MONSANTO COMPANY                                   FIRST QUARTER 2007 FORM 10-Q
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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

                                   (Mark One)
            [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended Nov. 30, 2006

                                       or

            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                        Commission file number 001-16167


                                MONSANTO COMPANY
             (Exact name of registrant as specified in its charter)

          Delaware                                    43-1878297
(State or other jurisdiction               (I.R.S. Employer Identification No.)
 of incorporation or organization)

      800 North Lindbergh Blvd.,                       63167
           St. Louis, MO                            (Zip Code)
(Address of principal executive offices)

                                 (314) 694-1000
              (Registrant's telephone number, including area code)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

     Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer or a non-accelerated  filer. See definition of "accelerated
filer and large  accelerated  filer" in Rule 12b-2 of the Exchange  Act.  (Check
one):
Large Accelerated Filer [X] Accelerated Filer [ ] Non-Accelerated  Filer []

     Indicate  by check mark  whether  the  registrant  is a shell  company  (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the latest practicable date: 543,506,587 shares of Common
Stock, $0.01 par value, outstanding as of Jan. 3, 2007.
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MONSANTO COMPANY                                   FIRST QUARTER 2007 FORM 10-Q
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TABLE OF CONTENTS

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PART I--FINANCIAL INFORMATION                                                                                            Page
-----------------------------------------------------------------------------------------------------------------------------
Item 1.               Financial Statements                                                                                2
                       Statements of Consolidated Operations                                                              3
                       Condensed Statements of Consolidated Financial Position                                            4
                       Statements of Consolidated Cash Flows                                                              5
                       Notes to Consolidated Financial Statements                                                         6
Item 2.               Management's Discussion and Analysis of Financial Condition and Results of Operations              18
                          Overview                                                                                       18
                          Results of Operations -- First Quarter Fiscal Year 2007                                        20
                          Seeds and Genomics Segment                                                                     21
                          Agricultural Productivity Segment                                                              22
                          Financial Condition, Liquidity, and Capital Resources                                          23
                          Outlook                                                                                        27
                          Critical Accounting Policies and Estimates                                                     29
                          New Accounting Standards                                                                       29
                          Caution Regarding Forward-Looking Statements                                                   30
Item 3.               Quantitative and Qualitative Disclosures About Market Risk                                         30
Item 4.               Controls and Procedures                                                                            31

PART II--OTHER INFORMATION
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Item 1.               Legal Proceedings                                                                                  32
Item 1A.              Risk Factors                                                                                       33
Item 2.               Unregistered Sales of Equity Securities and Use of Proceeds                                        34
Item 6.               Exhibits                                                                                           34
SIGNATURE                                                                                                                35
EXHIBIT INDEX                                                                                                            36


                                       1


MONSANTO COMPANY                                   FIRST QUARTER 2007 FORM 10-Q
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PART I--FINANCIAL INFORMATION

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ITEM 1.        FINANCIAL STATEMENTS

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The  Statements  of  Consolidated   Operations  of  Monsanto   Company  and  its
consolidated subsidiaries for the three months ended Nov. 30, 2006, and Nov. 30,
2005, the Condensed Statements of Consolidated Financial Position as of Nov. 30,
2006, and Aug. 31, 2006, the Statements of Consolidated Cash Flows for the three
months ended Nov. 30, 2006, and Nov. 30, 2005, and related Notes to Consolidated
Financial  Statements  follow.  Unless otherwise  indicated,  "Monsanto" and the
"company" 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.  In  the  notes  to  the  consolidated   financial
statements,  all dollars are  expressed in millions,  except per share  amounts.
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.

                                       2




MONSANTO COMPANY                                                                                 FIRST QUARTER 2007 FORM 10-Q
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Statements of Consolidated Operations

-----------------------------------------------------------------------------------------------------------------------------
Unaudited                                                                                         Three Months Ended Nov. 30,
                                                                                                  ---------------------------
(Dollars in millions, except per share amounts)                                                       2006          2005
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                          
Net Sales                                                                                         $  1,539      $  1,405
  Cost of goods sold                                                                                   859           771
-----------------------------------------------------------------------------------------------------------------------------
Gross Profit                                                                                           680           634
Operating Expenses:
  Selling, general and administrative expenses                                                         384           350
  Research and development expenses                                                                    182           168
-----------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses                                                                               566           518
Income from Operations                                                                                 114           116
  Interest expense                                                                                      33            32
  Interest income                                                                                      (30)          (14)
  Solutia-related expenses (see Note 13)                                                                10             6
  Other expense (income) -- net                                                                          4            (2)
-----------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes and Minority Interest                                                        97            94
  Income tax provision                                                                                  10            35
  Minority interest income                                                                              (3)           --
-----------------------------------------------------------------------------------------------------------------------------
Net Income                                                                                        $     90      $     59
--------------------------------------------------------------------------------------------------===========================

Basic Earnings per Share                                                                          $   0.17      $   0.11
Diluted Earnings per Share                                                                        $   0.16      $   0.11


Weighted Average Shares Outstanding:
  Basic                                                                                              543.1         536.8
  Diluted                                                                                            553.6         547.3


Dividends Declared per Share                                                                      $    --       $    --



The accompanying notes are an integral part of these consolidated financial
statements.

                                       3




MONSANTO COMPANY                                                                                 FIRST QUARTER 2007 FORM 10-Q
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Condensed Statements of Consolidated Financial Position

----------------------------------------------------------------------------------------------------------------------------
Unaudited                                                                                    As of Nov.30,    As of Aug. 31,
                                                                                             -------------    --------------
(Dollars in millions, except share amounts)                                                      2006             2006
----------------------------------------------------------------------------------------------------------    --------------
                                                                                                        
Assets
Current Assets:
  Cash and cash equivalents                                                                  $  1,842         $  1,460
  Short-term investments                                                                           --               22
  Trade receivables -- net of allowances of $305 and $298, respectively                         1,306            1,455
  Miscellaneous receivables                                                                       383              344
  Deferred tax assets                                                                             395              390
  Inventories (see Note 5)                                                                      1,954            1,688
  Assets of discontinued operations (see Note 15)                                                   6                6
  Other current assets                                                                             67               96
----------------------------------------------------------------------------------------------------------    --------------
Total Current Assets                                                                            5,953            5,461
Property, Plant and Equipment -- Net                                                            2,397            2,418
Goodwill (see Note 6)                                                                           1,527            1,522
Other Intangible Assets -- Net (see Note 6)                                                     1,195            1,229
Noncurrent Deferred Tax Assets                                                                    606              625
Other Assets                                                                                      462              473
----------------------------------------------------------------------------------------------------------    --------------
Total Assets                                                                                 $ 12,140         $ 11,728
---------------------------------------------------------------------------------------------=============    ==============

Liabilities and Shareowners' Equity
Current Liabilities:
  Short-term debt, including current portion of long-term debt                               $     42         $     28
  Accounts payable                                                                                477              514
  Income taxes payable                                                                            188              234
  Accrued compensation and benefits                                                               178              295
  Accrued marketing programs                                                                      343              494
  Deferred revenues                                                                               709              120
  Grower accruals                                                                                 185               26
  Liabilities of discontinued operations (see Note 15)                                              2                2
  Miscellaneous short-term accruals                                                               557              566
----------------------------------------------------------------------------------------------------------    --------------
Total Current Liabilities                                                                       2,681            2,279
Long-Term Debt                                                                                  1,580            1,639
Postretirement Liabilities                                                                        555              600
Long-Term Portion of Solutia-Related Reserve (see Note 13)                                        150              155
Other Liabilities                                                                                 513              530
Commitments and Contingencies (see Note 13)
Shareowners' Equity:
  Common stock (authorized: 1,500,000,000 shares, par value $0.01)
     Issued 572,460,058 and 571,377,639 shares, respectively;
     Outstanding 543,143,215 and 543,177,133 shares, respectively                                   6                6
  Treasury stock, 29,316,843 and 28,200,506 shares, respectively, at cost                        (673)            (623)
  Additional contributed capital                                                                8,923            8,879
  Retained deficit                                                                             (1,009)          (1,099)
  Accumulated other comprehensive loss                                                           (571)            (623)
  Reserve for ESOP debt retirement                                                                (15)             (15)
----------------------------------------------------------------------------------------------------------    --------------
Total Shareowners' Equity                                                                       6,661            6,525
----------------------------------------------------------------------------------------------------------    --------------
Total Liabilities and Shareowners' Equity                                                    $ 12,140         $ 11,728
---------------------------------------------------------------------------------------------=============    ==============


The accompanying notes are an integral part of these consolidated financial
statements.

                                       4



MONSANTO COMPANY                                                                                 FIRST QUARTER 2007 FORM 10-Q
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Statements of Consolidated Cash Flows

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Unaudited                                                                                         Three Months Ended Nov. 30,
                                                                                                  ---------------------------
(Dollars in millions)                                                                                 2006          2005
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                          
Operating Activities:
Net Income                                                                                        $     90      $     59
Adjustments to reconcile cash provided by operating activities:
  Items that did not require (provide) cash:
   Depreciation and amortization expense                                                               128           133
   Bad-debt expense                                                                                      9            14
   Stock-based compensation expense                                                                     18            13
   Excess tax benefits from stock-based compensation                                                   (12)          (10)
   Deferred income taxes                                                                                (4)           38
   Equity affiliate expense -- net                                                                      10             7
   Other items                                                                                           3            (7)
Changes in assets and liabilities that provided (required) cash, net of acquisitions:
   Trade receivables                                                                                   251           215
   Inventories                                                                                        (256)         (221)
   Deferred revenues                                                                                   592           610
   Accounts payable and other accrued liabilities                                                     (158)         (127)
   PCB litigation settlement proceeds                                                                    5             5
   Solutia-related payments (see Note 13)                                                               (6)           (9)
   Other items                                                                                         (70)           53
-----------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities                                                              600           773
-----------------------------------------------------------------------------------------------------------------------------
Cash Flows Provided (Required) by Investing Activities:
  Purchases of short-term investments                                                                   --           (18)
  Maturities of short-term investments                                                                  22            --
  Capital expenditures                                                                                 (92)          (56)
  Acquisition of businesses, net of cash acquired                                                       --           (53)
  Technology and other investments                                                                     (10)          (10)
  Other investments and property disposal proceeds                                                      13             2
-----------------------------------------------------------------------------------------------------------------------------
Net Cash Required by Investing Activities                                                              (67)         (135)
-----------------------------------------------------------------------------------------------------------------------------
Cash Flows Provided (Required) by Financing Activities:
  Net change in financing with less than 90-day maturities                                              (1)         (122)
  Short-term debt proceeds                                                                               2             4
  Short-term debt reductions                                                                            (8)           (6)
  Long-term debt proceeds                                                                                3             3
  Long-term debt reductions                                                                            (69)          (26)
  Payments on other financing                                                                           (2)           (1)
  Treasury stock purchases                                                                             (56)           --
  Stock option exercises                                                                                17            27
  Excess tax benefits from stock-based compensation                                                     12            10
  Dividend payments                                                                                    (54)          (46)
-----------------------------------------------------------------------------------------------------------------------------
Net Cash Required by Financing Activities                                                             (156)         (157)
-----------------------------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents                                             5            --
-----------------------------------------------------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents                                                              382           481
Cash and Cash Equivalents at Beginning of Period                                                     1,460           525
-----------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period                                                        $  1,842      $  1,006
--------------------------------------------------------------------------------------------------===========================



See Note 12 -- Supplemental Cash Flow Information -- for further details.

The accompanying notes are an integral part of these consolidated financial
statements.
                                       5



MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

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NOTE 1.        BACKGROUND AND BASIS OF PRESENTATION

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Monsanto Company,  along with its subsidiaries,  is a leading global provider of
agricultural  products  for  farmers.   Monsanto's  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.

Monsanto  manages  its  business  in  two  segments:  Seeds  and  Genomics,  and
Agricultural  Productivity.  Through the Seeds and  Genomics  segment,  Monsanto
produces leading seed brands,  including DEKALB, ASGROW, SEMINIS and STONEVILLE,
and Monsanto  develops  biotechnology  traits that assist farmers in controlling
insects and weeds.  Monsanto also  provides  other seed  companies  with genetic
material  and   biotechnology   traits  for  their  seed  brands.   Through  the
Agricultural  Productivity  segment,  the  company  manufactures  ROUNDUP  brand
herbicides and other herbicides and provides lawn-and-garden  herbicide products
for the residential market and animal agricultural products focused on improving
dairy cow productivity and swine genetics. See Note 14 -- Segment Information --
for further details.

On June 27, 2006,  the board of directors  approved a  two-for-one  split of the
company's  common shares.  The additional  shares resulting from the stock split
were paid on July 28, 2006, to  shareowners of record on July 7, 2006. All share
and per share information herein reflect this stock split.

The  accompanying  consolidated  financial  statements have not been audited but
have been prepared in conformity with accounting  principles  generally accepted
in the United States for interim financial  information and with instructions to
Form 10-Q and Article 10 of Regulation S-X. In the opinion of management,  these
unaudited consolidated financial statements contain all adjustments necessary to
present fairly the financial position,  results of operations and cash flows for
the  interim  periods  reported.  This  Report  on Form  10-Q  should be read in
conjunction  with Monsanto's  Report on Form 10-K for the fiscal year ended Aug.
31, 2006.  Financial  information for the first three months of fiscal year 2007
should not be annualized because of the seasonality of the company's business.

NOTE 2.        NEW ACCOUNTING STANDARDS

--------------------------------------------------------------------------------

In September 2006, the Financial  Accounting  Standards Board (FASB) issued SFAS
No.  158,   Employers'   Accounting  for  Defined   Benefit  Pension  and  Other
Postretirement  Benefit  Plans an amendment of FASB  Statements  No. 87, 88, and
132(R) (SFAS 158).  SFAS 158 requires  companies to recognize the  overfunded or
underfunded  status  of a  defined  benefit  postretirement  plan as an asset or
liability in its  statement of  financial  position and to recognize  changes in
that funded status through  comprehensive  income.  This statement also requires
the  measurement  date for plan  assets and  liabilities  to  coincide  with the
sponsor's year end. The standard provides two transition alternatives related to
the change in  measurement  date  provisions.  The  recognition  of an asset and
liability  related to the funded status  provision is effective for fiscal years
ending  after Dec. 15, 2006.  Accordingly,  Monsanto  will adopt SFAS 158 in the
fourth quarter of fiscal year 2007. The change in measurement date provisions is
effective for fiscal years ending after Dec. 15, 2008.  The company is currently
evaluating the impact of SFAS 158 on the consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value  Measurements  (SFAS
157).  SFAS 157 defines fair value,  establishes a framework for measuring  fair
value in generally accepted accounting principles, and expands disclosures about
fair value  measurements.  This statement is effective for financial  statements
issued for fiscal years  beginning  after Nov. 15, 2007.  Accordingly,  Monsanto
will adopt SFAS 157 in fiscal year 2009. The company is currently evaluating the
impact of SFAS 157 on the consolidated financial statements.

In  September  2006,  the  Securities  and  Exchange   Commission  issued  Staff
Accounting  Bulletin No. 108 (SAB 108).  SAB 108  considers the effects of prior
year  misstatements  when  quantifying  misstatements  in current year financial
statements.  It is  effective  for fiscal  years  ending  after Nov.  15,  2006.
Accordingly,  Monsanto  will adopt SAB 108 in the fourth  quarter of fiscal year
2007.  The company does not believe the adoption of SAB 108 will have a material
impact on the consolidated financial statements.

                                       6


MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED (continued)

--------------------------------------------------------------------------------

In June 2006, the FASB issued FASB  Interpretation  (FIN) No. 48, Accounting for
Uncertainty in Income Taxes - an  Interpretation  of FASB Statement No. 109 (FIN
48), which  clarifies the accounting  for  uncertainty in tax positions.  FIN 48
requires  financial  statement  recognition of the impact of a tax position,  if
that position is more likely than not to be sustained on  examination,  based on
the  technical  merits of the  position.  This  interpretation  is effective for
fiscal years beginning  after Dec. 15, 2006,  with the cumulative  effect of the
change in accounting principle recorded as an adjustment to retained earnings as
of the beginning of the period of adoption. Accordingly, Monsanto will adopt FIN
48 in first quarter of fiscal year 2008. The company is currently evaluating the
impact of FIN 48 on the consolidated financial statements.

In March  2006,  the FASB  issued  SFAS No. 156,  Accounting  for  Servicing  of
Financial  Assets - an amendment of FASB Statement No. 140 (SFAS 156).  SFAS 156
requires  recognition of a servicing  asset or liability at fair value each time
an  obligation  is  undertaken  to service a financial  asset by entering into a
servicing  contract.  SFAS 156 also provides guidance on subsequent  measurement
methods  for each  class of  servicing  assets  and  liabilities  and  specifies
financial statement presentation and disclosure requirements.  This statement is
effective for fiscal years beginning after Sept. 15, 2006. Accordingly, Monsanto
will adopt SFAS 156 in fiscal year 2008. The company is currently evaluating the
impact of SFAS 156 on the consolidated financial statements.

NOTE 3.        BUSINESS COMBINATIONS

--------------------------------------------------------------------------------

2006  Acquisitions:  In September 2005,  Monsanto's  American Seeds,  Inc. (ASI)
subsidiary  acquired five regional U.S. seed companies for an aggregate purchase
price of $54 million  (net of cash  acquired).  In March 2006,  ASI acquired two
additional  U.S. seed  companies for an aggregate  purchase  price of $6 million
(net of cash acquired). In June and July 2006, ASI acquired five additional U.S.
seed  companies  for an  aggregate  purchase  price of $73 million  (net of cash
acquired).  The  financial  results of these  acquisitions  were included in the
company's  consolidated  financial  statements  from their  respective  dates of
acquisition.

For all fiscal year 2006 acquisitions  described above, the business  operations
of the acquired entities were included in the Seeds and Genomics segment and are
expected to further  enhance  ASI's ability to directly  serve  farmer-customers
with  a  technology-rich,   locally-oriented  business  model.  The  assets  and
liabilities  of the acquired  entities  were  recorded at their  estimated  fair
values as of the dates of the  acquisitions.  The purchase price allocations for
the March,  June and July 2006  acquisitions  are preliminary and are subject to
adjustment  pending further  assessments,  including the valuation of intangible
assets.

NOTE 4.        CUSTOMER FINANCING PROGRAMS

--------------------------------------------------------------------------------

In April 2002,  Monsanto  established a revolving  financing  program to provide
financing  of up to $500 million for  selected  customers  in the United  States
through a third-party  specialty lender.  Under the financing program,  Monsanto
originates  customer loans on behalf of the lender,  which is a special  purpose
entity (SPE) that Monsanto consolidates, pursuant to Monsanto's credit and other
underwriting  guidelines approved by the lender. Under the program as amended in
August 2006, Monsanto services the loans and provides a first-loss  guarantee of
up to $130 million.  Following  origination,  the lender  transfers the loans to
multi-seller  commercial  paper conduits  through a  nonconsolidated  qualifying
special purpose entity (QSPE). Monsanto accounts for this transaction as a sale,
in  accordance  with SFAS No. 140,  Accounting  for  Transfers  and Servicing of
Financial Assets and Extinguishment of Liabilities (SFAS 140).

Monsanto  has no  ownership  interest  in the  lender,  the QSPE,  or the loans.
However,  because  Monsanto  substantively  originates the loans through the SPE
(which it  consolidates)  and  partially  guarantees  and  services  the  loans,
Monsanto  accounts for the program as if it were the originator of the loans and
the  transferor  selling the loans to the QSPE.  Because QSPEs are excluded from
the scope of FIN No. 46  (revised  December  2003),  Consolidation  of  Variable
Interest  Entities (FIN 46R), and Monsanto does not have the unilateral right to
liquidate the QSPE, FIN 46R does not have an effect on Monsanto's accounting for
the U.S. customer financing program.

                                       7



MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED (continued)

--------------------------------------------------------------------------------
Monsanto  accounts for the guarantee in accordance  with FIN No. 45,  Guarantors
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees and Indebtedness of Others,  an  interpretation of SFAS No. 5, 57 and
107, and  rescission  of FIN No. 34 (FIN 45),  which  requires  that a guarantor
recognize,  at the inception of the guarantee, a liability for the fair value of
the guarantee obligation undertaken. Monsanto records its guarantee liability at
a value that  approximates  fair value (except that it does not discount  credit
losses  because of the  short-term  nature of the  loans),  primarily  driven by
expected  future credit losses.  Monsanto does not recognize any servicing asset
or liability because the servicing fee is considered  adequate  compensation for
the  servicing  activities.  Discounts  on the sale of the  customer  loans  and
servicing  revenues  collected and earned were not significant  during the three
months ended Nov. 30, 2006, and Nov. 30, 2005.

Proceeds  from  customer  loans sold through the  financing  program  totaled $4
million for first  quarter 2007 and $18 million for first  quarter  2006.  These
proceeds  are  included in net cash  provided  by  operating  activities  in the
Statements of Consolidated  Cash Flows. The loan balance  outstanding as of Nov.
30, 2006 and Aug. 31, 2006,  was $154  million and $268  million,  respectively.
Loans are  considered  delinquent  when  payments  are 31 days  past  due.  If a
customer fails to pay an obligation  when due,  Monsanto would incur a liability
to perform under the  first-loss  guarantee.  As of Nov. 30, 2006,  and Aug. 31,
2006,  less than $1 million of loans sold  through this  financing  program were
delinquent,  and  Monsanto  recorded  its  guarantee  liability  at less than $1
million,  based on the company's  historical  collection  experience  with these
customers and a current  assessment of credit  exposure.  Adverse changes in the
actual loss rate would  increase  the  liability.  If Monsanto is called upon to
make payments  under the first-loss  guarantee,  it would have the benefit under
the financing program of any amounts subsequently collected from the customer.

In November 2004,  Monsanto entered into an agreement with a lender to establish
a program to provide  financing of up to $40 million for  selected  customers in
Brazil.  The agreement,  as amended in May 2005,  qualifies for sales  treatment
under SFAS 140. Proceeds from the transfer of receivables  subsequent to the May
2005 amendment are included in net cash provided by operating  activities in the
Statements of Consolidated  Cash Flows.  Total funds available under the program
have increased to $110 million under  subsequent  amendments.  Proceeds from the
transfer of receivables  through the program totaled $51 million and $18 million
for first quarter 2007 and 2006, respectively.  Monsanto provides a guarantee of
the  loans in the  event of  customer  default.  The  term of the  guarantee  is
equivalent to the term of the bank loans.  The  liability for the  guarantees is
recorded at an amount that approximates fair value and is based on the company's
historical  collection experience with customers that participate in the program
and a current assessment of credit exposure. The guarantee liability recorded by
Monsanto was $3 million and $2 million as of Nov.  30, 2006,  and Aug. 31, 2006,
respectively.  If  performance  is required  under the  guarantee,  Monsanto may
retain  amounts that are  subsequently  collected  from  customers.  The maximum
potential  amount of future  payments under the guarantee was $100 million as of
Nov. 30, 2006. The loan balance  outstanding for these programs was $100 million
and $64 million as of Nov. 30, 2006, and Aug. 31, 2006, respectively.

Monsanto also has similar  agreements  with banks that provide  financing to its
customers in Brazil through credit programs that are subsidized by the Brazilian
government and in similar programs in Europe and Argentina.  These programs also
qualify  for sales  treatment  under SFAS 140.  Accordingly,  proceeds  from the
transfer  of  receivables  are  included  in  net  cash  provided  by  operating
activities in the Statements of Consolidated  Cash Flows and totaled $38 million
and $32 million for first  quarter  2007 and 2006,  respectively.  Under most of
these  programs,  Monsanto  provides  a  guarantee  of the loans in the event of
customer default. The terms of the guarantees are equivalent to the terms of the
bank  loans.  The  liability  for the  guarantees  is recorded at an amount that
approximates  fair  value and is based on the  company's  historical  collection
experience  with  customers  that  participate  in  the  program  and a  current
assessment of credit exposure.  The guarantee liability recorded by Monsanto was
$1 million as of Nov. 30, 2006,  and Aug. 31, 2006. If  performance  is required
under the guarantee, Monsanto may retain amounts that are subsequently collected
from  customers.  The  maximum  potential  amount of future  payments  under the
guarantees was $66 million as of Nov. 30, 2006. The loan balance outstanding for
these programs was $66 million and $47 million as of Nov. 30, 2006, and Aug. 31,
2006, respectively.

Monsanto also sells accounts receivable,  both with and without recourse.  These
sales qualify for sales treatment under SFAS 140 and  accordingly,  the proceeds
are included in net cash provided by operating  activities in the  Statements of
Consolidated  Cash  Flows.  The gross  amounts of  receivables  sold  totaled $4
million for first quarter 2007 and 2006.  The liability for the  guarantees  for
sales with recourse is recorded at an amount that approximates fair value and is
based  on the  company's  historical  collection  experience  for the  customers
associated with the sale of the  receivables and a current  assessment of credit

                                       8


MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED (continued)

--------------------------------------------------------------------------------
exposure. The liability recorded by Monsanto was less than $1 million as of Nov.
30, 2006, and Aug. 31, 2006.  The maximum  potential  amount of future  payments
under the recourse  provisions of the  agreements was $31 million as of Nov. 30,
2006. The outstanding  balance of the  receivables  sold was $31 million and $41
million as of Nov. 30, 2006, and Aug. 31, 2006, respectively.

NOTE 5.        INVENTORIES

--------------------------------------------------------------------------------


Components of inventories were:

-----------------------------------------------------------------------------------------------------------------------------
                                                                                              As of Nov. 30,   As of Aug. 31,
                                                                                              -------------    --------------
(Dollars in millions)                                                                             2006             2006
-----------------------------------------------------------------------------------------------------------    -------------
                                                                                                         
Finished Goods                                                                                $    863         $    719
Goods In Process                                                                                   943              836
Raw Materials and Supplies                                                                         230              216
-----------------------------------------------------------------------------------------------------------    -------------
Inventories at FIFO Cost                                                                         2,036            1,771
Excess of FIFO over LIFO Cost                                                                      (82)             (83)
-----------------------------------------------------------------------------------------------------------    -------------
Total                                                                                         $  1,954         $  1,688
----------------------------------------------------------------------------------------------=============    =============



NOTE 6.        GOODWILL AND OTHER INTANGIBLE ASSETS

--------------------------------------------------------------------------------


Changes in the net carrying amount of goodwill for the first quarter of fiscal
year 2007, by segment, are as follows:

----------------------------------------------------------------------------------------------------------------------------
                                                                                    Seeds and    Agricultural
(Dollars in millions)                                                                Genomics    Productivity     Total
----------------------------------------------------------------------------------------------------------------------------
                                                                                                      
Balance as of Aug. 31, 2006                                                        $  1,457      $     65      $  1,522
Effect of Foreign Currency Translation Adjustments                                        4             1             5
----------------------------------------------------------------------------------------------------------------------------
Balance as of Nov. 30, 2006                                                        $  1,461      $     66      $  1,527
-----------------------------------------------------------------------------------=========================================



Information regarding the company's other intangible assets is as follows:


----------------------------------------------------------------------------------------------------------------------------
                                        As of Nov. 30, 2006                               As of Aug. 31, 2006
                           ----------------------------------------------    -----------------------------------------------
                             Carrying      Accumulated                          Carrying       Accumulated
(Dollars in millions)         Amount       Amortization        Net               Amount        Amortization        Net
-------------------------------------------------------------------------    -----------------------------------------------
                                                                                            
Acquired Germplasm         $    932     $     (522)       $    410           $    932       $     (518)       $    414
Acquired Biotechnology
  Intellectual Property         823           (399)            424                823             (376)            447
Trademarks                      211            (50)            161                211              (48)            163
Customer Relationships          208            (26)            182                208              (21)            187
Other                            33            (15)             18                 32              (14)             18
-------------------------------------------------------------------------    -----------------------------------------------
Total                      $  2,207     $   (1,012)       $  1,195           $  2,206       $     (977)       $  1,229
---------------------------=============================================     ===============================================



Total  amortization  expense of other intangible assets was $36 million in first
quarter  of fiscal  year 2007 and $42  million in first  quarter of fiscal  year
2006.  Estimated  intangible  asset  amortization  expense  for each of the five
succeeding fiscal years has not changed significantly from the amounts disclosed
in Monsanto's Report on Form 10-K for the fiscal year ended Aug. 31, 2006.

NOTE 7.        INCOME TAXES

--------------------------------------------------------------------------------

Management  regularly  assesses the tax risk of the  company's tax return filing
positions  for all open tax  years and  establishes  tax  reserves  accordingly.
During first quarter  2007,  an audit was completed in an ex-U.S.  jurisdiction.
Primarily  as a result of the  conclusion  of this audit and the  resolution  of
various state income tax issues,  Monsanto recorded an income tax benefit of $23
million in first quarter 2007.

                                       9


MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED (continued)

--------------------------------------------------------------------------------
NOTE 8.        POSTRETIREMENT BENEFITS -- PENSIONS, HEALTH CARE AND OTHER

--------------------------------------------------------------------------------

The majority of  Monsanto's  employees  are covered by  noncontributory  pension
plans sponsored by the company. The company also provides certain postretirement
health care and life insurance  benefits for retired employees through insurance
contracts.  The company's net periodic  benefit cost for pension  benefits,  and
health care and other postretirement benefits include the following components:


-----------------------------------------------------------------------------------------------------------------------------
                                                          Three Months Ended Nov. 30,         Three Months Ended Nov. 30,
-----------------------------------------------------------------------------------------------------------------------------
                                                                      2006                                2005
                                                        ---------------------------------   ---------------------------------
Pension Benefits                                                 Outside the                          Outside
(Dollars in millions)                                     U.S.       U.S.       Total         U.S.     the U.S.     Total
-----------------------------------------------------------------------------------------   ---------------------------------
                                                                                               
Service Cost for Benefits Earned During the Period      $   10   $     1      $   11        $   10    $     1    $   11
Interest Cost on Benefit Obligation                         26         3          29            25          1        26
Assumed Return on Plan Assets                              (30)       (4)        (34)          (31)        (1)      (32)
Amortization of Unrecognized Net Loss                       11         1          12            15         --        15
-----------------------------------------------------------------------------------------   ---------------------------------
Total Net Periodic Benefit Cost                         $   17   $     1      $   18        $   19    $     1    $   20
--------------------------------------------------------=================================   =================================




-----------------------------------------------------------------------------------------------------------------------------
Health Care and Other Postretirement Benefits                                                     Three Months Ended Nov. 30,
                                                                                                  ------------- -------------
(Dollars in millions)                                                                                 2006          2005
--------------------------------------------------------------------------------------------------------------- -------------
                                                                                                          
Service Cost for Benefits Earned During the Period                                                $      3      $      4
Interest Cost on Benefit Obligation                                                                      5             4
Amortization of Unrecognized Net Loss (Gain)                                                            (3)            1
-----------------------------------------------------------------------------------------------------------------------------
Total Net Periodic Benefit Cost                                                                   $      5      $      9
--------------------------------------------------------------------------------------------------===========================


Monsanto  contributed  $60 million to its U.S.  qualified plan and $1 million to
plans outside the United  States in first  quarter 2007 and 2006.  The remaining
portion of expected  contributions  for 2007 relates to the  non-qualified  U.S.
plan and plans  outside  the United  States.  As of Nov.  30,  2006,  management
expects to make  additional  contributions  of  approximately  $2 million to the
company's pension plans in fiscal year 2007.

NOTE 9.        STOCK-BASED COMPENSATION PLANS

--------------------------------------------------------------------------------

On Sept.  1, 2005,  Monsanto  adopted SFAS No. 123 (revised  2004),  Share-Based
Payment  (SFAS  123R),   which  requires  the  measurement  and  recognition  of
compensation  expense for all  share-based  payment awards made to employees and
directors  based on  estimated  fair  values.  The  following  table shows total
stock-based  compensation  expense  included in the  Statements of  Consolidated
Operations  for the three  months  ended  Nov.  30,  2006,  and Nov.  30,  2005.
Stock-based  compensation  cost  capitalized in inventories was $3 million as of
Nov. 30, 2006, and Aug. 31, 2006.


----------------------------------------------------------------------------------------------------------------------------
                                                                                                  Three Months Ended Nov. 30,
                                                                                                  --------------------------
(Dollars in millions)                                                                                 2006         2005
----------------------------------------------------------------------------------------------------------------------------
                                                                                                          
Cost of Goods Sold                                                                                $     2       $     1
Selling, General and Administrative Expenses                                                           13            10
Research and Development Expenses                                                                       3             2
----------------------------------------------------------------------------------------------------------------------------
Pre-Tax Stock-Based Compensation Expense                                                               18            13
Income Tax Benefit                                                                                     (6)           (5)
----------------------------------------------------------------------------------------------------------------------------
Net Stock-Based Compensation Expense                                                              $    12       $     8
-------------------------------------------------------------------------------------------------===========================


Upon  adoption of SFAS 123R,  Monsanto  began  estimating  the value of employee
stock  options on the date of grant  using a  lattice-binomial  model.  Prior to
adoption of SFAS 123R,  the value of employee stock options was estimated on the
date of grant using the  Black-Scholes  model,  for the disclosures of pro forma
financial  information  required under SFAS No. 123,  Accounting for Stock-Based
Compensation.

                                       10


MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED (continued)

--------------------------------------------------------------------------------
During the three months ended Nov. 30, 2006,  Monsanto  granted  4,239,010 stock
options, 31,800 shares of restricted stock and 118,460 restricted stock units to
employees under the Monsanto Company  Long-Term  Incentive Plan, as amended.  In
addition,  19,471 shares of deferred stock and 1,557 shares of restricted  stock
were  granted to  directors  under the  Monsanto  Non-Employee  Director  Equity
Incentive  Compensation  Plan (Director Plan). The  weighted-average  grant-date
fair value of non-qualified  stock options granted during the three months ended
Nov. 30, 2006 was $13.56 per share.  Pre-tax  unrecognized  compensation expense
for stock options, net of estimated forfeitures,  was $79 million as of Nov. 30,
2006,  and will be recognized as expense over a  weighted-average  period of 2.4
years.

The  weighted-average  grant-date fair value of restricted  stock and restricted
stock units granted  during the first quarter of fiscal year 2007 was $45.13 and
$44.08, respectively,  per share. Pre-tax unrecognized compensation expense, net
of estimated  forfeitures,  for nonvested  restricted stock and restricted stock
units was $3 million and $11 million,  respectively,  as of Nov. 30, 2006, which
will be  recognized  as expense over the  weighted-average  remaining  requisite
service periods.  The  weighted-average  remaining requisite service periods for
nonvested  restricted  stock and  restricted  stock units were 3.0 years and 1.9
years, respectively,  as of Nov. 30, 2006. The weighted-average  grant-date fair
value of directors'  deferred  stock granted  during the three months ended Nov.
30, 2006 was $46.92 per share.  Pre-tax  unrecognized  compensation  expense for
awards  granted under the Director Plan was $1 million as of Nov. 30, 2006,  and
will be recognized as expense over a weighted-average period of 1 year.

NOTE 10.       COMPREHENSIVE INCOME

--------------------------------------------------------------------------------

Comprehensive  income includes all nonshareowner  changes in equity and consists
of net income, foreign currency translation adjustments, gains and losses on the
foreign currency hedge of the company's net investment in a foreign  subsidiary,
net unrealized  gains and losses on  available-for-sale  securities,  additional
minimum pension liability  adjustments,  and net accumulated derivative gains or
losses on cash flow hedges not yet realized.  Comprehensive income for the three
months ended Nov. 30, 2006, and Nov. 30, 2005, was $142 million and $88 million,
respectively.

The components of accumulated other comprehensive loss are as follows:


------------------------------------------------------------------------------------------------------------------------------
                                                                                               As of Nov.30,    As of Aug. 31,
                                                                                               ------------     ------------
(Dollars in millions)                                                                             2006             2006
-----------------------------------------------------------------------------------------------------------     ------------
                                                                                                          
Accumulated Foreign Currency Translations                                                      $   (386)        $   (402)
Net Unrealized Gains on Investments, Net of Taxes                                                    22               18
Net Accumulated Derivative Gain (Loss), Net of Taxes                                                  4              (28)
Minimum Pension Liability, Net of Taxes                                                            (211)            (211)
-----------------------------------------------------------------------------------------------------------     ------------
Accumulated Other Comprehensive Loss                                                           $   (571)        $   (623)
-----------------------------------------------------------------------------------------------============     ============


NOTE 11.       EARNINGS PER SHARE

--------------------------------------------------------------------------------

Basic earnings per share (EPS) was computed using the weighted-average number of
common shares  outstanding during the period shown in the table below. For first
quarter 2007 and 2006,  diluted EPS was computed  taking into account the effect
of dilutive  potential  common  shares,  as shown in the table below.  Potential
common shares consist primarily of stock options using the treasury stock method
and are excluded if their effect is antidilutive.  Approximately 4.3 million and
0.3 million  stock  options  were  excluded  from the  computations  of dilutive
potential  common shares as they were  antidilutive as of Nov. 30, 2006 and Nov.
30, 2005,  respectively.  Of those antidilutive  options,  less than 0.1 million
stock options were excluded from the  computations of dilutive  potential common
shares as of Nov.  30, 2006 and Nov.  30, 2005,  as their  exercise  prices were
greater than the average market price of common shares for the period.



----------------------------------------------------------------------------------------------------------------------------
                                                                                                  Three Months Ended Nov. 30,
                                                                                                  --------------------------
                                                                                                     2006          2005
----------------------------------------------------------------------------------------------------------------------------
                                                                                                         
Weighted-Average Number of Common Shares                                                             543.1        536.8
Dilutive Potential Common Shares                                                                      10.5         10.5
----------------------------------------------------------------------------------------------------------------------------


                                       11


MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED (continued)

--------------------------------------------------------------------------------
NOTE 12.       SUPPLEMENTAL CASH FLOW INFORMATION

--------------------------------------------------------------------------------

Cash payments for interest and taxes were as follows:


----------------------------------------------------------------------------------------------------------------------------
                                                                                                  Three Months Ended Nov. 30,
                                                                                                  --------------------------
(Dollars in millions)                                                                                2006          2005
----------------------------------------------------------------------------------------------------------------------------
                                                                                                         
Interest                                                                                          $     10     $     15
Taxes                                                                                                   54           26
----------------------------------------------------------------------------------------------------------------------------


In October 2005,  the board of directors  authorized  the purchase of up to $800
million of the company's common stock over a four-year  period. In first quarter
fiscal year 2007,  the company  paid $6 million for shares  accrued at Aug.  31,
2006 and acquired an additional 1.1 million shares for $50 million. Through Nov.
30, 2006, the company had acquired 3.9 million shares for $170 million. In first
quarter  fiscal year 2006,  the  company  accrued a  contingent  payment of $125
million  relating to the acquisition of Seminis,  Inc.,  which was  subsequently
paid in second quarter fiscal year 2006.

NOTE 13.       COMMITMENTS AND CONTINGENCIES

--------------------------------------------------------------------------------

Litigation   and   Indemnification:   Monsanto  is  involved  in  various  legal
proceedings  that  arise in the  ordinary  course  of its  business,  as well as
proceedings that management has considered to be material under SEC regulations.
These  include  proceedings  to  which  Monsanto  is a party  in its  own  name,
proceedings  to which  Pharmacia  is a party but that  Monsanto  manages and for
which Monsanto is responsible, and proceedings that Monsanto is managing related
to Solutia's  Assumed  Liabilities  (defined  below).  Some of the lawsuits seek
damages  in very large  amounts,  or seek to  restrict  the  company's  business
activities.  Information  with respect to these  lawsuits  appears in Part II --
Item 8 -- Note 22 -- Commitments and Contingencies and Part I -- Item 3 -- Legal
Proceedings in Monsanto's Report on Form 10-K for the fiscal year ended Aug. 31,
2006,  and in this  report.  Monsanto  believes  that it has  meritorious  legal
arguments and will continue to represent its interests  vigorously in all of the
proceedings that it is defending or prosecuting.  While the ultimate liabilities
resulting  from such  proceedings  may be significant  to  profitability  in the
period  recognized,  management  does not  anticipate  they will have a material
adverse  effect on  Monsanto's  consolidated  financial  position or  liquidity,
excluding liabilities relating to Solutia.

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 is  referred  to as the  "Pension  Plan." The suit claims that the Pension
Plan has  violated  the age  discrimination  and other rules under the  Employee
Retirement  Income Security Act of 1974 from Jan. 1, 1997 (when the Pension Plan
was sponsored by Pharmacia,  then known as Monsanto  Company) and  continuing to
the present.  In January 2006, a separate group of former employees of Pharmacia
filed a similar  purported  class action lawsuit in the U.S.  District Court for
the Southern District of Illinois against Pharmacia,  the Pharmacia Cash Balance
Plan,  and other  defendants.  On July 7, 2006,  the  plaintiffs  amended  their
lawsuit to add Monsanto and the Pension Plan as additional defendants.  On Sept.
1, 2006, the Court  consolidated  these lawsuits with two purported class action
lawsuits  also  pending in the same Court  against the Solutia  Company  Pension
Plan, under Walker v. Monsanto,  the first filed case. There is no trial setting
for this matter.

Solutia Inc.:  The  following  discussion  provides new and updated  information
regarding  proceedings  related to Solutia Inc.  Pursuant to the Sept.  1, 2000,
Separation  Agreement  between  Monsanto and Pharmacia,  as amended  (Separation
Agreement),  Monsanto was 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 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.

                                       12



MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED (continued)

--------------------------------------------------------------------------------
Following is an update and description of certain of the proceedings related to
Solutia's bankruptcy:

o    On March 7, 2005, the Official Committee of Equity Security Holders (Equity
     Committee)  filed a Complaint and  Objection to Claim against  Monsanto and
     Pharmacia,  objecting to the claims filed by Monsanto and Pharmacia against
     Solutia on the grounds that Solutia was  undercapitalized at its inception,
     Pharmacia  failed  to  disclose  the full  extent of the  potential  legacy
     liabilities  at the time of  Solutia's  spinoff,  and  Solutia's  indemnity
     obligations to Pharmacia and Monsanto are unduly burdensome.  The Complaint
     and Objection to Claim seeks,  among other things,  to: (i)  recharacterize
     Monsanto's and Pharmacia's claims as equity interests and subordinate these
     equity  interests;  (ii)  disallow  and expunge any claims of Monsanto  and
     Pharmacia  related to the  spinoff;  (iii)  obtain a  declaration  that the
     provisions of the Distribution  Agreement  requiring  Solutia to assume the
     legacy   liabilities  and  requiring  Solutia  to  indemnify  Monsanto  and
     Pharmacia  were  unconscionable  and may be avoided;  and (iv) allocate all
     liability  for claims  related  to  environmental  contamination  allegedly
     caused by Pharmacia to Monsanto and Pharmacia and obtain a declaration that
     Solutia is  entitled  to an implied  indemnity  in contract or in tort from
     Pharmacia and Monsanto for any liability of Solutia arising from the legacy
     liabilities of Pharmacia.  On May 24, 2005,  Monsanto and Pharmacia filed a
     motion to dismiss the Complaint  and  Objection to Claim,  and on April 11,
     2006, the Bankruptcy  Court  announced that it would deny  Pharmacia's  and
     Monsanto's  motion to dismiss and permit  this  litigation  to proceed.  On
     Sept. 14, 2006, the Bankruptcy  Court  determined that the Equity Committee
     lacks standing to pursue  Solutia's  claims against  Pharmacia and Monsanto
     but that the Equity  Committee has standing to pursue its own objections to
     the claims of Pharmacia  and  Monsanto.  Pharmacia  and Monsanto  intend to
     challenge any pursuit of claims by the Equity  Committee  allowed under the
     April  11 and  Sept.  14,  2006,  rulings.  Trial on the  Equity  Committee
     objections  to the  claims of  Pharmacia  and  Monsanto  is  scheduled  for
     February 2007.

o    On Dec. 16, 2005,  Solutia filed a complaint against Pharmacia and Monsanto
     to recover  alleged  preferential  transfers  from  Monsanto  and avoid the
     transfers of certain  liabilities  allegedly  fraudulently  transferred  to
     Solutia by Pharmacia  and  Monsanto.  This  complaint  was filed by Solutia
     prior to a two-year  statutory  deadline from Solutia's Chapter 11 petition
     date (Dec. 17, 2003) to preserve  rights,  if any, of Solutia's  bankruptcy
     estate.  Concurrent with this filing,  Solutia announced that: (i) it filed
     this action to preserve the legal rights of  Solutia's  bankruptcy  estate;
     (ii) Solutia has made no decision to pursue this action;  and (iii) Solutia
     remains  committed  to the  agreement  in principle  described  below.  The
     complaint is  redundant in many  respects to other  pending  actions  filed
     against Monsanto and Pharmacia by other constituents in the case (including
     the Equity  Committee  and the  Retirees'  Committee).  This  litigation is
     currently stayed.

o    On Feb.  14,  2006,  Solutia  filed its Plan of  Reorganization  (Plan) and
     accompanying   Disclosure   Statement   (Disclosure   Statement)  with  the
     Bankruptcy Court.  Monsanto's  contribution commitment to Solutia under the
     Plan   is    substantially    similar    to   that    described    in   the
     agreement-in-principle  Monsanto  reached on June 7, 2005, with Solutia and
     the  Creditors'  Committee,  namely,  Monsanto  would:  (i) backstop a $250
     million rights  offering to certain  unsecured  creditors who will be given
     the opportunity to purchase 22.7 percent of the common stock of Reorganized
     Solutia;  (ii) accept  financial  responsibility  for toxic tort litigation
     relating to Pharmacia's  chemical  business that occurred prior to Sept. 1,
     1997; (iii) accept financial  responsibility for environmental  remediation
     obligations  at sites  relating  to  Pharmacia's  chemical  business  which
     Solutia never owned or operated;  and (iv) share  financial  responsibility
     for off-site  environmental  remediation  costs in Anniston,  Alabama,  and
     Sauget, Illinois, provided that Solutia would pay the first $50 million out
     of the rights offering  (described above),  Monsanto would pay the next $50
     million  minus amounts  Monsanto  paid toward these sites during  Solutia's
     Chapter 11 case,  and Solutia would pay the next $325  million,  if needed,
     after which  Monsanto  and Solutia  would  share  responsibility  for costs
     equally.  The Plan  provides for a  comprehensive  retiree  settlement  and
     includes  a  release  for  Monsanto  and  Pharmacia   from  certain  legacy
     liabilities  associated with Pharmacia's chemical business that arose prior
     to Sept. 1, 1997, including liabilities related to retiree medical, retiree
     life  insurance  and  disability  benefits for  individuals  who retired or
     became  disabled  prior to Sept. 1, 1997. In  consideration  for Monsanto's
     contributions described in the Plan, the resolution of Monsanto's claims in
     Solutia's  Chapter  11  case,  and  settlement  of  ongoing  and  potential
     litigation in the case,  among other things,  Monsanto would receive common
     stock in  Reorganized  Solutia.  If the Plan was  approved and Monsanto was
     required to make the full  investment  contemplated  by the rights offering

                                       13


MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED (continued)

--------------------------------------------------------------------------------
     under its backstop  commitment,  Monsanto's  equity interest in Reorganized
     Solutia could range from approximately 45 percent to 49 percent, based upon
     an estimated range of unsecured claims against Solutia.

o    On Dec. 28, 2006,  Solutia filed a Form 8-K with the SEC describing (i) its
     proposal for an amended plan of  reorganization,  which was designed to act
     as a framework for  negotiations  among Solutia,  certain  noteholders  and
     other major stakeholders; and (ii) a summary update of Solutia's efforts to
     obtain proposals for a possible sale of the equity of reorganized  Solutia.
     Solutia's   description   of  the   framework   for  an  amended   plan  of
     reorganization is unacceptable to Monsanto.  No amended Plan has been filed
     and it is unknown whether an amended Plan will be filed,  and if an amended
     Plan is filed, what terms an amended Plan might include.  However, Monsanto
     remains  supportive  of efforts for a negotiated  resolution  of unresolved
     issues in  Solutia's  Chapter  11  proceeding,  and  continues  to  support
     Solutia's efforts to reorganize as a viable company.

o    Various parties participating in Solutia's bankruptcy proceeding, including
     the  Equity  Committee,  have  filed  objections  to  Solutia's  Disclosure
     Statement.  The  Bankruptcy  Court has  deferred a hearing to consider  the
     legal  adequacy  of  the  Disclosure   Statement  pending  rulings  on  the
     above-described lawsuit by the Equity Committee and a lawsuit filed against
     Solutia by JPMorgan  Chase Bank,  as  indenture  trustee for two classes of
     Solutia's unsecured noteholders  aggregating $450 million,  seeking a court
     order declaring the notes to be secured. The trial of JPMorgan Chase Bank's
     claim has completed and awaits the  Bankruptcy  Court's  decision.  Various
     parties have  asserted that a  determination  of this claim is an essential
     component of the Disclosure Statement. In addition, if the Plan is amended,
     the  Disclosure  Statement  must  also be  amended.  If and when the  Court
     resolves  all  objections  and  determines  that the  Disclosure  Statement
     provides sufficient  information for creditors and other parties to vote on
     the Plan,  the Plan and  Disclosure  Statement  will be  distributed to all
     parties for voting purposes.  Following the voting process,  the Court will
     hold a hearing to consider court approval or "confirmation" of the Plan, or
     an amended  Plan.  If the Court  confirms  the Plan,  or an  amended  Plan,
     Solutia would emerge from Chapter 11 thereafter.

A charge in the  amount of $284  million  (the  "Solutia-related  charge" or the
"charge") was recorded in Monsanto's  first quarter  fiscal 2005 results.  As of
Nov. 30,  2006,  $205  million was  recorded in the  Statement  of  Consolidated
Financial  Position ($55 million in current  liabilities and $150 million in the
long-term portion of the Solutia-related reserve).

Monsanto believes that the Solutia-related charge represents the discounted cost
that Monsanto  would expect to incur in  connection  with these  litigation  and
environmental matters.  However,  actual costs to Monsanto may differ materially
from this estimate. Monsanto expects to pay for these potential liabilities over
time as the various legal  proceedings are resolved and remediation is performed
at the various environmental sites. In addition,  the charge may not reflect all
potential  liabilities  that  Monsanto may incur in  connection  with  Solutia's
bankruptcy.  Litigation or  environmental  matters that are not reflected in the
charge may arise in the future,  and Monsanto may also  manage,  settle,  or pay
judgments  or  damages  with  respect  to such  matters  in  order  to  mitigate
contingent  potential  liability and protect Pharmacia and Monsanto,  if Solutia
refuses to do so.

The  charge  does not  reflect  any  insurance  reimbursements,  any  recoveries
Monsanto  might  receive  through  the  bankruptcy  process,  or any  recoveries
Monsanto might receive through the  contribution  actions that it is pursuing on
Pharmacia's behalf with regard to the Anniston,  Alabama, and Sauget,  Illinois,
sites. Receivables of $40 million were recorded as of Nov. 30, 2006 ($27 million
was recorded in miscellaneous  receivables and $13 million was recorded in other
assets), for the anticipated insurance  reimbursement of a portion of Monsanto's
settlement  payments  for  certain  litigation  related  to  Anniston,  Alabama.
Monsanto  expects these  receivables  to be paid over three years,  in quarterly
installments,  which began in March 2005.  Monsanto has  received net  insurance
proceeds of $119 million.

In addition to the Solutia-related charge, Monsanto has incurred legal and other
costs   related  to  the   Chapter  11   proceeding   and  its   Solutia-related
indemnification  obligations to Pharmacia. These costs are expensed as incurred,
because the potential  future costs to Monsanto to protect its interests  cannot
be  reasonably  estimated.   The  legal  and  other  costs,  together  with  the
Solutia-related   charge,  are  reflected  in  the  Statements  of  Consolidated
Operations as Solutia-related expenses.

                                       14



MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED (continued)

--------------------------------------------------------------------------------
The degree to which Monsanto may  ultimately be  responsible  for the particular
matters  reflected in the charge or other of Solutia's  Assumed  Liabilities  or
Solutia-related  expenses is  uncertain  until the outcome of all matters in the
Chapter 11 proceeding are resolved.

Solutia  Litigation  Obligations:  Included  in the  Solutia-related  charge are
amounts related to certain of Solutia's  third-party tort litigation,  including
lawsuits involving  polychlorinated biphenyls (PCBs), dioxins and other chemical
and premises liability litigation. Monsanto's Report on Form 10-K for the fiscal
year ended Aug. 31, 2006, describes the significant litigation matters reflected
in the Solutia-related charge.

Solutia Environmental  Obligations:  Included in the Solutia-related  charge are
amounts related to certain of Solutia's environmental liabilities,  particularly
expenses for environmental  remediation of sites Solutia never owned or operated
and sites beyond the property lines of Solutia's  current or former  operations.
Monsanto's  Report  on Form  10-K for the  fiscal  year  ended  Aug.  31,  2006,
describes the significant environmental matters reflected in the Solutia-related
charge.

Other  Solutia-Related  Matters:  Monsanto is a party to several agreements with
Solutia for the supply of raw materials  and services used in the  production of
an intermediate for glyphosate at Monsanto's facility at Chocolate Bayou, Texas.
In February  2006,  Monsanto  prepaid  Solutia $29 million for raw materials and
services in  consideration  for a reduction in future  payments owed by Monsanto
under the supply agreements.  As of Nov. 30, 2006, the full amount of Monsanto's
prepayment had been applied and no amount remained outstanding.

Guarantees:  Disclosure  regarding the guarantees  Monsanto provides for certain
customer loans in the United States,  Brazil,  Europe and Argentina can be found
in Note 4 --  Customer  Financing  Programs  -- of this  Form  10-Q.  Except  as
described in that note,  there have been no  significant  changes to  guarantees
made by Monsanto since Aug. 31, 2006.  Disclosures  regarding  these  guarantees
made by Monsanto can be found in Note 22 -- Commitments and  Contingencies -- of
the notes to the  consolidated  financial  statements  contained  in  Monsanto's
Report on Form  10-K for the  fiscal  year  ended  Aug.  31,  2006.  Information
regarding  Monsanto's   indemnification   obligations  to  Pharmacia  under  the
Separation  Agreement  relating to Solutia's  Assumed  Liabilities  can be found
above.

                                       15



MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED (continued)

--------------------------------------------------------------------------------

NOTE 14.       SEGMENT INFORMATION

--------------------------------------------------------------------------------

Operating  segments  are  organized  primarily  by  similarity  of products  and
aggregated into two reportable  segments:  Seeds and Genomics,  and Agricultural
Productivity.  The Seeds and Genomics  segment  consists of the global seeds and
related  traits  businesses  and  biotechnology   platforms.   The  Agricultural
Productivity   segment  consists  of  the  crop  protection   products,   animal
agriculture businesses and lawn-and-garden  herbicide products.  EBIT is defined
as  earnings  (loss)  before  interest  and taxes and is the  primary  operating
performance measure for the two business segments.  EBIT is useful to management
in  demonstrating  the  operational  profitability  of the segments by excluding
interest and taxes, which are generally  accounted for across the entire company
on a consolidated  basis.  Sales between segments were not significant.  Certain
selling,  general and  administrative  expenses are allocated  between  segments
primarily by the ratio of segment sales to total Monsanto sales, consistent with
the company's  historical  practice.  Based on the Seeds and Genomics  segment's
increasing contribution to total Monsanto operations, the allocation percentages
were  changed  at the  beginning  of fiscal  year  2007.  Data for the Seeds and
Genomics  and  Agricultural  Productivity  reportable  segments,  as well as for
Monsanto's  significant  operating  segments  is  presented  in the  table  that
follows.


----------------------------------------------------------------------------------------------------------------------------
                                                                                                  Three Months Ended Nov. 30,
                                                                                                  --------------------------
(Dollars in millions)                                                                                2006          2005
----------------------------------------------------------------------------------------------------------------------------
                                                                                                         
Net Sales
    Corn seed and traits                                                                          $    360     $    267
    Soybean seed and traits                                                                            170          173
    Vegetable and fruit seed                                                                           100          125
    All other crops seeds and traits                                                                    50           91
----------------------------------------------------------------------------------------------------------------------------
  Total Seeds and Genomics                                                                        $    680     $    656
----------------------------------------------------------------------------------------------------------------------------
    ROUNDUP and other glyphosate-based herbicides                                                 $    649     $    549
    All other agricultural productivity products                                                       210          200
----------------------------------------------------------------------------------------------------------------------------
  Total Agricultural Productivity                                                                 $    859     $    749
----------------------------------------------------------------------------------------------------------------------------
  Total                                                                                           $  1,539     $  1,405
----------------------------------------------------------------------------------------------------------------------------

EBIT(1)
  Seeds and Genomics                                                                              $      1     $     19
  Agricultural Productivity                                                                            103           93
----------------------------------------------------------------------------------------------------------------------------
  Total                                                                                           $    104     $    112
----------------------------------------------------------------------------------------------------------------------------

Depreciation and Amortization Expense
  Seeds and Genomics                                                                              $     86     $     89
  Agricultural Productivity                                                                             42           44
----------------------------------------------------------------------------------------------------------------------------
  Total                                                                                           $    128     $    133
----------------------------------------------------------------------------------------------------------------------------

(1)  EBIT is defined as  earnings  (loss)  before  interest  and taxes;  see the
     following table for reconciliation. Earnings (loss) is intended to mean net
     income  (loss) as presented in the  Statements of  Consolidated  Operations
     under  generally  accepted  accounting  principles.  EBIT  is  the  primary
     operating performance measure for the two business segments.

A reconciliation of EBIT to net income for each quarter follows:


----------------------------------------------------------------------------------------------------------------------------
                                                                                                  Three Months Ended Nov. 30,
                                                                                                  --------------------------
(Dollars in millions)                                                                                2006          2005
----------------------------------------------------------------------------------------------------------------------------
                                                                                                       
EBIT(1)                                                                                           $    104     $    112
Interest Expense -- Net                                                                                  3           18
Income Tax Provision(2)                                                                                 11           35
----------------------------------------------------------------------------------------------------------------------------
Net Income                                                                                        $     90     $     59
--------------------------------------------------------------------------------------------------==========================



(1) Includes pre-tax minority interest income.
(2) Includes the income tax provision from minority interest income.

                                       16



MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED (continued)

--------------------------------------------------------------------------------

NOTE 15.       DISCONTINUED OPERATIONS

--------------------------------------------------------------------------------

Environmental  technologies businesses: In 2005, Monsanto committed to a plan to
sell Enviro-Chem Systems, Inc. ("Enviro-Chem" or the "environmental technologies
businesses")  that met the "held for sale" criteria  under SFAS 144,  Accounting
for  the   Impairment  or  Disposal  of  Long-Lived   Assets  (SFAS  144).   The
environmental  technologies  businesses  provided  engineering,  procurement and
construction  management  services,  and sold proprietary  equipment and process
technologies. The environmental technologies businesses were previously reported
as part of the Agricultural  Productivity  segment.  The company determined that
these businesses were no longer consistent with its strategic business goals. In
August 2005, the company  completed the sale of substantially all of Enviro-Chem
to a new  company  formed by the  management  of the  businesses  and an outside
investor.  As a  result,  the  financial  data for  these  businesses  have been
presented as discontinued operations.  The financial statements have been recast
and prepared in compliance  with the  provisions  of SFAS 144.  During the three
months ended Nov. 30, 2006 and Nov. 30, 2005,  the income  statement  results of
these businesses were less than $1 million,  and thus there was no impact on the
Statements of Consolidated Operations.

In April 2001,  Enviro-Chem entered into an agreement with a third party related
to the  engineering,  design and  construction  of a power  generation  plant in
Oregon. As of the date of the divestiture,  the receivable related to this power
plant  and  related  fixed  assets  had not  been  collected.  The  title to the
receivable was  transferred to the buyer of  Enviro-Chem,  and the buyer entered
into an  agreement  with  Monsanto in August 2005 to remit the  proceeds of this
receivable  to  Monsanto  upon  repayment  by the  third  party.  As  such,  the
receivable  that the third  party owed to  Enviro-Chem  has been  recorded as an
asset of  discontinued  operations as of Nov. 30, 2006, and Aug. 31, 2006. As of
Nov. 30, 2006, and Aug. 31, 2006, the miscellaneous receivable of $6 million was
recorded as an asset of discontinued operations and $2 million of deferred taxes
on the  miscellaneous  receivable was recorded in  liabilities  of  discontinued
operations.  Monsanto  expects that it will collect the  outstanding  receivable
balance in fiscal year 2007.

NOTE 16.       SUBSEQUENT EVENTS

-------------------------------------------------------------------------------

In December 2006,  Monsanto entered into two agreements with Landec Corporation.
In the first  agreement,  ASI acquired  Landec's direct marketing and seed sales
company,  Fielder's Choice Direct,  for a purchase price of $50 million,  with a
potential  additional  earn-out  amount  of up  to $5  million.  In  the  second
agreement,  Monsanto  entered into a five-year  global  technology  license with
Landec for certain seed coating technology.  Monsanto also received an option to
purchase  technology.  Future payments over the five year period related to this
agreement could range from $17 million to $21 million.

On Dec. 12, 2006,  the board of directors  declared an increase in the quarterly
dividend on the  company's  common  shares from 10 cents per share to 12.5 cents
per share. The dividend is payable on Jan. 26, 2007, to shareowners of record on
Jan. 5, 2007.

                                       17


MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
--------------------------------------------------------------------------------

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 the Seeds and Genomics  segment,  we produce leading seed
brands,  including  DEKALB,  ASGROW,  SEMINIS  and  STONEVILLE,  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  the  Agricultural  Productivity  segment,  we
manufacture   ROUNDUP  brand   herbicides  and  other   herbicides  and  provide
lawn-and-garden  herbicide  products  for  the  residential  market  and  animal
agricultural  products  focused on improving  dairy cow  productivity  and swine
genetics.

On June 27, 2006,  the board of directors  approved a  two-for-one  split of our
common shares. The additional shares resulting from the stock split were paid on
July 28, 2006, to shareowners of record on July 7, 2006. All share and per share
information herein reflect this stock split.

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, 2006.  Financial  information  for the first three months of
fiscal  year 2007 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  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 14 -- Segment Information -- for a reconciliation of EBIT to net income for
the three months ended Nov. 30, 2006, and Nov. 30, 2005.

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

                                       18


MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------
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  $134  million,  or 10
percent,  in the  three-month  comparison.  This  improvement  was a  result  of
increased  sales of U.S.  corn seed and  traits and  increased  sales of ROUNDUP
herbicides in the United  States and Brazil,  which were  partially  offset by a
decline in cotton trait sales in Australia. The effective tax rate for the first
quarter 2007 was 10 percent, compared with 37 percent in the first quarter 2006.
The decrease in the effective  tax rate was  primarily  because of a tax benefit
resulting from the conclusion of an ex-U.S.  audit.  Net income in first quarter
2007 was $0.16 per share, compared with $0.11 per share in first quarter 2006.

Financial Condition,  Liquidity, and Capital Resources -- In first quarter 2007,
net cash provided by operating  activities was $600 million,  compared with $773
million in the prior-year quarter. Net cash required by investing activities was
$67 million in first quarter  2007,  compared with $135 million in first quarter
2006.  Free cash flow was $533 million in first  quarter 2007 compared with $638
million in the  prior-year  quarter.  This decrease is primarily  because of the
increased operating working capital needs, particularly related to inventory and
market funding payments, due to higher business levels in 2007.

Outlook -- We aim 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 aim to improve and to grow the Seminis  business  by applying  our  molecular
breeding  and  marker  capabilities  to  its  library  of  vegetable  and  fruit
germplasm.  Further,  our pending  purchase of the Delta and Pine Land  Company,
which is subject to antitrust clearance and customary closing conditions,  could
expand our cotton breeding  operation.  In fiscal year 2007, we will continue to
focus on accelerating the potential growth of these new businesses and executing
our business plan.

ROUNDUP  herbicides  remain the market  leader.  We are focused on managing  the
costs associated with our agricultural chemistry business as that sector matures
globally.

We are  required  to  indemnify  Pharmacia  for  Solutia's  Assumed  Liabilities
(defined  in Note 13),  to the  extent  that  Solutia  fails to pay,  perform or
discharge  those  liabilities.  Prior to and following its filing for bankruptcy
protection,  Solutia has disclaimed responsibility for some of Solutia's Assumed
Liabilities. In 2005, we recorded a pre-tax charge of $284 million for estimated
litigation  and  environmental  costs we  expect  to incur  in  connection  with
Solutia's bankruptcy. As of Nov. 30, 2006, the remaining Solutia-related reserve
was $205 million.  We believe that the reserve  represents the  discounted  cost
that  we  would  expect  to  incur  in  connection  with  these  litigation  and
environmental matters. However, our actual costs may differ materially from this
estimate.  In addition,  the reserve may not reflect all  potential  liabilities
that we may incur in connection  with Solutia's  bankruptcy and does not reflect
any insurance  reimbursements or other recoveries that we might receive. We also
continue  to incur  legal  and other  expenses  associated  with the  bankruptcy
proceedings.  The  degree  to which we may  ultimately  be  responsible  for the
particular  matters  reflected  in the  reserve  or other of  Solutia's  Assumed
Liabilities or  Solutia-related  expenses is uncertain  until the outcome of all
matters in the Chapter 11 proceeding are resolved.  Additional information about
Solutia and other  litigation  matters and the related risks to our business may
be found in Note  13.  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" below and Part II -- Item 1A --
Risk Factors of this Form 10-Q.

                                       19




MONSANTO COMPANY                                                                                FIRST QUARTER 2007 FORM 10-Q
-----------------------------------------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS -- FIRST QUARTER FISCAL YEAR 2007

-----------------------------------------------------------------------------------------------------------------------------
                                                                                                  Three Months Ended Nov. 30,
                                                                                                  ---------------------------
(Dollars in millions, except per share amounts)                                                    2006     2005    % Change
---------------------------------------------------------------------------------------------------------- -------- ---------
                                                                                                              
Net Sales                                                                                         $ 1,539  $ 1,405     10%
Gross Profit                                                                                          680      634      7%
Operating Expenses:
  Selling, general and administrative expenses                                                        384      350     10%
  Research and development expenses                                                                   182      168      8%
-----------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses                                                                              566      518      9%
-----------------------------------------------------------------------------------------------------------------------------

Income from Operations                                                                                114      116    (2)%
  Interest expense                                                                                     33       32      3%
  Interest income                                                                                     (30)     (14)   114%
  Solutia-related expenses (see Note 13)                                                               10        6     67%
  Other expense (income) -- net                                                                         4       (2) (300)%
-----------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes and Minority Interest                                                       97       94      3%
  Income tax provision                                                                                 10       35   (71)%
  Minority interest income                                                                             (3)      --    100%
-----------------------------------------------------------------------------------------------------------------------------
Net Income                                                                                        $    90  $    59     53%
--------------------------------------------------------------------------------------------------===========================

Diluted Earnings per Share                                                                        $  0.16  $  0.11
--------------------------------------------------------------------------------------------------===========================

Effective Tax Rate                                                                                    10%      37%

Comparison as a Percent of Net Sales:
  Gross profit                                                                                        44%      45%
  Selling, general and administrative expenses                                                        25%      25%
  Research and development expenses                                                                   12%      12%
  Total operating expenses                                                                            37%      37%
  Income before income taxes and minority interest                                                     6%       7%
  Net income                                                                                           6%       4%


The following explanations discuss the significant components of our results of
operations that affected the quarter-to-quarter comparison of our first quarter
income from continuing operations:

Net sales  increased  10 percent in first  quarter  2007 from the same quarter a
year ago. Our Seeds and Genomics  segment net sales improved 4 percent,  and our
Agricultural  Productivity  segment net sales improved 15 percent. The following
table presents the percentage  changes in first quarter 2007 worldwide net sales
by segment  compared with the prior-year  quarter,  including the effect volume,
price, currency and acquisitions had on these percentage changes:


----------------------------------------------------------------------------------------------------------------------------
                                        First Quarter 2007 Percentage Change in Net Sales vs. First Quarter 2006
                              ----------------------------------------------------------------------------------------------
                                                                                              Impact of
                                 Volume        Price           Currency         Subtotal     Acquisitions(1)    Net Change
                              ----------------------------------------------------------------------------------------------
                                                                                                 
Seeds and Genomics Segment          1%             3%            --               4%               --               4%
Agricultural Productivity          11%             2%            2%              15%               --              15%
  Segment
Total Monsanto Company              6%             3%            1%              10%               --              10%
----------------------------------------------------------------------------------------------------------------------------

(1)  See Note 3 -- Business Combinations -- and "Financial Condition, Liquidity,
     and Capital Resources" in MD&A for details of our acquisitions in fiscal
     year 2006. Acquisitions are segregated in this presentation for one year
     from the acquisition date.

For  a  more  detailed  discussion  of  the  factors  affecting  the  net  sales
comparison,   see  the  "Seeds  and  Genomics  Segment"  and  the  "Agricultural
Productivity Segment" sections.

Gross profit  increased 7 percent in the three-month  comparison.  Total company
gross  profit  as a percent  of net sales  decreased  1  percentage  point to 44
percent in first quarter 2007. As a percent of total net sales, the Agricultural
Productivity  Segment increased from 53 percent of total net sales in 2006 to 56
percent of total net sales in 2007.  This  increase  in the percent of total net
sales decreased the total company gross profit as a percent of net sales because
this segment delivers lower gross profit as a percent of net sales when compared
with the Seeds and Genomics segment.  Gross profit as a percent of sales for the
Seeds and Genomics segment reached 61 percent,  a 2 percentage point increase in
the quarter-over-quarter comparison. Gross profit as a percent of sales declined
2 percentage points for the Agricultural  Productivity  segment to 31 percent in
the  three-month   comparison.   See  the  "Seeds  and  Genomics   Segment"  and
"Agricultural Productivity Segment" sections of MD&A for details.

                                       20


MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------
Operating  expenses increased 9 percent,  or $48 million,  in first quarter 2007
from the prior-year comparable quarter. In the three-month comparison,  selling,
general  and  administrative  (SG&A)  expenses  increased  10 percent  primarily
because of the Seeds and  Genomics  business  growth in the United  States,  and
research  and  development  (R&D)  expenses  increased 8 percent  related to the
increase in our investment in our product  pipeline.  As a percent of net sales,
SG&A  expenses  were 25  percent,  and R&D  expenses  were  12  percent  in both
three-month periods.

Interest expense increased $1 million in the three-month  comparison  because of
the addition of a three-year term bank loan completed in July 2006.

Interest  income  increased $16 million in the  quarter-over-quarter  comparison
because of interest  earned on higher average cash balances in the United States
and Brazil and interest earned on past-due trade  receivables in Brazil in first
quarter 2007.

Solutia-related expenses were $10 million in first quarter 2007 compared with $6
million in first quarter 2006.  This increase was a result of an increase in the
legal and other expenses associated with the bankruptcy proceedings.

Other expense -- net was $4 million in first  quarter 2007,  compared with other
income -- net of $2 million in first  quarter  2006.  In first  quarter 2007, we
recorded  foreign-currency  transaction  losses  of  $3  million  compared  with
foreign-currency  transaction  gains of $7 million in first  quarter  2006.  The
remaining  difference  is  primarily  related to gains on  disposals  of various
assets in the first quarter 2007.

Income tax provision  was $10 million in first  quarter 2007,  compared with $35
million in the  prior-year  quarter.  The  effective  tax rate  decreased  to 10
percent from 37 percent in first  quarter  2006.  First  quarter  2007  includes
several discrete tax adjustments  resulting in a tax benefit of $23 million. The
majority  of this  benefit is the  result of audit  settlements,  including  the
conclusion  of an ex-U.S.  audit and the  resolution of various state income tax
matters.  First  quarter  2006  includes a charge to establish a reserve for tax
exposures in Brazil. Without these items, our effective tax rate would have been
comparable in both three-month periods.

SEEDS AND GENOMICS SEGMENT


---------------------------------------------------------------------------------------------------------------------------
                                                                                             Three Months Ended Nov. 30,
                                                                                           ---------------------------------
(Dollars in millions)                                                                         2006       2005     % Change
----------------------------------------------------------------------------------------------------------------------------
                                                                                                         
Net Sales
  Corn seed and traits                                                                     $    360    $    267       35%
  Soybean seed and traits                                                                       170         173      (2)%
  Vegetable and fruit seed                                                                      100         125     (20)%
  All other crops seeds and traits                                                               50          91     (45)%
----------------------------------------------------------------------------------------------------------------------------
Total Net Sales                                                                            $    680    $    656        4%
-------------------------------------------------------------------------------------------=================================
Gross Profit
  Corn seed and traits                                                                     $    223    $    153       46%
  Soybean seed and traits                                                                       122         114        7%
  Vegetable and fruit seed                                                                       51          63     (19)%
  All other crops seeds and traits                                                               18          56     (68)%
----------------------------------------------------------------------------------------------------------------------------
Total Gross Profit                                                                         $    414    $    386        7%
-------------------------------------------------------------------------------------------=================================
EBIT(1)                                                                                    $      1    $     19     (95)%
----------------------------------------------------------------------------------------------------------------------------


(1)  EBIT is defined as earnings (loss) 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 14 -- Segment  Information and the "Overview
     -- Non-GAAP Financial Measures" section of MD&A for further details.

Seeds and Genomics Financial Performance -- First Quarter Fiscal Year 2007

Net sales of corn seed and traits increased 35 percent,  or $93 million,  in the
three-month  comparison,  primarily because of an increase in sales of U.S. corn
seed and traits.  In first  quarter  2007,  our U.S.  corn seed and traits sales
volume  increased   because  of  stronger   customer  demand.   Increased  trait
penetration and growth in our triple-stack product,  YIELDGARD Plus with ROUNDUP
READY Corn 2 also  favorably  affected  our corn seed and traits  revenue in the
United States.

In first quarter 2007,  vegetable and fruit seed net sales decreased 20 percent,
or  $25  million,  in the  three-month  comparison  primarily  because  we  made
logistical  changes that aligned  distributor  inventory levels closer to market
demand.

                                       21


MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------
All other crops seeds and traits net sales decreased 45 percent, or $41 million,
in first quarter 2007  primarily  because of lower cotton trait sales volumes in
Australia  resulting  from a decline in cotton  acres.  Planted  cotton acres in
Australia declined  approximately 54 percent in first quarter 2007 compared with
first quarter 2006 because of a severe  drought in certain parts of Australia in
first quarter 2007.

Gross  profit as a percent  of sales for this  segment  increased  2  percentage
points in the  quarter-over-quarter  comparison to 61 percent.  This improvement
was  driven  primarily  by  increased   penetration  of  higher  margin  traits,
particularly in U.S. corn. EBIT for the Seeds and Genomics segment decreased $18
million to $1 million  in first  quarter  2007.  The sales  increases  discussed
throughout  this  section  resulted in $24 million  higher gross profit in first
quarter 2007. In the three-month comparison,  increased SG&A expenses related to
the growth in the business and the increase in the  investment in R&D offset the
gross profit improvement.

AGRICULTURAL PRODUCTIVITY SEGMENT


-----------------------------------------------------------------------------------------------------------------------------
                                                                                              Three Months Ended Nov. 30,
                                                                                           ----------------------------------
(Dollars in millions)                                                                         2006        2005     % Change
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                          
Net Sales
ROUNDUP and other glyphosate-based herbicides                                              $    649     $    549      18%
All other agricultural productivity products                                                    210          200       5%
-----------------------------------------------------------------------------------------------------------------------------
Total Net Sales                                                                            $    859     $    749      15%
-------------------------------------------------------------------------------------------==================================
Gross Profit
ROUNDUP and other glyphosate-based herbicides                                              $    194     $    182       7%
All other agricultural productivity products                                                     72           66       9%
-----------------------------------------------------------------------------------------------------------------------------
Total Gross Profit                                                                         $    266     $    248       7%
-------------------------------------------------------------------------------------------==================================
EBIT(1)                                                                                    $    103     $     93      11%
-----------------------------------------------------------------------------------------------------------------------------


(1)  EBIT is defined as earnings (loss) 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 14 -- Segment  Information and the "Overview
     -- Non-GAAP Financial Measures" section of MD&A for further details.

Agricultural  Productivity  Financial  Performance  -- First Quarter Fiscal Year
2007

Net sales of ROUNDUP and other glyphosate-based herbicides increased 18 percent,
or  $100  million,  in the  quarter-to-quarter  comparison.  In the  three-month
comparison,  sales volumes of ROUNDUP herbicides  increased in the United States
and Brazil.

Sales volumes of ROUNDUP and other glyphosate-based  herbicides increased in the
United  States  because of an  increase  in customer  demand  resulting  from an
increase in ROUNDUP READY corn acres.

ROUNDUP  herbicides  net sales  increased in Brazil because of an improvement in
farmer liquidity which increased the demand for our branded chemistry  products.
Farmer  liquidity  improved  in the  quarter-over-quarter  comparison  primarily
because of the increase in the soybean commodity prices.

The sales increases  discussed  throughout this section  resulted in $18 million
higher gross profit in first  quarter  2007.  Gross profit as a percent of sales
for the Agricultural  Productivity  segment  declined 2 percentage  points to 31
percent in first quarter 2007. A key contributor to this decline was higher cost
of  goods  sold for  herbicides  because  of price  increases  for  certain  raw
materials  and energy  required for  herbicide  production  and the  unfavorable
effect of the exchange rate for the Brazilian  real.  EBIT for the  Agricultural
Productivity  segment  increased  $10 million to $103  million in first  quarter
2007.

                                       22


MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------

FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES

--------------------------------------------------------------------------------

Working Capital and Financial Condition


----------------------------------------------------------------------------------------------------------------------------
                                                                                                                   As of
                                                                                      As of Nov. 30,             Aug. 31,
                                                                                ---------------------------     ------------
(Dollars in millions, except current ratio)                                         2006          2005             2006
--------------------------------------------------------------------------------------------- -------------     ------------
                                                                                                       
Cash and cash equivalents                                                       $  1,842      $  1,006          $  1,460
Short-term investments                                                                --           168                22
Trade receivables -- net                                                           1,306         1,413             1,455
Inventories                                                                        1,954         1,890             1,688
Other current assets(1)                                                              851           963               836
-----------------------------------------------------------------------------------------------------------     ------------
Total Current Assets                                                            $  5,953      $  5,440          $  5,461
-----------------------------------------------------------------------------------------------------------     ------------

Short-term debt                                                                 $     42      $     78          $     28
Accounts payable                                                                     477           447               514
Accrued liabilities(2)                                                             2,162         2,301             1,737
-----------------------------------------------------------------------------------------------------------     ------------
Total Current Liabilities                                                       $  2,681      $  2,826          $  2,279
-----------------------------------------------------------------------------------------------------------     ------------
Working Capital(3)                                                              $  3,272      $  2,614          $  3,182
Current Ratio(3)                                                                  2.22:1        1.92:1            2.40:1
--------------------------------------------------------------------------------===========================     ============

(1)  Includes miscellaneous receivables,  current deferred tax assets, assets of
     discontinued  operations and other current  assets.
(2)  Includes income taxes payable,  accrued compensation and benefits,  accrued
     marketing programs, deferred revenues, grower accruals, contingent purchase
     price -- Seminis (only as of Nov. 30, 2005),  liabilities  of  discontinued
     operations and miscellaneous  short-term accruals.
(3)  Working  capital is total current  assets less total  current  liabilities;
     current  ratio  represents  total current  assets  divided by total current
     liabilities.

Nov.  30, 2006,  compared  with Aug. 31, 2006:  Working  capital  increased  $90
million  between  Aug. 31, 2006,  and Nov.  30, 2006,  because of the  following
factors:

     o    Cash  and  cash   equivalents   increased  $382  million  between  the
          respective  periods.  See the "Cash Flow"  section in this  section of
          MD&A for further  details of this  increase.

     o    Inventories  increased  $266 million  between the  respective  periods
          primarily because of the seasonality of our U.S. corn and soybean seed
          business in which the fall  harvest of seed  products  occurs in first
          quarter of the fiscal year resulting in a higher inventory  balance as
          of Nov. 30, 2006.

These  increases to working  capital  between Aug. 31, 2006,  and Nov. 30, 2006,
were offset primarily by the following factors:

     o    Accrued  liabilities  increased  $425  million  primarily  because our
          deferred revenue balance increased due to U.S. customer prepayments in
          first quarter 2007.

     o    Trade receivables -- net decreased $149 million due to the seasonality
          of our business.

Nov. 30, 2006,  compared  with Nov. 30, 2005:  Working  capital  increased  $658
million  between Nov.  30,  2006,  and Nov.  30,  2005.  The  following  factors
increased working capital as of Nov. 30, 2006, compared with Nov. 30, 2005:

     o    Cash  and  cash   equivalents   increased  $836  million  between  the
          respective  periods.  As presented on the  Statements of  Consolidated
          Cash Flows,  the net  increase in cash and cash  equivalents  was $382
          million in first  quarter  2007  compared  with $481  million in first
          quarter 2006. The cash and cash  equivalents  balance was higher as of
          Aug. 31, 2006,  compared with Aug. 31, 2005, by $935 million primarily
          because of payments for  acquisitions  in 2005.

     o    Accrued  liabilities  decreased $139 million  primarily because of the
          $125 million liability  related to the Seminis  acquisition as of Nov.
          30, 2005. We paid this liability during the second quarter of 2006.

These working capital increases were offset primarily by the following  factors:

     o    We decreased our position in short-term investments by $168 million as
          of Nov. 30, 2006, to less than $1 million.

     o    Trade  receivables -- net decreased $107 million  primarily because of
          the tightening of our credit policies in South America.

                                       23


MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------

Customer Financing  Programs:  We refer certain of our interested U.S. customers
to a third-party specialty lender that makes loans directly to our customers. In
April  2002,  we  established  this  revolving  financing  program of up to $500
million, which allows certain U.S. customers to finance their product purchases,
royalties and licensing fee  obligations.  The funding  availability may be less
than $500 million if certain program requirements are not met. It also allows us
to reduce our reliance on commercial paper borrowings. We received $4 million in
first  quarter  2007 and $18 million in first  quarter 2006 from the proceeds of
loans made to our customers through this financing  program.  These proceeds are
included in the net cash provided by operating  activities in the  Statements of
Consolidated  Cash Flows.  We originate  these  customer  loans on behalf of the
third-party   specialty   lender,   a  special  purpose  entity  (SPE)  that  we
consolidate,  using our credit and other underwriting guidelines approved by the
lender.  We service the loans and provide a  first-loss  guarantee of up to $130
million.  Following origination,  the lender transfers the loans to multi-seller
commercial paper conduits through a nonconsolidated  qualifying  special purpose
entity (QSPE).  We have no ownership  interest in the lender, in the QSPE, or in
the loans.  We account for this  transaction as a sale, in accordance  with SFAS
No.  140,  Accounting  for  Transfers  and  Servicing  of  Financial  Assets and
Extinguishment of Liabilities (SFAS 140).

As of Nov. 30, 2006,  and Aug. 31, 2006, the customer loans held by the QSPE and
the  QSPE's  liability  to the  conduits  were $154  million  and $268  million,
respectively.  The  lender or the  conduits  may  restrict  or  discontinue  the
facility at any time. If the facility were to terminate, existing loans would be
collected by the QSPE over their remaining terms  (generally 12 months or less),
and we would  revert to our past  practice of  providing  these  customers  with
direct credit purchase  terms.  Our servicing fee revenues from the program were
not significant.  As of Nov.30,  2006, and Aug. 31, 2006, our recorded guarantee
liability was less than $1 million, primarily based on our historical collection
experience  with these  customers and a current  assessment of credit  exposure.
Adverse changes in the actual loss rate would increase the liability.

In November  2004,  we entered  into an  agreement  with a lender to establish a
program to provide  financing  of up to $40 million for  selected  customers  in
Brazil.  The agreement,  as amended in May 2005,  qualified for sales  treatment
under  SFAS  140.   Accordingly,   the  customer  receivables  and  the  related
liabilities that had been recorded since the program was established in November
2004 were removed from the company's consolidated balance sheet in May 2005 as a
noncash transaction. Proceeds from the transfer of the receivables subsequent to
the May 2005 amendment are included in net cash provided by operating activities
in the  Statements  of  Consolidated  Cash  Flows.  The  program  was amended to
increase  the total  funds  available  under the  program  to $110  million.  We
received  $51  million  and $18  million  of  proceeds  through  these  customer
financing  programs in first quarter 2007 and first quarter 2006,  respectively.
The amount of loans  outstanding was $100 million and $64 million as of Nov. 30,
2006, and Aug. 31, 2006,  respectively.  The maximum  potential amount of future
payments  under  the  guarantees  was $100  million  as of Nov.  30,  2006.  The
liability  for the  guarantee  is recorded at an amount that  approximates  fair
value  and is  primarily  based on our  historical  collection  experience  with
customers  that  participate  in the program and a current  assessment of credit
exposure.  Our guarantee  liability was $3 million and $2 million as of Nov. 30,
2006,  and Aug. 31, 2006,  respectively.  If  performance  is required under the
guarantee, we may retain amounts that are subsequently collected from customers.

We also have  similar  agreements  with  banks  that  provide  financing  to our
customers in Brazil through credit programs that are subsidized by the Brazilian
government, and in similar programs in Europe and Argentina. These programs also
qualify  for sales  treatment  under SFAS 140.  Accordingly,  proceeds  from the
transfer of receivables through the programs described above are included in net
cash provided by operating  activities in the  Statements of  Consolidated  Cash
Flows.  We  received  $38 million  and $32  million of  proceeds  through  these
customer  financing  programs  in first  quarter  2007 and first  quarter  2006,
respectively. The amount of loans outstanding was $66 million and $47 million as
of Nov. 30, 2006, and Aug. 31, 2006, respectively. For most programs, we provide
a full guarantee of the loans in the event of customer default. The terms of the
guarantees are equivalent to the terms of the bank loans. The maximum  potential
amount of future  payments  under the  guarantees was $66 million as of Nov. 30,
2006. The liability for the guarantee is recorded at an amount that approximates
fair value and is primarily based on our historical  collection  experience with
customers  that  participate  in the program and a current  assessment of credit
exposure.  Our guarantee  liability was $1 million as of Nov. 30, 2006, and Aug.
31, 2006. If performance is required under the guarantee,  we may retain amounts
that are subsequently collected from customers.

                                       24


MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------

We also sell accounts  receivable,  both with and without recourse.  These sales
qualify for sales  treatment  under SFAS 140 and  accordingly,  the proceeds are
included in net cash  provided by  operating  activities  in the  Statements  of
Consolidated  Cash Flows. The gross amounts of accounts  receivable sold totaled
$4 million for first quarter 2007 and first quarter 2006.  The liability for the
guarantees  for sales with  recourse is recorded at an amount that  approximates
fair value and is based on the company's  historical  collection  experience for
the customers  associated with the sale of the accounts receivable and a current
assessment of credit exposure.  Our guarantee liability was less than $1 million
as of Nov. 30, 2006 and Aug. 31, 2006.  The maximum  potential  amount of future
payments  under the recourse  provisions of the agreements was $31 million as of
Nov. 30, 2006. The outstanding  balance of the receivables  sold was $31 million
and $41 million as of Nov. 30, 2006, and Aug. 31, 2006, respectively.

Cash Flow


-----------------------------------------------------------------------------------------------------------------------------
                                                                                                  Three Months Ended Nov. 30,
                                                                                                  --------------------------
(Dollars in millions)                                                                                 2006         2005
----------------------------------------------------------------------------------------------------------------------------
                                                                                                          
Net Cash Provided by Operating Activities                                                         $    600      $    773
Net Cash Required by Investing Activities                                                              (67)         (135)
----------------------------------------------------------------------------------------------------------------------------
Free Cash Flow(1)                                                                                      533           638
----------------------------------------------------------------------------------------------------------------------------
Net Cash Required by Financing Activities                                                             (156)         (157)
Effect of Exchange Rate Changes on Cash and Cash Equivalents                                             5            --
----------------------------------------------------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents                                                              382           481
Cash and Cash Equivalents at Beginning of Period                                                     1,460           525
----------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period                                                        $  1,842      $  1,006
--------------------------------------------------------------------------------------------------==========================

(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).

Cash  provided by operating  activities  was $600 million in first  quarter 2007
compared with $773 million in first  quarter 2006. In first quarter 2007,  other
items were a use of cash of $70 million and in first quarter  2006,  other items
were a source  of cash of $53  million.  The two  largest  contributors  to this
decline were the  non-recurring $43 million payment we received in first quarter
2006  from  our  distributor  of  lawn-and-garden  products  and the  timing  of
collections  of  value-added  tax  credits  outside of the United  States.  Cash
required for  inventory  increased  $35 million to $256 million in first quarter
2007 primarily  because of increased  activity levels in our U.S. corn business.
The change in accounts payable and accrued liabilities was a use of cash of $158
million in first  quarter  2007  compared  with $127  million in the  prior-year
quarter.  This increase in the use of cash  resulted from higher market  funding
payments in the  quarter-over-quarter  comparison resulting from the increase in
sales in fiscal year 2006 when compared with fiscal year 2005 and an increase in
the timing of market funding  payments.  These declines were partially offset by
an increase in cash  provided  by the change in trade  receivables  driven by an
increase in collections in the quarter-over-quarter comparison.

Cash   required  by   investing   activities   decreased   $68  million  in  the
quarter-over-quarter  comparison.  This  decrease  is  primarily  because of the
businesses we acquired in 2006.

The amount of cash  required by financing  activities  was $156 million in first
quarter 2007 compared with $157 million in first quarter 2006. The net change in
short-term  financing required cash of $7 million in first quarter 2007 compared
with $124 million in the  prior-year  quarter.  Cash required for long-term debt
reductions  was $69 million in first  quarter 2007  compared with $26 million in
first quarter 2006. In first quarter 2007,  treasury  stock  purchases  required
cash of $56 million under the four-year $800 million share  repurchase  program,
which was  authorized by our board of directors on Oct. 25, 2005. No shares were
repurchased under this plan in first quarter 2006.

Capital Resources and Liquidity


---------------------------------------------------------------------------------------------------------------------------
                                                                               As of Nov. 30,               As of Aug. 31,
                                                                       --------------------------------     ---------------
(Dollars in millions, except debt-to-capital ratio)                           2006             2005              2006
-------------------------------------------------------------------------------------------------------     ---------------
                                                                                                    
Short-Term Debt                                                           $     42         $     78         $      28
Long-Term Debt                                                               1,580            1,445             1,639
Total Shareowners' Equity                                                    6,661            5,754             6,525
Debt-to-Capital Ratio                                                          20%              21%               20%
-------------------------------------------------------------------------------------------------------     ---------------


Total debt outstanding decreased $45 million between Aug. 31, 2006, and Nov. 30,
2006,  primarily  because we repaid $63 million of our three-year term bank loan
in Europe in October 2006.

                                       25


MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------

Dividend:  In December  2006,  we  declared a  quarterly  dividend of 12.5 cents
payable on Jan. 26, 2007, to shareowners of record as of Jan. 5, 2007.

Capital Expenditures:  We expect 2007 capital expenditures to be in the range of
$400 million  compared  with $370 million in 2006.  The largest  drivers of this
increase  are  expected  to be  projects  to  expand  corn seed  production  and
information technology facilities.

2007  Acquisition:  In December 2006,  Monsanto entered into two agreements with
Landec  Corporation.  In the  first  agreement,  ASI  acquired  Landec's  direct
marketing and seed sales company,  Fielder's Choice Direct, for a purchase price
of $50 million, with a potential additional earn-out amount of up to $5 million.
In the second  agreement,  Monsanto entered into a five-year  global  technology
license with Landec for certain seed coating technology.  Monsanto also received
an option to buy-out the  technology.  Future payments over the five year period
related to this agreement could range from $17 million to $21 million.

2006 Acquisitions:  In 2006, ASI acquired 12 regional U.S. seed companies for an
aggregate  purchase price of $133 million (net of cash  acquired).  For all 2006
acquisitions,  the business operations of the acquired entities were included in
the Seeds and  Genomics  segment.  See Note 3 --  Business  Combinations  -- for
further discussion of these acquisitions.

Pending Acquisition:  On Aug. 15, 2006, we announced the signing of a definitive
agreement  to  purchase  all of the  outstanding  stock of Delta  and Pine  Land
Company (NYSE: DLP) for a cash purchase price of $42 per share, or approximately
$1.5 billion (net of cash acquired and debt  assumed).  Delta and Pine Land is a
leader in the cotton  seed  industry  and  currently  operates  the  largest and
longest  running  private  cotton  seed  breeding  program  in  the  world.  The
transaction  was  unanimously  approved  by the  boards  of  directors  of  both
companies,  and on Dec. 21, 2006, was approved by the  shareholders of Delta and
Pine Land.  Appropriate filings were made under the  Hart-Scott-Rodino  Act, and
the transaction is being reviewed by federal and state authorities including the
U.S.  Department  of Justice  (DOJ) and is subject  to other  customary  closing
conditions.  The  transaction  has received  clearance  from ex-U.S.  regulatory
authorities  that required  pre-merger  notification.  The initial  deadline for
closing  prescribed  in the merger  agreement is Feb.  14,  2007,  subject to an
automatic  extension  of up to six months to  complete  regulatory  reviews.  We
anticipate that the regulatory process may extend beyond Feb. 14, 2007, and that
therefore  the  automatic  extension  period  will be  invoked  per  the  merger
agreement.  The agreement provides several potential consequences for litigation
between  Delta and Pine Land and us in the event the  transaction  is not closed
because of: (1) certain circumstances  generally related to antitrust issues, in
which case we would be obligated to pay Delta and Pine Land $600 million and all
litigation would terminate; (2) Delta and Pine Land's failure to perform certain
covenants,  in which case all  litigation  would  terminate  without  payment by
either party;  or (3) any other reason,  in which case litigation may recommence
and  certain  of Delta and Pine  Land's  licenses  with us may be amended in its
favor, depending on the reason for the termination.

We may be  required  to  divest  the U.S.  assets of our  Stoneville  cottonseed
business,  as a condition  of  obtaining  regulatory  clearance  of our proposed
acquisition  of Delta and Pine Land.  As such,  we have engaged in activities to
identify  potential  buyers for this business.  However,  any sale of Stoneville
assets  would be  conditioned  upon  consummation  of the  Delta  and Pine  Land
acquisition,  which is being reviewed by regulatory agencies.  Accordingly,  the
financial  results  of the  Stoneville  business  are  included  in income  from
continuing operations for all years presented. We intend to finance a portion of
the  acquisition  with cash reserves at the time of close and are  considering a
number of alternatives to finance the remaining balance,  including current debt
facilities  already in place.  If we decide to change our capital  structure  to
finance the acquisition,  some initial  alternatives under  consideration are an
increased  credit  line,  commercial  paper  financing  or an  incremental  debt
offering.

Solutia Contingency:  On Feb. 14, 2006, Solutia filed its Plan of Reorganization
(Plan) and accompanying  Disclosure  Statement with the Bankruptcy Court.  Among
other  things,  the  Plan  provides  for $250  million  of new  investment  in a
reorganized  Solutia  in the  form of a rights  offering  to  certain  unsecured
creditors,  who will be given the  opportunity  to purchase  22.7 percent of the
common stock in the  reorganized  Solutia.  The date for any rights offering has
not  been  established.   Subject  to  approval  of  the  Bankruptcy  Court  and
confirmation  of the Plan,  we have  agreed to  backstop  the  rights  offering,
meaning  we have  agreed to  purchase  any amount of the  rights  offering  left
unsubscribed by the unsecured creditors, up to the entire $250 million of stock.
On Dec. 28, 2006, Solutia filed a Form 8-K disclosing,  among other things, that
it has  developed  a  proposal  for an  amended  plan of  reorganization,  which
proposal was designed to act as a framework for  negotiations  among Solutia and
certain stakeholders.  No amended plan has been filed, and we do not know if any
terms, such as the rights offering, would be modified. No assurance can be given
that the Plan will be approved. See Note 13 for further details.

                                       26


MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------

Contingent Liabilities Relating to Solutia Inc. (Off-Balance Sheet Arrangement)

There are no  material  changes  related to our  off-balance  sheet  arrangement
relating  to  Solutia  from the  disclosure  in our  Report on Form 10-K for the
fiscal year ended Aug. 31, 2006. See Note 13 under the subheading "Solutia Inc."
for further  information  regarding  Solutia's Assumed  Liabilities,  the charge
taken  in  connection  with  Solutia's  Assumed  Liabilities,  and  the  plan of
reorganization filed by Solutia in its bankruptcy. Also see Part II -- Item 1 --
Legal Proceedings for further information.

OUTLOOK

--------------------------------------------------------------------------------

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 of these two
parts of our  business  is quite  different.  In the  Agricultural  Productivity
segment, our glyphosate business is stable, and our selective chemistry business
is expected to decline. In the Seeds and Genomics segment,  our seeds and traits
business is expected to expand.  As a result,  we are focused on maintaining our
position in our  chemistry  business,  and we are striving to grow our seeds and
traits business.

We believe that our company is positioned to sustain  earnings growth and strong
cash flow, and we remain  committed to returning  value to  shareowners  through
vehicles such as  investments  that grow and expand the business,  dividends and
share  repurchases.  We will remain focused on cost and cash management for each
segment, 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.  We also
expect to see  increased  gross  profit as our  higher-margin  seeds and  traits
business grows.

We expect to continue to implement locally  responsive  business  strategies for
our businesses in each world area.  Outside of the United States, our businesses
will continue to face  additional  challenges  related to the risks  inherent in
operating in emerging markets. We have taken steps to reduce our credit exposure
in those areas,  which has the potential to negatively  affect sales in the near
term.

Seeds and Genomics

Our capabilities in plant breeding and  biotechnology  research are generating a
rich and balanced product  pipeline that we expect will drive long-term  growth.
We plan to  continue  to invest  more than 85 percent of our R&D in the areas of
seeds, genomics and biotechnology 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 U.S. and international seeds and traits businesses
will have significant  near-term growth  opportunities  through a combination of
improved  breeding,  continued growth of stacked and  second-generation  biotech
traits, and acquisitions.

We  expect  advanced  breeding  techniques  combined  with  improved  production
practices  and  capital  investments  to  continue  to  contribute  to  improved
germplasm quality and yields for our seed offerings, leading to increased global
demand for both our branded and our licensed germplasm.  Our vegetable and fruit
portfolio  will focus on 25 crops.  We plan to continue  to apply our  molecular
breeding and marker  capabilities to Seminis'  germplasm and expect that to lead
to growth in our  higher-margin,  global fruit and vegetable  business.  We also
plan to make strategic acquisitions,  such as acquisitions by ASI or Seminis, to
grow our  branded  seed  market  share  or  expand  our  germplasm  library  and
strengthen our global breeding programs.  We entered into a definitive agreement
to acquire  Delta and Pine Land  Company,  which would  provide us a  leadership
position  in the U.S.  cotton  market,  although  we will  likely be required by
regulatory  authorities to  concurrently  sell our current  branded U.S.  cotton
business.  We expect to see continued  competition  in seeds and genomics in the
near  term but  believe  we will have a  competitive  advantage  because  of our
breeding  capabilities and our three-channel sales approach for corn and soybean
seeds.

Commercialization  of  second-generation  traits and the  stacking  of  multiple
traits in corn 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 are currently  seeking the  necessary  regulatory
clearances  at the state level in the United  States and  approvals in countries
that are major  importers of U.S. corn for single and stacked  products with our
next   second-generation   trait,   YIELDGARD   VT.  In  2007,  we  expect  that
higher-value,  stacked-trait products will represent a larger share of our total
U.S. corn seed sales than single-trait  products.  Acquisitions may also present
near-term opportunities to increase penetration of our traits. In particular, we
expect that our  acquisition  of Delta and Pine Land Company  would enable us to
accelerate  penetration of our  second-generation  cotton traits.  We expect the

                                       27



MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------

competition in biotechnology to increase,  as more competitors  launch traits in
the United  States and  internationally  by the end of the decade.  However,  we
believe  we will  have a  competitive  advantage  because  we will be  poised to
deliver second- and third-generation traits, when our competitors are delivering
their first-generation traits.

Our international traits businesses, in particular, will likely continue to face
regulatory  environments that may be nascent or highly  politicized,  as well as
operate in volatile,  and often difficult  economic  environments.  While we see
growth potential in our India cotton business with the ongoing conversion to new
hybrids and  BOLLGARD  II,  this  business is  currently  operating  under state
governmental  pricing directives that we believe have limited near-term earnings
growth and increased our collection risk. We will continue to carefully  monitor
our Indian trade receivables throughout 2007.

In Brazil,  we expect to  continue to need to operate  our  dual-track  business
model of certified seeds and  point-of-grain  or cotton  delivery-based  payment
system to ensure that we capture value on all Monsanto  ROUNDUP  READY  soybeans
and BOLLGARD  cotton  crops grown  there.  Income is expected to grow as farmers
choose to plant more of these approved  traits.  However,  full operation of the
regulatory system to approve additional traits must be achieved for Brazil to be
a greater  contributor to revenue in seeds and traits. The strong Brazilian real
continues to have a negative  effect on the Brazilian  agricultural  economy and
farmer liquidity in 2007. To mitigate the associated credit risks we continue to
monitor  our  credit  policy,  expand our  grain-based  collection  system,  and
increase cash sales.

It is likely  that a ruling of patent  infringement  from court  cases in Europe
will be required  before we can expect to capture  value from our ROUNDUP  READY
soybeans  grown  in  Argentina.   We  are  continuing  to  discuss   alternative
arrangements with various  stakeholders;  however, we have no certainty that any
of these  discussions  will lead to a paying outcome in the near term. We do not
plan to seek to commercialize new soybean or cotton traits in Argentina until we
can achieve more certainty that we would be compensated for the technology.

Agricultural Productivity

We  believe  our  ROUNDUP  herbicide   business  will  continue  to  generate  a
sustainable  source of cash and gross profit for us, even with increased pricing
pressure from generic formulations of glyphosate herbicides. We have experienced
increased  demand in  recent  years and are  evaluating  strategies  to meet the
future  demand for our  ROUNDUP  business,  as well as our  licensed  glyphosate
business.  To sustain the cash and income generation of our ROUNDUP business, we
expect to have to continue to actively  manage our  inventory  and other  costs,
particularly in our  international  businesses,  and offer product  innovations,
superior  customer  service and logistics  and marketing  programs to support or
allow us to increase  prices.  Any further  expansion  of crops with our ROUNDUP
READY traits may also incrementally increase sales of our ROUNDUP products.

Like most other selective herbicides,  our products face increasing  competitive
pressures and a declining  market,  in part because of the rapid  penetration of
ROUNDUP  READY  corn in the  United  States.  We will  continue  to seek ways to
optimize our  selective  herbicides  business,  as we believe it is important to
offer fully integrated crop-protection solutions,  particularly in ROUNDUP READY
corn. We anticipate a continued  decline in this business in the near term,  but
the gross profit from the ROUNDUP  READY traits and from the ROUNDUP  herbicides
used on these acres are  significantly  higher than the gross profit on the lost
selective herbicide sales.

We expect that our lawn-and-garden  herbicide products will remain a strong cash
generator  and that  they will  support  our  brand  equity in the  marketplace.
However,  we anticipate that they will face increasing  competition from generic
and private-label products and cost pressure from major retailers.

During 2007, our POSILAC business will continue to reduce bulk powder inventory.
Sandoz GmbH,  which  manufactures  the active  ingredient  and the finished dose
formulation  for  POSILAC,  has notified us of its  intention  to terminate  its
agreement with us,  effective Dec. 31, 2008. We do not expect the termination to
have a  significant  effect on our  supplies  because  in 2006 we  received  FDA
approval of the Augusta, Georgia facility for finished formulation and packaging
of POSILAC.  We believe some processor  requests for "r-BST-free"  milk, coupled
with rising feed costs, could limit our future sales.

Other Information

As discussed in Note 13 -- 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.

                                       28



MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------

As mentioned in the "Overview -- Executive  Summary -- Outlook" section of MD&A,
we are required to indemnify  Pharmacia for Solutia's Assumed  Liabilities.  Our
obligation to indemnify Pharmacia for Solutia's Assumed Liabilities is discussed
in Note 13.

For additional  information on the outlook for Monsanto,  see "Caution Regarding
Forward-Looking  Statements"  below,  and Part II -- Item 1A -- Risk  Factors of
this Form 10-Q.


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, 2006. 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,  by its  nature  the
estimation  process is  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, 2006. 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.

NEW ACCOUNTING STANDARDS

--------------------------------------------------------------------------------

In  September  2006,  the FASB issued SFAS No. 158,  Employers'  Accounting  for
Defined Benefit Pension and Other  Postretirement  Benefit Plans an amendment of
FASB Statements No. 87, 88, and 132(R) (SFAS 158).  SFAS 158 requires  companies
to  recognize  the  overfunded  or  underfunded  status  of  a  defined  benefit
postretirement  plan as an asset or  liability  in its  statement  of  financial
position and to recognize  changes in that funded status  through  comprehensive
income.  This statement also requires the  measurement  date for plan assets and
liabilities to coincide with the sponsor's  year end. The standard  provides two
transition  alternatives  related to the change in measurement  date provisions.
The recognition of an asset and liability related to the funded status provision
is effective for fiscal years ending after Dec. 15, 2006.  Accordingly,  we will
adopt  SFAS 158 in the  fourth  quarter  of  fiscal  year  2007.  The  change in
measurement  date provisions is effective for fiscal years ending after Dec. 15,
2008.  We are  currently  evaluating  the  impact  of  adopting  SFAS 158 on the
consolidated financial statements.

In September  2006, the FASB issued SFAS No. 157, Fair Value  Measurement  (SFAS
157).  SFAS 157 defines fair value,  establishes a framework for measuring  fair
value in generally accepted accounting principles, and expands disclosures about
fair value  measurements.  This statement is effective for financial  statements
issued for fiscal years  beginning  after Nov. 15,  2007.  Accordingly,  we will
adopt SFAS 157 in fiscal year 2009.  We are currently  evaluating  the impact of
adopting SFAS 157 on the consolidated financial statements.

In  September  2006,  the  Securities  and  Exchange   Commission  issued  Staff
Accounting  Bulletin No. 108, (SAB 108).  SAB 108 considers the effects of prior
year  misstatements  when  quantifying  misstatements  in current year financial
statements.  It is  effective  for fiscal  years  ending  after Nov.  15,  2006.
Accordingly, we will adopt SAB 108 in the fourth quarter of fiscal year 2007. We
do not  believe  the  adoption  of SAB 108 will  have a  material  impact on the
consolidated financial statements.

In June 2006, the FASB issued FASB  Interpretation  (FIN) No. 48, Accounting for
Uncertainty in Income Taxes - an  Interpretation  of FASB Statement No. 109 (FIN
48), which  clarifies the accounting  for  uncertainty in tax positions.  FIN 48
requires  financial  statement  recognition of the impact of a tax position,  if
that position is more likely than not to be sustained on  examination,  based on
the  technical  merits of the  position.  This  interpretation  is effective for
fiscal years beginning  after Dec. 15, 2006,  with the cumulative  effect of the
change in accounting principle recorded as an adjustment to retained earnings as

                                       29



MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------

of the beginning of the period of adoption. Accordingly, we will adopt FIN 48 in
first quarter of fiscal year 2008. We are currently evaluating the impact of FIN
48 on the consolidated financial statements.

In March  2006,  the FASB  issued  SFAS No. 156,  Accounting  for  Servicing  of
Financial  Assets -- an amendment of FASB Statement No. 140 (SFAS 156). SFAS 156
requires  recognition of a servicing  asset or liability at fair value each time
an  obligation  is  undertaken  to service a financial  asset by entering into a
servicing  contract.  SFAS 156 also provides guidance on subsequent  measurement
methods  for each  class of  servicing  assets  and  liabilities  and  specifies
financial statement presentation and disclosure requirements.  This statement is
effective for fiscal years beginning after Sept. 15, 2006. Accordingly,  we will
adopt SFAS 156 in fiscal year 2008.  We are currently  evaluating  the impact of
SFAS 156 on the consolidated financial statements.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

--------------------------------------------------------------------------------

In the  interests of our  investors,  and in  accordance  with the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995, this section
of our report explains some of the important  reasons that actual results may be
materially  different  from those that we anticipate.  In this report,  and from
time to time  throughout the year, we share our  expectations  for our company's
future performance.  These forward-looking  statements include statements about:
our business plans; the potential  development,  regulatory approval, and public
acceptance of our products; our expected financial performance,  including sales
performance,   and  the  anticipated  effect  of  our  strategic  actions;   the
anticipated benefits of recent acquisitions; the outcome of contingencies,  such
as  litigation;   domestic  or  international  economic,  political  and  market
conditions; and other factors that could affect our future results of operations
or financial  position,  including,  without  limitation,  statements  under the
captions  "Overview  --  Executive  Summary --  Outlook,"  "Seeds  and  Genomics
Segment," "Agricultural Productivity Segment," "Financial Condition,  Liquidity,
and Capital Resources,"  "Outlook," "Critical Accounting Policies and Estimates"
and "Legal  Proceedings." Any statements we make that are not matters of current
reportage  or  historical  fact  should  be  considered  forward-looking.   Such
statements  often  include  words  such as  "believe,"  "expect,"  "anticipate,"
"intend," "plan," "estimate," "will," and similar expressions.  By their nature,
these types of statements  are  uncertain  and are not  guarantees of our future
performance.

Since  these   statements   are  based  on  factors  that   involve   risks  and
uncertainties,   our  company's  actual   performance  and  results  may  differ
materially from those described or implied by such  forward-looking  statements.
Factors  that could  cause or  contribute  to such  differences  include,  among
others:  continued competition in seeds, traits and agricultural chemicals;  the
company's  exposure  to  various  contingencies,   including  those  related  to
intellectual property protection, regulatory compliance and the speed with which
approvals are received,  and public  acceptance of biotechnology  products;  the
success of the company's  research and development  activities;  the outcomes of
major  lawsuits,  including  proceedings  related to Solutia Inc.;  developments
related to foreign currencies and economies; successful completion and operation
of  recent  and  proposed   acquisitions;   fluctuations  in  commodity  prices;
compliance with  regulations  affecting our  manufacturing;  the accuracy of the
company's  estimates  related to distribution  inventory  levels;  the company's
ability to fund its  short-term  financing  needs and to obtain  payment for the
products that it sells; the effect of weather conditions,  natural disasters and
accidents on the  agriculture  business or the company's  facilities;  and other
risks and factors described in Part II -- Item 1A -- Risk Factors below.

Our forward-looking  statements represent our estimates and expectations and are
based  on  currently  available  information  at the  time  that we  make  those
statements.  However, circumstances change constantly, often unpredictably,  and
many  events  beyond  our  control  will  determine   whether  the  expectations
encompassed in our  forward-looking  statements  will be realized.  As a result,
investors should not place undue reliance on these  forward-looking  statements.
We  disclaim  any  current  intention  or  obligation  to revise  or update  any
forward-looking  statements,  or the factors that may affect their  realization,
whether in light of new information,  future events or otherwise,  and investors
should not rely on us to do so.

ITEM 3.        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

--------------------------------------------------------------------------------

There are no material  changes  related to market risk from the  disclosures  in
Monsanto's Report on Form 10-K for the fiscal year ended Aug. 31, 2006.

                                       30


MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------

ITEM 4.        CONTROLS AND PROCEDURES

--------------------------------------------------------------------------------

We maintain a  comprehensive  set of  disclosure  controls  and  procedures  (as
defined in Rules  13a-15(e)  and  15d-15(e)  under the Exchange Act) designed to
ensure that  information  required  to be  disclosed  in our  filings  under the
Exchange Act is recorded,  processed,  summarized  and reported  accurately  and
within the time periods  specified in the SEC's rules and forms.  As of Nov. 30,
2006 (the Evaluation  Date), an evaluation was carried out under the supervision
and with the  participation  of our  management,  including our Chief  Executive
Officer and Chief  Financial  Officer,  of the  effectiveness  of the design and
operation of our disclosure controls and procedures. Based upon that evaluation,
the Chief Executive  Officer and Chief Financial  Officer  concluded that, as of
the Evaluation Date, the design and operation of these  disclosure  controls and
procedures were effective to provide reasonable  assurance of the achievement of
the objectives described above.

During the quarter  that ended on the  Evaluation  Date,  there was no change in
internal  control over  financial  reporting (as defined in Rules  13a-15(f) and
15d-15(f) under the Exchange Act) that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.

                                       31



MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------

PART II--OTHER INFORMATION

--------------------------------------------------------------------------------

ITEM 1.        LEGAL PROCEEDINGS

--------------------------------------------------------------------------------

We are involved in various legal  proceedings  that arise in the ordinary course
of our business,  as well as proceedings  that we have considered to be material
under SEC  regulations.  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  in Note 13).  We  believe we have
meritorious  legal  arguments  and will  continue  to  represent  our  interests
vigorously  in all of the  proceedings  that we are  defending  or  prosecuting.
Information  regarding certain material  proceedings and the possible effects on
our business of  proceedings  we are defending is disclosed in Note 13 under the
subheading  "Litigation  and  Indemnification"  and is incorporated by reference
herein.  Following is information regarding other material proceedings for which
we are responsible.

The following discussion provides new and updated information  regarding certain
proceedings  to which  Pharmacia  or  Monsanto  is a party  and for which we are
responsible.  Other information with respect to legal proceedings appears in our
Report on Form 10-K for the fiscal year ended Aug. 31, 2006.

Patent and Commercial Proceedings

The following proceeding involves Syngenta AG (Syngenta) and its affiliates:

     o    As described in our Report on Form 10-K for the fiscal year ended Aug.
          31, 2006, on July 28, 2004, Syngenta filed suit against us in the U.S.
          District  Court for the  District of Delaware,  alleging  that we have
          monopolized or attempted to monopolize markets for glyphosate-tolerant
          corn seed, European corn borer-protected corn seed and foundation corn
          seed (the  Antitrust  Action).  Syngenta seeks $57 million in supposed
          actual  damages and  requested  treble  damages,  attorneys'  fees and
          injunctive  relief.  In July  2005,  we  filed  counterclaims  against
          Syngenta,    Syngenta    Seeds,    and   affiliated    companies   for
          misappropriation  of property and false advertising.  On Nov. 8, 2006,
          the Court stayed the trial of this matter.  It currently  has no trial
          setting.

As described in our Report on Form 10-K for the fiscal year ended Aug. 31, 2006,
on July 26, 2005,  American Seed Company  (which is unrelated to Monsanto or its
ASI  subsidiary)  filed a purported  class  action  suit  against us in the U.S.
District  Court for the  District of  Delaware,  supposedly  on behalf of direct
purchasers  of  corn  seed  containing  our  transgenic  traits.  American  Seed
essentially  alleges that we have monopolized or attempted to monopolize markets
for  glyphosate-tolerant  corn seed, European corn borer-protected corn seed and
foundation  corn seed.  Plaintiffs  seek an  unspecified  amount of damages  and
injunctive  relief. On Nov. 13, 2006, the trial court denied  plaintiffs' motion
for class certification.  Plaintiffs have filed a motion with the U. S. Court of
Appeal for the Third Circuit seeking review of the trial court's  decision.  The
case has been stayed pending the decision of the Third Circuit.  There currently
is no trial setting for this matter.

As described in our Report on Form 10-K for the fiscal year ended Aug. 31, 2006,
while efforts continue,  discussions have failed to resolve  outstanding  issues
related to the  development of a payment system for the use of our technology to
produce soybean products in Argentina or Uruguay containing our patented Roundup
Ready  technologies.  We have  initiated  patent  infringement  actions  against
importers  of  Argentine  soy  products  that  were  found by  European  customs
officials to have contained our unlicensed glyphosate-tolerant technology, which
is patented in the respective European  countries.  In June 2005, we filed cases
against Cefetra, in The Hague, the Netherlands,  and Den Lokale Andel, A.m.d.A.,
et al., in the Danish High Court, Eastern Division.  In February and March 2006,
we filed cases against Bunge Iberica SA,  Ceralto SL and Sesostris SAE in Spain,
and Cargill  International  SA and Cargill  plc in England.  Further  cases were
filed in May and June 2006  against  Alfred C.  Toepfer  International  GmbH and
Glencore Grain BV and Glencore  Grain  Rotterdam BV, in the courts of The Hague.
The Argentine government has opposed our use of patent infringement actions as a
means of securing  payment for the use of our  technology  in Argentina  and has
been admitted as an observer to the  proceedings in the Netherlands and Denmark.
No imminent  decision  is expected in any of the cases.  Also in response to our
actions,  the Argentine Secretary of Agriculture has requested that the national
competition  commission in Argentina (CNDC) proceed with a civil  administrative
action  against us. The CNDC has initiated a market  investigation,  but we will
have an opportunity to provide  information to the CNDC before it would consider
whether or not to initiate a formal proceeding.

                                       32


MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------

Farmer Lawsuits

As described in our Report on Form 10-K for the fiscal year ended Aug. 31, 2006,
two  purported  class action  lawsuits were  initially  filed against the former
Monsanto  Company by two groups of farmers  and were  transferred  to the United
States  District  Court for the Eastern  District of  Missouri.  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  Monsanto,  Pioneer,  Syngenta  and  Bayer
CropScience  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.  30, 2003,  the District  Court denied  plaintiffs'  motion to allow their
antitrust claims to proceed as a class action.  On March 7, 2005, the U.S. Court
of Appeals for the Eighth Circuit  affirmed the District Court's denial of class
certification  for plaintiffs'  antitrust  claims.  On Dec. 6, 2006, the parties
resolved this action. All claims have been dismissed with prejudice.

Agent Orange Proceedings

As described in our Report on Form 10-K for the fiscal year ended Aug. 31, 2006,
in a purported class action suit styled Dobbie,  et al. v. The Attorney  General
of Canada, pending in the Federal Court of Canada in Ottawa, Canada, individuals
who  either  served  at or live by a  Canadian  Forces  Base  in  Gagetown,  New
Brunswick,  brought an action  against  the  Canadian  government  for  injuries
supposedly  suffered as the result of exposure to a variety of chemicals used by
it during the course of a 30-year program to control weeds and vegetation at the
facility.  On May 3, 2006, the Federal Court granted the government's  motion to
stay  proceedings so that it could file a third-party  action in this litigation
against The Dow  Chemical  Company  and us, as  manufacturers  of Agent  Orange.
Thereafter,  purported  class  action  lawsuits  have been  filed by  plaintiffs
against the Canadian government in at least three provinces, including Manitoba,
New  Brunswick,  and Ontario.  On Sept.  29, 2006, the Manitoba Court denied the
Canadian government's motion to stay the proceedings before it.

Environmental Proceedings

As described in our Report on Form 10-K for the fiscal year ended Aug. 31, 2006,
on Oct. 18, 2006, we received a proposed Consent Order setting forth allegations
of  violations  of the  Federal  Insecticide,  Fungicide,  and  Rodenticide  Act
(FIFRA).  The EPA  alleged  that on 34  occasions  certain  Monsanto  registered
pesticide  products were sold without up-to-date  labeling,  in violation of EPA
guidance under FIFRA. The EPA has withdrawn its complaint and closed this matter
following its determination that the labeling  provisions did not apply to these
products.

Proceedings Related to Solutia's Assumed Liabilities

See Note 13 for additional  information  regarding legal proceedings  related to
Solutia's Assumed Liabilities.

See "MD&A -- Caution Regarding Forward-Looking  Statements," in Part I -- Item 2
of this Report on Form 10-Q and Item 1A below,  for  information  regarding  the
risk factors that may affect any forward-looking  statements regarding our legal
proceedings.

ITEM 1A.       RISK FACTORS

--------------------------------------------------------------------------------

Please see "MD&A -- Caution Regarding Forward-Looking  Statements," in Part I --
Item 2 of this  Report on Form 10-Q and Part I -- Item 1A of our  Report on Form
10-K for the fiscal year ended Aug. 31, 2006,  for  information  regarding  risk
factors.  There have been no material  changes from the risk factors  previously
disclosed in our Report on Form 10-K.

                                       33



MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------

ITEM 2.        UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

--------------------------------------------------------------------------------

Issuer Purchases of Equity Securities

The following  table is a summary of any purchases of equity  securities  during
the first quarter of fiscal year 2007 by Monsanto and any affiliated purchasers,
pursuant to SEC rules.


-----------------------------------------------------------------------------------------------------------------------------------
                                                                                         (c)Total Number of   (d)Approximate Dollar
                                                                                          Shares Purchased     Value of Shares that
                                                                                         as Part of Publicly   May Yet Be Purchased
                                               (a)Total Number of    (b)Average Price     Announced Plans         Under the Plans
Period                                           Shares Purchased      per Share(1)         or Programs            or Programs
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                    
September 2006:
   Sept. 1, 2006, through Sept. 30, 2006                 --                --                     --            $680,541,246
October 2006:
   Oct. 1, 2006, through Oct. 31, 2006              342,698(2)           43.93                341,399           $665,544,252
November 2006:
   Nov. 1, 2006, through Nov. 30, 2006              772,645              45.30                772,645           $630,541,399
-----------------------------------------------------------------------------------------------------------------------------------
   Total                                          1,115,343              44.88              1,114,044           $630,541,399
--------------------------------------------------=================================================================================

(1)  The average price paid per share is  calculated  on a settlement  basis and
     excludes  commission.
(2)  Includes  1,299  shares  withheld to cover the  withholding  taxes upon the
     vesting of restricted stock.

On Oct. 25, 2005,  the board of directors  authorized the purchase of up to $800
million of the company's common stock over a four-year period.  The plan expires
on Oct. 25, 2009. There were no other publicly announced plans outstanding as of
Nov. 30, 2006.

ITEM 6.        EXHIBITS

--------------------------------------------------------------------------------

Exhibits:  The  list  of  exhibits  in the  Exhibit  Index  to  this  Report  is
incorporated herein by reference.
                                       34



MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------

SIGNATURE

--------------------------------------------------------------------------------

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                MONSANTO COMPANY
                                (Registrant)

                                By: /s/ RICHARD B. CLARK
                                --------------------------------------
                                Richard B. Clark
                                Vice President and Controller
                                (On behalf of the Registrant and as Principal
                                 Accounting Officer)

Date: Jan. 8, 2007


                                       35



MONSANTO COMPANY                                    FIRST QUARTER 2007 FORM 10-Q
--------------------------------------------------------------------------------


EXHIBIT INDEX

--------------------------------------------------------------------------------

These Exhibits are numbered in accordance with the Exhibit Table of Item 601 of
Regulation S-K.

------------------- ------------------------------------------------------------
Exhibit
No.                 Description
------------------- ------------------------------------------------------------
2                   Omitted

3                   Omitted

4                   Omitted

10                  Omitted

11                  Omitted -- see Note 11 of Notes to Consolidated Financial
                    Statements -- Earnings Per Share.

12                  Computation of Ratio of Earnings to Fixed Charges.

15                  Omitted

18                  Omitted

19                  Omitted

22                  Omitted

23                  Omitted

24                  Omitted

31.1                Rule 13a-14(a) Certification (pursuant to Section 302 of the
                    Sarbanes-Oxley Act of 2002, executed by the
                    Chief Executive Officer).

31.2                Rule 13a-14(a) Certification (pursuant to Section 302 of the
                    Sarbanes-Oxley Act of 2002, executed by the
                    Chief Financial Officer).

32                  Rule 13(a)-14(b) Certifications (pursuant to Section 906 of
                    the Sarbanes-Oxley Act of 2002, executed by the Chief
                    Executive Officer and the Chief Financial Officer).



                                       36