Recession or no, we need to eat. But that doesn't mean this downturn has been an easy one for agricultural stocks.

Even now that investors dare to dream of economic recovery, the clouds hanging over Big Ag haven't lifted quite yet. On May 27, bad news came from agricultural products powerhouse Monsanto (MON). Based on enthusiasm for its genetically modified seeds, which boost farm yields, Monsanto was a top-performing stock of recent years. However, the company disappointed investors on May 27 by warning 2009 earnings could fall on the lower end of a previously predicted range.

The problem is not Monsanto's seed business, but its older herbicide business, sold under the brand name Roundup. Gross profits from that division could fall from a previous forecast of $2.4 billion to about $2 billion, the firm warned.

Monsanto Chairman and Chief Executive Hugh Grant emphasized the positive. "Even in the face of a $400 million decline in our expected gross profit from Roundup, we can see a path to our fifth consecutive year of 20% or greater earnings growth," Grant said in prepared remarks at an investment conference.

Competition from Generics The patent for Monsanto's Roundup has expired and overseas competitors are producing a glut of cheap generic "glyphosate" fertilizer. Citigroup (C) analyst P.J. Juvekar cites "an onslaught" of glyphosate from China. "Longer term, we remain positive on the company's growth prospects as Monsanto's pipeline of agricultural biotech products is unrivaled by competitors," Juvekar wrote May 17. But lower-cost competition on its ag chemical division creates "near-term pressures," he said.

UBS (UBS) analyst Don Carson lowered estimates for Monsanto, citing both Chinese competition and also problems from bad weather affecting corn and soybean planting. "The delayed planting season in the U.S. farm belt has prolonged the period of weak demand that began this past fall," he wrote May 27.

And the farming sector still hasn't shaken off the effects of last fall's financial and economic meltdown. Farmers are still have trouble getting financing, said Credit Suisse (CS) analyst Rohan Gallagher in a May 25 note on the sector's outlook. Both farm income and capital expenditures should hit a six-year low this year, he predicted. "Farmers continue to delay fertilizer purchases [and] no material improvement demand is expected short term," Gallagher wrote.

Rising Commodity Prices Still, there is good news in farm country: Commodity prices -- for grains and other farm products -- have risen along with hopes for the economy. As a result, some ag stocks have also moved higher. Monsanto shares did fall 6.3% on May 27, to 79.88.