Agricultural seed giant Monsanto Co posted a lower-than-expected quarterly profit and warned that potent competition, primarily in its struggling Roundup herbicide business, would make it hard to meet its 2010 financial targets.

The company has seen stiff herbicide competition from rivals such as DuPont on pricing and technology and its patent for the Roundup herbicide will expire in 2015.

The first half of 2010 has seen some new market realities, Monsanto Chief Executive Hugh Grant said on a conference call. We're seeing evidence of margin compression in the herbicide business.

Monsanto warned on Wednesday that full-year results would likely be at the low end of its announced range of $3.10 to $3.30 and it was unlikely to meet its long-promised goal of doubling 2007 gross profit by 2012.

While there may be options to make an accelerated push for 2012, it's clear to me that achieving that objective would involve making short-term choices that are not in the long-range interests of the business, Grant said.

Monsanto executives said fiscal third-quarter profit would be somewhat less than last year and that more than 45 percent of its earnings would need to come in the second half of the year to hit the low end of its annual forecast.

The outlook pushed Monsanto shares down more than 3 percent in morning trading. The shares closed on Wednesday down 2 percent at $68.09, while the shares of rival DuPont slipped 0.05 percent to $38.79.

PROFIT DOWN 19 PERCENT

The St. Louis-based company said its fiscal second-quarter net income fell 19 percent to $887 million, or $1.60 per share, compared with $1.09 billion, or $1.97 per share, a year earlier.

Excluding restructuring charges, Monsanto earned $1.70 per share. By that measure, analysts were expecting $1.73 a share, according to Thomson Reuters I/B/E/S.

Revenue fell 4 percent to $3.89 billion due largely to lower prices for the company's glyphosate-based Roundup herbicide. Analysts had forecast revenue of $3.93 billion.

I'm pleasantly shocked by the results, Edward Jones analyst Dan Ortwerth said. I expected a disaster. Roundup (herbicide) is a train wreck, but we knew that. But the seed business is holding up well.

Grant said Monsanto is committed to Roundup, the most popular herbicide in the world. The company has already launched a second generation of Roundup that will not be subject to the patent expiration.

Roundup is the underpinning of a major franchise for Monsanto that includes soy, corn and other seeds that are resistant to its main chemical, allowing farmers to use the herbicide liberally without fear of damaging crops.

Already, competition is starting to harm results. Gross profit in the quarter slipped 17 percent to $2.1 billion because of price declines for Roundup. For the first six months of the fiscal year, gross profit was down 30 percent or $1.2 billion.

And for fiscal 2010, Monsanto now expects gross profit from its herbicides business of about $600 million, down from last fall's forecast of $650 million to $750 million. In fiscal 2009, the company made $1.84 billion from its herbicide business.

Seed sales and the company's genetic traits -- which are engineered into seeds to make crops resistant to pests, drought and other ailments -- grew in the quarter.

But executives admitted that Monsanto's share of the corn market was flat compared with 2009 and that the company had lost ground in the soybean market.

Monsanto is one of the world's largest producers of genetically modified seeds and the company has had problems recently with regions resistant to the technology. The European Union, which bans GMOs, is currently weighing whether Monsanto's patent for soybean seeds extends to cover imports of processed soybean meal from Argentina to the EU.

At stake is more than 3 billion euros ($4.1 billion) of annual trade in Argentine soymeal to Europe. Argentina is the world's top soymeal supplier and the European Union is its No. 1 client.

Monsanto took a restructuring expense of $84 million in the quarter, including a $54 million charge for U.S. corn cost-of-goods sold to exit some product lines in its U.S. branded corn business.

($1=.7485 euro)

(Reporting by Carey Gillam; additional reporting by Ernest Scheyder; editing by Dave Zimmerman and Andre Grenon)