical products business (the Chemicals Business). Former Monsanto is today known as Pharmacia. Pharmacia is now a wholly owned subsidiary of Pfizer Inc. (Pfizer), which together with its subsidiaries operates the Pharmaceuticals Business. Our business consists of the operations, assets and liabilities that were previously the Ag Business. Solutia comprises the operations, assets and liabilities that were previously the Chemicals Business. The following table sets forth a chronology of events that resulted in the formation of Monsanto, Pharmacia and Solutia as three separate and distinct corporations, and provides a brief background on the relationships among these corporations.

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Mexico. The Seeds and Genomics segment also uses seed foundation and production facilities, breeding facilities, and genomics and other research laboratories at various locations.

The Agricultural Productivity segment has principal chemicals manufacturing facilities at the following locations: Alvin, Texas; Antwerp, Belgium; Augusta, Georgia; Camaçari, Brazil; Luling, Louisiana; Muscatine, Iowa; São Jose dos Campos, Brazil; Soda Springs, Idaho; Texas City, Texas; and Zarate, Argentina. We own most of these properties. However, we lease the land underlying the facilities that we own in Alvin, Texas, and in Texas City, Texas. In addition, we lease the manufacturing facility at Augusta, Georgia, with an option to buy, pursuant to an industrial revenue bond financing.

Our principal properties are suitable and adequate for their use. Use of these facilities may vary with seasonal, economic and other business conditions, but none of the principal properties is substantially idle, with the exception of the manufacturing facility at Texas City, Texas. This is one of the facilities that manufactures a key raw material for glyphosate herbicide and was built in order to use byproduct from a neighboring plant owned by another company. Monsanto is not currently receiving the byproduct but has the option to receive the byproduct and re-start its plant. The facilities generally have sufficient capacity for existing needs and expected near-term growth, and expansion projects are undertaken as necessary to meet future needs. In certain instances, we have granted leases on portions of sites not required for current operations.

ITEM 3. LEGAL PROCEEDINGS

This section of the report on Form 10-K provides information regarding material legal proceedings that we are defending or prosecuting. These include proceedings to which we are party in our own name, proceedings to which Pharmacia is a party but that we manage and for which we are responsible, and proceedings that we are managing related to Solutia’s Assumed Liabilities (as defined below). We are also defending or prosecuting other legal proceedings, not described in this section, which arise in the ordinary course of our business.

Under the Separation Agreement, we assumed responsibility for, among other things described below, legal proceedings primarily related to the agricultural business that Pharmacia transferred to us. As required by the Separation Agreement, we will indemnify Pharmacia for costs, expenses, judgments or settlements of, and will receive benefits from, any such legal proceedings.

Pursuant to the Separation Agreement, we were also required to indemnify Pharmacia for liabilities that Solutia assumed from Pharmacia under a Distribution Agreement entered into between those companies in connection with the spinoff of Solutia on Sept. 1, 1997, as amended (Distribution Agreement), to the extent that Solutia fails to pay, perform or discharge those liabilities. Those liabilities remain the present responsibility of Pharmacia and are referred to as “Solutia’s Assumed Liabilities.” Solutia’s Assumed Liabilities may include, among others, litigation, environmental remediation, and certain retiree liabilities relating to individuals who were employed by Pharmacia prior to the Solutia spinoff.

On Dec. 17, 2003, Solutia and 14 of its U.S. subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York (Bankruptcy Court). Solutia is seeking relief from paying certain liabilities, including some or all of Solutia’s Assumed Liabilities, and on Feb. 17, 2004, notified Pharmacia and Monsanto that it was disclaiming its obligations to defend pending or future litigation relating to Solutia’s Assumed Liabilities. We believe Solutia remains obligated to continue to defend such litigation unless and until discharged from such obligations by the Bankruptcy Court. However, in order to protect Pharmacia’s and our interests while that issue is resolved, we have assumed, on an interim basis, the management of that litigation for which Solutia has disclaimed responsibility and have advanced and expect to continue to advance funds for the defense, performance or disposition of these matters. To the extent additional such matters arise in the future, we may also assume management of those matters and advance funds for purposes of defense and resolution. We plan to pursue recovery of our expenses from Solutia in the Chapter 11 proceeding. For additional information, see Item 8 — Note 22 — Commitments and Contingencies and Item 1 — Relationships Among Monsanto Company, Pharmacia Corporation, Pfizer Inc. and Solutia Inc.

While the results of litigation cannot be predicted with certainty, we do not believe that the resolution of the proceedings that we are defending or prosecuting, excluding litigation relating to Solutia’s Assumed Liabilities, either individually or taken as a whole, will have a material adverse effect on our financial position, profitability and/or liquidity. As discussed in Item 8 - Note 22, it is reasonably possible that the resolution of Solutia’s Chapter 11 proceeding, including the allocation of responsibility related to Solutia’s Assumed Liabilities, could have a material adverse effect on our financial position,

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profitability and/or liquidity. We have meritorious legal arguments and will continue to represent our interests vigorously in all of the proceedings that we are defending or prosecuting, including those related to Solutia’s Assumed Liabilities.

Patent and Commercial Proceedings

Monsanto and Mycogen Plant Science, Inc. (Mycogen Plant Science), an affiliate of Dow AgroSciences LLC, have been involved in interference proceedings in the U.S. Patent and Trademark Office to determine the first party to invent certain technology related to synthetic Bt technology. Under U.S. law, patents are issued to the first to invent, not the first to file for a patent on, a subject invention. On Jan. 29, 2004, the Board of Patent Appeals determined that Monsanto scientists were the first to invent synthetic Bt genes for expression in plants. As a result of this decision, we expect that Monsanto’s scientists will receive a patent covering this technology. On March 29, 2004, Mycogen Plant Science filed with the U.S. District Court for the Southern District of Indiana an appeal in which it seeks to have the decision of the Board of Patent Appeals reversed.

On Dec. 4, 2000, Monsanto filed suit in the U.S. District Court for the Eastern District of Missouri for a declaratory judgment against Bayer CropScience AG, a subsidiary of Bayer AG (Bayer CropScience), and its affiliates that four patents, which had been assigned to Bayer CropScience by Plant Genetics Systems, N.V. and which involve claims to truncated Bt technology, were invalid and not infringed by MON810 in YieldGard corn. Bayer CropScience counterclaimed to request royalties for prior sales of YieldGard corn and injunctive relief. The District Court granted Monsanto’s motion for summary judgment and ordered Bayer CropScience to pay Monsanto’s attorneys’ fees and costs. Bayer CropScience appealed the District Court’s judgment to the U.S. Court of Appeals for the Federal Circuit, which on March 30, 2004, determined that possible contested issues of fact existed that made summary judgment inappropriate and reversed the District Court’s summary judgment decision. The award of Monsanto’s attorneys’ fees and costs was subsequently vacated. On June 22, 2004, Bayer CropScience dismissed with prejudice its claims on three of the four patents in dispute and agreed not to sue Monsanto, its affiliates or its sublicensees under those patents for any of Monsanto’s current commercial products. Monsanto intends to seek recovery from Bayer CropScience of its attorneys’ fees involved in defending against the dismissed claims and to assert defenses, including non-infringement and invalidity of the fourth and remaining patent in the litigation.

The following proceedings involve Syngenta AG (Syngenta) and its affiliates:

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     European corn borer-protected corn seed and foundation corn seed. Syngenta seeks an unspecified amount of damages and injunctive relief.

Following receipt of a patent relating to bovine growth hormone, on Feb. 17, 2004, the Regents of the University of California filed suit against Monsanto in U.S. District Court for the Northern District of California seeking damages for the alleged infringement of the patent by sales of our Posilac bovine somatotropin product.

On June 3, 1999, AgrEvo Environmental Health (n/k/a Aventis Environmental Science) filed a suit in the U.S. District Court for the Southern District of New York against The Scotts Company (Scotts) and Monsanto seeking damages and injunctive relief for alleged antitrust violations by Scotts and Monsanto and alleged tortious interference of contract by Monsanto. In May 1998, Scotts purchased a consumer herbicide business from AgrEvo Environmental Health (AgrEvo) that included a supply agreement for the active ingredient for the Finale® consumer herbicide. AgrEvo claims that Scotts’ subsequent agreement to become the exclusive sales and marketing agent for Monsanto’s Roundup lawn-and-garden business violated its agreement with AgrEvo and that Monsanto and Scotts agreed that Scotts would divest Finale® to a weaker competitor in connection with the Roundup deal. On Oct. 25, 2004, the court granted Monsanto summary judgment on the state law claims but denied the defendants’ motions for summary judgment on the antitrust claims. A trial is scheduled for Feb. 22, 2005.

Grower Lawsuits

Two purported class action lawsuits by farmers concerning our biotechnology trait products have been consolidated in the U.S. District Court for the Eastern District of Missouri. The suits were initially filed against the former Monsanto Company by two groups of farmers: one on Dec. 14, 1999, in the U.S. District Court for the District of Columbia, which complaint was amended in March 2001 to add Pioneer Hi-Bred International, Inc., Syngenta Seeds, Syngenta Crop Protection, and Bayer CropScience as defendants; and the other on Feb. 14, 2002, in the U.S. District Court for the Southern District of Illinois. The complaints included both tort and antitrust allegations. The tort claims included alleged violations of unspecified international laws through patent license agreements, alleged breaches of an implied warranty of merchantability, and alleged violations of unspecified consumer fraud and deceptive business practices laws, all in connection with the sale of genetically modified seed. The antitrust claims included allegations of violations of various antitrust laws, including allegations of a conspiracy among defendants to fix seed prices in the United States in violation of federal antitrust laws. Plaintiffs sought declaratory and injunctive relief in addition to antitrust, treble, compensatory and punitive damages, and attorneys’ fees. On Sept. 22, 2003, the District Court granted Monsanto’s motion for summary judgment on all tort claims and denied the plaintiffs’ motion to allow the tort claims to proceed as a class action. On Sept. 30, 2003, the District Court for the Eastern District of Missouri denied the plaintiffs’ motion to allow their antitrust claims to proceed as a class action. The plaintiffs appealed this decision, and on Sept. 13, 2004, the U.S. Court of Appeals for the Eighth Circuit heard oral argument on its review of the District Court’s decision denying class certification of the plaintiffs’ antitrust claims.

Starting the week of March 7, 2004, individual plaintiffs filed essentially identical purported class actions on behalf of direct and indirect purchasers in 16 different state courts essentially re-alleging claims set forth in the federal case described above. On June 8, 2004, Monsanto filed suit in the U.S. District Court for the Eastern District of Missouri against each of the individual named plaintiffs in the state class actions for breach of contract, which we refer to as the “Monsanto Action.” Monsanto alleges that the agreements it entered into with the plaintiffs required that the plaintiffs’ suits be filed in federal or state court in Missouri. Subsequently, the plaintiffs agreed to stay their state actions pending determination of Monsanto’s request for summary judgment in its favor in the Monsanto Action.

Monsanto is defending two lawsuits which allege that, beginning in 1988, the former Monsanto Company, and later Monsanto, conspired with competitors, through a series of negotiations and legal settlements, to fix the price of glyphosate-based and paraquat-based herbicides at prices higher than the market would otherwise bear. One of the lawsuits was filed in state court in California and one in state court in Tennessee. Each lawsuit alleges claims on behalf of all direct purchasers of glyphosate-based or paraquat-based herbicides in the United States from March 1, 1988, to the present and seeks monetary damages.

Proceedings Related to Delta and Pine Land Company

On Jan. 18, 2000, Delta and Pine Land Company (Delta and Pine Land) reinstituted a suit against the former Monsanto Company in the Circuit Court of the First Judicial District of Bolivar County, Mississippi, seeking unspecified compensatory damages for lost stock market value of not less than $1 billion, as well as punitive damages, resulting from an alleged failure to exercise reasonable efforts to complete a merger between the two companies. The amended complaint alleges that the

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former Monsanto Company tortiously interfered with Delta and Pine Land’s prospective business relations by feigning interest in the merger so as to keep Delta and Pine Land from pursuing transactions with other entities. On Sept. 9, 2003, the Court granted Monsanto’s motion to file a counterclaim seeking to set aside the merger agreement on the basis of Delta and Pine Land’s fraudulent nondisclosure of material information and substantial damages including recoupment of the $83 million breakup fee previously paid to Delta and Pine Land. On Sept. 10, 2004, the Court ruled in Monsanto’s favor, ordering that certain documents that Delta and Pine Land had attempted to use for its case were inadmissible and could not be used at trial. On Sept. 30, 2004, Delta and Pine Land Company requested that the Court allow it to immediately appeal the decision. Subsequently, on Oct. 8, 2004, the Court granted Monsanto’s motion for partial summary judgment, which eliminated a significant element of Delta and Pine Land’s damages claim against Monsanto. While it considers various other motions, the Court has suspended all deadlines in the case and indicated that it will issue a new scheduling order in the future. No trial date has been set.

On May 20, 2004, Monsanto filed a request with the American Arbitration Association for arbitration and a determination that Monsanto has the right to terminate the 1996 U.S. licensing agreements that provided Delta and Pine Land with access to Monsanto’s Bollgard insect-protected cotton and Roundup Ready herbicide-tolerant technologies for cotton. Monsanto believes Delta and Pine Land has violated its duties to, and its contracts with, Monsanto in a variety of ways including: (i) failing to calculate, collect and ensure that Monsanto was paid all royalty amounts due under the agreements; (ii) breaching its fiduciary duty to Monsanto as the managing agent of D&M Partners by neglecting to properly collect and allocate the income of D&M Partners; and (iii) misusing Monsanto’s intellectual property by inappropriately providing Monsanto technology to an unlicensed party.

Agent Orange

Various manufacturers of herbicides used by the U.S. armed services during the Vietnam War, including the former Monsanto Company, have been parties to lawsuits filed on behalf of veterans and others alleging injury from exposure to the herbicides. In the United States, this litigation has been assigned to Judge Weinstein of the U.S. District Court for the Eastern District of New York, as part of In re Agent Orange Product Liability Litigation, MDL 381 (MDL)., a multidistrict litigation proceeding established in 1977 to coordinate Agent Orange-related litigation in the United States. In 1984, a settlement in the MDL proceeding concluded all class action litigation filed on behalf of U.S. and certain other groups of plaintiffs. Approximately 30 suits filed by individual U.S. veterans contesting the denial of their claims subsequent to the class action settlement have been consolidated in the MDL and are currently pending in the District Court. On June 9, 2003, the U.S. Supreme Court allowed two claims (Isaacson and Stephenson) to proceed notwithstanding the 1984 class action settlement. On Feb. 9, 2004, the District Court granted defendants’ motion for summary judgment on all claims made in the Isaacson and Stephenson cases on the basis of the government contractor defense. The District Court, however, stayed entry of that judgment and granted plaintiffs’ request for an additional six months to conduct further discovery solely relating to the government contractor defense. On March 18, 2004, the District Court ordered that all other plaintiffs in all other lawsuits currently pending before the court in this matter were to adhere to the same schedule, unless they specifically requested not to be so bound.

On Feb. 5, 2004, a putative class action suit was filed in the U.S. District Court for the Eastern District of New York by certain citizens of Vietnam alleging that the manufacturers of Agent Orange conspired with the United States government to commit war crimes and crimes against humanity in connection with the spraying of Agent Orange. This case has also been assigned to Judge Weinstein.

Certain Korean veterans of the Vietnam War have filed suit in Seoul, South Korea, against The Dow Chemical Company and the former Monsanto Company. Plaintiffs allege that they were exposed to herbicides, and that they suffered injuries or their children suffered birth defects as a result. Three separate complaints filed in October 1999 are being handled collectively and currently involve approximately 16,700 plaintiffs. The complaints seek damages of 300 million won (approximately US$260,000) per plaintiff. On May 23, 2002, the Seoul District Court ruled in favor of the manufacturers and dismissed all claims of the plaintiffs on the basis of lack of causation and statutes of limitations. Plaintiffs have filed an appeal de novo with the Seoul High Court and the parties have engaged in the briefing process required by that court. The Seoul High Court has held three preparatory hearings to address issues on the appeal and has indicated that it will hold a formal hearing on the appeal in December 2004. Other ancillary actions are also pending in Korea, including a request for provisional relief pending resolution of the main action.

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Activities of Foreign Affiliates

During an internal audit and follow-up review conducted by management and outside counsel, management learned of certain books and records and compliance irregularities involving the company’s Indonesian affiliate companies and certain of their foreign national employees. The employment of those employees involved in the irregularities has been terminated. Monsanto notified the SEC of this matter on Nov. 12, 2002, and thereafter provided a full report of its internal review to the SEC, with a copy to the U.S. Department of Justice. On March 22, 2004, Monsanto announced that the Department of Justice had advised Monsanto that its investigation had expanded to include an inquiry into whether a former outside consultant made an improper $50,000 payment to an Indonesian government official in early 2002 at the direction of a former Monsanto employee. Monsanto will continue to cooperate with further review of this matter.

Environmental Proceedings

Since the late 1990s, the U.S. Environmental Protection Agency (EPA) has identified more than 20 sites as potential sources of dioxin in the Kanawha River in West Virginia. In May 2002, the EPA sent Monsanto, as well as Solutia, a “notice of potential liability and offer to negotiate for removal action” regarding the Kanawha River site in Putnam and Kanawha counties, West Virginia, which was premised on Pharmacia’s former operations at its Nitro, West Virginia, manufacturing facility. Pharmacia, Solutia and Monsanto have all been in communication with the EPA regarding the notice and offer. Monsanto believes that the Kanawha River site is the responsibility of Solutia under the terms of the Distribution Agreement between Pharmacia and Solutia relating to Solutia’s 1997 spinoff; however, prior to Solutia’s Chapter 11 filing, Solutia refused to accept responsibility for this matter. In order to mitigate damages and protect the rights and positions of Monsanto and Pharmacia, Monsanto has been managing this matter on behalf of Pharmacia and will make a claim for recovery against Solutia in the course of its bankruptcy proceeding. The EPA, Monsanto and Pharmacia have negotiated a consent order under which Monsanto is preparing an Engineering Evaluation/Cost Analysis Report, which will contain the results of our investigation of dioxin contamination in the Kanawha River, the sources of such contamination, an evaluation of removal options, and a recommended approach to removing or otherwise addressing the contaminated sediments. The degree to which Monsanto, Solutia and Pharmacia, as opposed to third parties, could ultimately be responsible for costs associated with this matter is unclear.

Pharmacia is party to several EPA administrative orders that require investigation and remediation activities in and around Sauget, Illinois. In connection with its Chapter 11 filing bankruptcy, Solutia ceased performing under these orders on Pharmacia’s behalf. Monsanto therefore has stepped in on Pharmacia’s behalf and is performing Pharmacia’s obligations under those administrative orders. We anticipate that work will continue under these administrative orders through 2005, after which we expect EPA to issue a Record of Decision identifying further remedial activities.

On Oct. 20, 2004, the EPA issued a Notice of Violation to P4 Production, LLC (P4 Production) alleging violations of federal and state hazardous waste management regulations at P4 Production’s phosphorus manufacturing plant in Soda Springs, Idaho. The EPA has asserted that the alleged violations may subject P4 Production to civil penalties. We intend to work with the EPA to reach a resolution of this matter.

Pension Plan

On June 23, 2004, two former employees of Monsanto and Pharmacia filed a purported class action lawsuit in the U.S. District Court for the Southern District of Illinois against Monsanto and the Monsanto Company Pension Plan, which we refer to as the “Plan.” The suit claims that the Plan underpaid certain benefits and violated federal law against age discrimination from Jan. 1, 1997 (when the Plan was sponsored by Pharmacia, then known as Monsanto Company), and continuing to the present. On July 13, 2004, Monsanto tendered defense of this suit to Pharmacia pursuant to the terms of the Separation Agreement and demanded that (a) Pharmacia defend Monsanto or pay Monsanto’s costs of defense, and (b) indemnify Monsanto for any liabilities arising from the lawsuit. Pharmacia has rejected Monsanto’s tender.

Proceedings Relating to Solutia’s Assumed Liabilities

As described above, Solutia managed and directed the defense of proceedings with respect to Solutia’s Assumed Liabilities until approximately Feb. 17, 2004, when Solutia notified Pharmacia and Monsanto of its intention to cease or suspend performance. In order to protect the interests of Pharmacia and Monsanto, we have assumed management of these matters on an interim basis or until resolution of Solutia’s Chapter 11 proceeding. As we are now managing proceedings relating to Solutia’s Assumed Liabilities, a description of material pending proceedings relating to Solutia’s Assumed Liabilities that may be material to our company is included in this portion of this report on Form 10-K.

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The following proceedings allege damages arising from exposure to polychlorinated biphenyls (PCBs) discharged from an Anniston, Alabama, plant site that was formerly owned by Pharmacia and was transferred to Solutia as part of the spinoff of Solutia from Pharmacia:

Pursuant to an Aug. 4, 2003, Partial Consent Decree, Solutia and Pharmacia agreed to conduct a Remedial Investigation and Feasibility Study to provide information for the selection by the EPA of a cleanup remedy for the Anniston PCB site. Solutia has since stated that it will only perform remediation on sites where it has current operations. Monsanto has therefore stepped in as Pharmacia’s representative and is funding some of the remaining environmental obligations.

On June 5, 2003, Solutia and Pharmacia filed suit against 19 parties to force them to pay their fair share toward past and future investigation and cleanup costs under the Comprehensive Environmental Response Compensation and Liability Act. The suit was filed in the U.S. District Court for the Northern District of Alabama in an action captioned Solutia Inc. and Pharmacia Corporation v. McWane, Inc. et al. The 19 parties are owners and operators of manufacturing facilities that Solutia/Pharmacia believed were responsible for a major share of the PCB contamination found throughout Anniston. Solutia was managing this suit until it filed for bankruptcy protection. Monsanto and Solutia have negotiated an arrangement for the continued management and vigorous prosecution of this suit.

Pharmacia was added as a defendant on Feb. 7, 1997, to a case then pending in the Commonwealth Court of Pennsylvania. This action was originally filed against U.S. Mineral Products Company in 1990 by the Commonwealth, seeking damages caused by the presence of asbestos fireproofing in the Transportation and Safety Building (T & S Building) in Harrisburg, Pennsylvania. In June 1994, a fire broke out in the T & S Building. The Commonwealth claims that PCBs contaminated the building and necessitated its demolition and temporary relocation of Commonwealth employees caused by the alleged contamination. In addition, the Commonwealth sought the cost of constructing a new building on the site of the T & S Building. Solutia defended the litigation pursuant to its obligations under the Distribution Agreement and, on Aug. 23, 2000, the jury returned a verdict of $90 million against Pharmacia. The verdict was reduced to $45 million by the trial court. On Nov. 15, 2002, Solutia filed an appeal to the Supreme Court of Pennsylvania. Please refer to Item 8 — Note 22 for more information regarding the appeal bond posted by Monsanto on Solutia’s behalf in this matter. Oral argument before the Supreme Court of Pennsylvania on this matter was heard on May 11, 2004.

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In January 1984, Pharmacia was served in Furch v. General Electric Company, et al., the first of five cases brought in state court in Broome County, New York, relating to claims of injury allegedly resulting from exposure to PCBs during and immediately after a fire in a state office building in Binghamton, New York. Plaintiffs were 43 emergency responders or individuals involved in cleanup activities immediately after the fire and their spouses or representatives, for a total of 81 plaintiffs. The plaintiffs claimed that PCBs, dibenzofurans and dibenzodioxins were spread throughout the building when a transformer, located in an equipment room in the basement of the building, ruptured during the fire. Plaintiffs made claims for various personal injuries, including in some cases death, and alleged fear of future disease and the need for medical monitoring. They sought compensatory and punitive damages in an unspecified amount. This case was resolved pursuant to a settlement in the fourth quarter of fiscal 2004.

Seventeen PCB cases are now pending in Mississippi. All of these cases were filed in state court in Hinds County and Copiah County, Mississippi. The 1,654 plaintiffs in 16 of these cases are either present or former employees of an electrical transformer manufacturing facility owned by Kuhlman Electric Corporation located in Crystal Springs, Mississippi, or present or former residents of the Crystal Springs community. The cases assert various negligence and product liability claims and seek damages for personal injury and/or property damage caused by exposure to PCBs. The plaintiffs seek to recover both compensatory and punitive damages in unspecified amounts. The plaintiffs in these cases name as defendants in various combinations Solutia, Monsanto and/or Pharmacia. All 16 cases have been removed to the U.S. District Court for the Southern District of Mississippi. The remaining two cases were recently filed and will also be removed. Motions to remand have been filed in each removed case. On Sept. 29, 2004, in the first case removed to federal court, the District Court denied the plaintiffs’ motion to remand. In addition, on Dec. 30, 2003, a wrongful death case was filed against Monsanto in the Circuit Court of Hinds County on behalf of three wrongful death beneficiaries for damages allegedly arising from their decedent’s exposure to PCBs in the course of his work as an electrician in the Ingall’s shipyard in Pascagoula, Mississippi. Pharmacia is not named as a defendant in this suit. The case was removed to federal court, and a motion to remand was recently denied by the federal court. No trial dates have been scheduled.

See “MD&A — Cautionary Statements: Risk Factors Regarding Forward-Looking Statements,” in Item 7 of this Form 10-K, which is incorporated herein by reference, for information regarding the risk factors that may affect any forward-looking statements regarding our legal proceedings.