By Tom Polansek

CHICAGO (Reuters) - Monsanto Co <MON.N> will give cash back to U.S. farmers who buy a weed killer that has been linked to widespread crop damage, offering an incentive to apply its product even as regulators in several U.S. states weigh restrictions on its use.

The incentive to use XtendiMax with VaporGrip, a herbicide based on a chemical known as dicamba, could refund farmers over half the sticker price of the product in 2018 if they spray it on soybeans Monsanto engineered to resist the weed killer, according to company data.

The United States faced an agricultural crisis this year caused by new formulations of dicamba-based herbicides, which farmers and weed experts say harmed crops because they evaporated and drifted away from where they were sprayed.

Monsanto says XtendiMax is safe when properly applied. The company is banking on the chemical and soybean seeds engineered to resist it, called Xtend, to dominate soybean production in the United States, the world’s second-largest exporter.

BASF SE <BASFn.DE> and DowDuPont <DWDP.N> also sell versions of dicamba-based herbicides.

Monsanto's cash-back offer comes as federal and state regulators are requiring training for farmers who plan to spray dicamba in 2018 and limiting when it can be used. Weed specialists say the restrictions make the chemical more costly and inconvenient to apply, but Monsanto's incentive could help convince farmers to use it anyway.

"We believe cash-back incentives for using XtendiMax with VaporGrip Technology better enable growers to use a management system that represents the next level of weed control," said Ryan Rubischko, Monsanto product manager.

XtendiMax costs about $11 per acre to buy, and Monsanto is offering an extra $6 per acre in cash back to farmers when they apply it on Xtend soybeans, rather than using another seed-and-chemical combination to control weeds.

The rebate means farmers can receive up to $11.50 per acre in cash back next year when they use XtendiMax along with other approved chemicals, such as one called Intact that aims to prevent drift and costs $2.40 per acre, according to Monsanto.

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The company, which launched a program offering incentives to use multiple herbicides in 2010, competes against rivals including Bayer AG <BAYGn.DE> to sell genetically modified soybean seeds and chemicals to farmers.

Bayer is selling its LibertyLink soybean brand, a main rival to Xtend, to BASF as part of a deal to acquire Monsanto for $63.5 billion.

Monsanto also faces increasing government oversight.

On Monday, Missouri said it would ban sprayings of XtendiMax and DowDuPont's product, called FeXapan, in 10 counties after June 1, 2018, and statewide after July 15, 2018. Last month, the state imposed the same restrictions on BASF's dicamba herbicide, Engenia.

North Dakota said it planned to prohibit the use of dicamba herbicides after June 30, 2018, and when temperatures top 85 degrees Fahrenheit in a bid to prevent the chemical from drifting away from where it is sprayed.

Arkansas is close to prohibiting dicamba sprayings after April 15, 2018, the tightest limits yet, while Minnesota is also considering restrictions.

The states are taking action after the U.S. Environmental Protection Agency mandated special training for dicamba users for 2018 and required farmers to keep records proving they were complying with label instructions.

"Utilizing the technology, the cost will go up because of these changes," said Andrew Thostenson, a pesticide specialist for North Dakota State University.

U.S. farmers planted 90 million acres of soybeans this year, and about 4 percent showed signs of damage linked to dicamba, according to University of Missouri data. Despite that, Monsanto predicts farmers will double plantings of Xtend soybeans to about 40 million acres next year.

Farmers said its cash-back offer was designed to increase sales.

"I think they're just trying to buy more acres," Dan Henebry, an Illinois farmer who plans to grow Xtend soybeans next year, said about Monsanto.





(Reporting by Tom Polansek; Editing by Andrew Hay and Tom Brown)