Yes, all soybeans are prior art by virtue of countless generations of selective cultivation by unincorporated humans which has resulted in the soybean which Monsanto has modified in their quest for profit and market domination.
No, D9u, by planting the patented seeds, the farmer has made himself a manufacturer of the patented seeds. Again, I don't personally believe that we should have patent protection on anything, but it's rather clear that this is exactly what patents protect against. The exahustion of the patents upon first sale merely means that the patentholder cannot exercise any attempts at controlling resale of the original item. The second generation of seeds is not the original item.
An analogy would be as such: You buy a computer chip. Exhaustion means that the patentholder cannot restrict you from breaking it open and examining the chip with a microscope, or even making a clone that presents the same API to the pinset, or reselling the original chip without compensation to the original manufacturer. What would be against the law, though, would be to take the knowledge you get from the chip, make a copy of large sections of it, and then resell this.
