John Deere Committed to Those Linked to the Land Market Fundamentals

Transcription

1 John Deere Committed to Those Linked to the Land Market Fundamentals Deere & Company July 2013

2 Safe Harbor Statement & Disclosures This presentation includes forward-looking comments subject to important risks and uncertainties. It may also contain financial measures that are not in conformance with accounting principles generally accepted in the United States of America (GAAP). Refer to Deere s reports filed on Forms 8-K (current), 10-Q (quarterly), and 10-K (annual) for information on factors that could cause actual results to differ materially from information in this presentation and for information reconciling financial measures to GAAP. Guidance noted in the following slides was effective as of the company s most recent earnings release and conference call (15 May 2013). Nothing in this presentation should be construed as reaffirming or disaffirming such guidance. This presentation is not an offer to sell or a solicitation of offers to buy any of Deere s securities. 2

3 Table of Contents Slide # Ag Fundamentals U.S. 4 Construction & Forestry Fundamentals U.S. 13 Other Regions 16 3

4 Ag Fundamentals United States

5 $ Billions U.S. Farm Cash Receipts Total cash receipts remain at historically high levels $450 $400 $350 $300 $250 $200 $150 $100 $50 $ F 2013F Government Payments Total Cash Receipts Source: : USDA 11 February F 2013F: Deere & Company Forecast as of 15 May

6 F 2013F $ Billions U.S. Farm Balance Sheet Strong $3,000 30% 28% $2,500 26% $2,000 24% 22% $1,500 20% $1,000 18% 16% $500 14% 12% $0 10% Farm Debt Farm Equity Debt to Equity Ratio (%) Debt to Asset Ratio (%) Source: : USDA 11 February F 2013F: Deere & Company Forecast as of 15 May

7 Dollars per Bushel Dollars per Pound Dollars Per Bushel Dollars per Bushel Corn, Soybeans, Wheat and Cotton Prices Nearby Futures: 2 July July 2013 Corn Soybeans /2/08 7/2/09 7/2/10 7/2/11 7/2/12 7/2/ /2/08 7/2/09 7/2/10 7/2/11 7/2/12 7/2/13 Wheat /2/08 7/2/09 7/2/10 7/2/11 7/2/12 7/2/13 Cotton /2/08 7/2/09 7/2/10 7/2/11 7/2/12 7/2/13 Source: Chicago Board of Trade Corn, Soybeans & Wheat; Intercontinental Exchange Cotton 7

8 Gallons (billions) Agricultural Growth Energy 2007 U.S. Energy Bill Significantly expanded mandatory levels of renewable fuels Corn-Based Starch Ethanol Advanced Biofuels Source: Energy Independence and Security Act of

9 Bushels (millions) Uses of U.S. Corn Crop ,000 20,000 15,000 10,000 5, % 38.0% 35.0% 32.0% 29.0% 26.0% 23.0% 20.0% Exports Food, Seed, & Industrial (Less Ethanol) Ethanol & By-Products for fuel Feed & residual Ethanol & By-Products for Fuel as % of Total Corn Usage Source: USDA Agricultural Projections to 2022, February

10 E 2013P World Farm Fundamentals Global Stocks-To-Use Ratios 90% 80% 70% 60% Cotton 50% 40% 30% 20% 10% Wheat Corn Soybeans 0% Source: USDA - 11 July

11 Bushels (millions) Agricultural Growth Energy U.S. Ethanol 6,000 U.S. Corn Used In Ethanol 5,000 4,000 3,000 2,000 1, /00 01/02 03/04 05/06 07/08 09/10 11/12 13/14F 15/16F Source: Informa May

12 7/2/09 10/2/09 1/2/10 4/2/10 7/2/10 10/2/10 1/2/11 4/2/11 7/2/11 10/2/11 1/2/12 4/2/12 7/2/12 10/2/12 1/2/13 4/2/13 7/2/13 Daily Ethanol Margin Per Bushel Corn Grind Based on Nearby Futures Prices (Excl ITDA*) $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 ($0.50) *Interest, Tax, Depreciation and Amortization (ITDA) totals ~$0.50 and is often disregarded in margin calculations because it does not influence short term production decisions Source: Informa June

13 Construction & Forestry Fundamentals United States

14 F 2013F U.S. Housing Starts Housing Starts (Millions of Units) Multi-Family Housing Starts Single-Family Housing Starts Source: : U.S. Census Bureau December F 2013F: Deere & Company Forecast as of 15 May

15 F 2013F Billions, 2005 Chained $ s U.S. Construction Spending 2,300 2,200 2,100 2,000 1,900 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1, U.S. Construction Spending (Billions, 2005 Chained $ s) Residential Investment in Structures Nonresidential Investment in Structures Government Investment in Structures Government Infrastructure Investment 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% -60% -70% -80% -90% -100% -110% -120% -130% -140% -150% -160% % Total Construction Spend Source: : U.S. Bureau of Economic Analysis December F 2013F: Deere & Company Forecast as of 15 May

16 Other Regions

17 EU 27 Macroeconomic Data F GDP Growth (%) 1.6% -0.3% -0.2% Inflation (%) 2.9% 2.4% 1.7% Unemployment (%) 9.8% 10.7% 11.2% GDP Composition 25% 2% 73% Agriculture Industry Services Major Economies GDP Growth (%) Germany UK France Italy Spain F Source: The World Factbook, 2012 est. Labor Composition 23% 5% 72% Agriculture Industry Services Source: IHS Global Insight April 2013 Source: The World Factbook, 2011 est. 17

18 F $ Billions EU 27 Ag Economic Data $120 Crop Value of Production Utilized agricultural area ~ 187 million hectares Arable land ~ 107 million hectares Growth potential for Ag equipment industry in Central & Eastern Europe $100 $80 $60 $40 $20 $0 Ongoing farm & Ag land consolidation and yield improvements Average farm size ~ 13 hectares Number of farms ~ 13 million Crops included: Wheat, Barley, Corn, Rapeseed, Sunflower Seed, Soybeans, Sugar Beet, Cotton and Rice Source: IHS Global Insight 2013 Share of the World Market Production Net Exports Total Grains 15% 3% Wheat 20% 8% Barley 40% 19% Pork Meat 22% 31% Cow Milk 30% 19% Source: USDA, 2013; average excluding Rice Source: FAO, Eurostat Agricultural Census 2010 Deere & Company Forecast as of 15 May

19 EU 27 Economic Update Lower levels of farm machinery demand Financial crisis continues to impact EU economy Cold, wet weather conditions in UK Overall Ag fundamentals remain positive Beef, pork, milk and grain prices are favorable Production expected to increase to long-term average levels Despite mixed winter crop conditions Deere & Company Forecast as of 15 May

20 EUR bn (nominal prices) EU 27 Government Support of Agriculture Common Agricultural Policy proposed budget frozen at nominal levels (-10% in real terms) Ongoing debate over EU Council proposal to reduce budget by 13% in real terms Portion of direct payments tied to environmentally-friendly farming practices Limited effects of direct payments redistribution in favor of new member states Pillar I (Direct Payments + Market Expenditures) Pillar II (Rural Development) Source: EU Commission, Agra Europe 20

21 Brazil Macroeconomic Data GDP Composition F Interest rate (%) 11.7% 8.5% 7.2% CPI Inflation (%) 6.6% 5.4% 6.3% Unemployment (%) 6.0% 5.5% 5.5% 26% 5% 68% GDP Growth (%) F Agriculture Industry Services Source: Brazilian Institute of Geography and Statistics (IBGE), 2012 est. Labor Composition 23% 17% 60% Agriculture Industry Services Source: Brazilian Institute of Geography and Statistics (IBGE), 2011 Source: IHS Global Insight

22 F Billions of Brazilian Real Brazil Ag Economic Data Gross Value of Agricultural Production Agricultural area ~ 275 million hectares 1 Planted area ~ 72 million hectares 2 ~ 17 million hectares brought into production from (~ half from pasture) ~ 24 million hectares will be brought into production in next decade 3 ~ 4.5% CAGR in industry equipment sales through the end of the decade 3 Average farm size ~ 64 hectares Number of farms ~ 5 million 1 Includes pasture, excludes double crop 2 Includes double crop 3 Deere & Company Forecast as of 15 May 2013 Source: FAO, Conab, Brazilian Institute of Geography and Statistics (IBGE) Key crops: soybean, corn, rice, wheat, sorghum, cotton, sugarcane Source: Actual: MAPA (Brazilian Ministry of Agriculture), Apr : Deere & Company Forecast as of 15 May 2013 Share of the World Market Production Net Exports Soybean 8% 19% Corn 28% 38% Sugar 21% 44% Beef 16% 17% Chicken 16% 36% Source: USDA, 2013; average

23 Brazil Government Support of Agriculture R$133 billion approved for 2012/2013 Agriculture and Livestock Plan R$115 billion targeted towards Agribusiness (large-scale operations) 7.5% higher than 2011/2012 R$18 billion targeted towards family agriculture (small-scale operations) Government programs to support equipment purchases Tractor Engine Interest Grace Programs 1 hp Where Rate Period (Max) Term Maturity Mais Alimentos Brazil 2% 3 Years 10 Perennial Pró-Trator SP 0% 3 6 Not Defined Trator Solidário PR ~ 2% 2 10 Dec14 Finame PSI-BK Moderfrota All All Brazil Brazil 3%-3.5% 2 5.5% Dec13 4 Jun13 Combine Programs 1 Class Where Interest Rate Grace Period (Max) Term Maturity Mais Alimentos IV Brazil 2% 3 Years 10 Perennial Finame PSI-BK Moderfrota All All Brazil Brazil 3%-3.5% 2 5.5% Dec13 Jun13 1 Exclusively Finame qualified products. Minimum of 60% local content (weight and value) 2 3% until 30 June 2013 then 3.5% until 31 December years if amount financed > R$100 million 23

24 CIS Macroeconomic Data F GDP Growth (%) 4.7% 3.5% 3.1% Inflation (%) 9.4% 5.8% 6.7% Unemployment (%) 6.2% 5.4% 5.7% GDP Composition (Russia) 36% 60% 4% Agriculture Industry Services Major Economies GDP Growth (%) Russia Ukraine Kazakhstan Belarus F Source: The World Factbook, 2012 est. Labor Composition (Russia) 27% 8% 65% Agriculture Industry Services Source: IHS Global Insight April 2013 Source: The World Factbook, 2011 est. 24

25 F $ Billions CIS Ag Economic Data Utilized agricultural area ~ 560 million hectares $60 $50 $40 $30 Crop Value of Production Arable land ~ 196 million hectares Significant opportunities exist to improve yield rates in all major crops $20 $10 $0 Land under cultivation (sown crops) expected to remain flat over the next decade Deere estimates Western-style equipment used on <25% of farm land Average farm size ~ 995 hectares Number of farms ~ 0.5 million Crops included: Wheat, Barley, Corn, Sunflower Seed, Rapeseed, Soybeans, Sugar Beet Source: IHS Global Insight 2013, Russia and Ukraine only Share of the World Market Production Net Exports Total Grains 9% 18% Wheat 15% 18% Barley 22% 27% Rapeseed 6% 13% Sunflower 50% 33% Source: USDA, 2013; average excluding Rice Source: FAO, CIS farm statistics (Russia, Ukraine and Kazakhstan) Deere & Company Forecast as of 15 May

26 CIS Government Support of Agriculture Import duty on new and used combines in Russia, Kazakhstan, and Belarus Total for combines and combine bodies is 32.5% (was 5% previously) Effective 13 February 2013 through 5 July 2013 Export barriers lifted Russian grain export ban ended in July 2011 Ukraine s wheat and corn export duty ended in October 2011 Barley export duty ended in January 2012 Restructured Russian National Ag Program for expected to increase Ag support by over 60% by 2020 in nominal terms Interest rate subsidies for Ag equipment to be largely eliminated, replaced with direct subsidies to domestic Ag equipment industry Ag Equipment localization requirements re-considered/strenghtened 26

27 China Macroeconomic Data GDP Composition F Interest rate (%) 6.35% 6.26% 6.00% Inflation (%) 5.4% 2.7% 2.5% Unemployment (%) 4.1% 4.1% 4.1% 45% 10% 45% GDP Growth (%) F Agriculture Industry Services Source: IHS Global Insight, 2012 est. Labor Composition 36% 35% 29% Agriculture Industry Services Source: The World Factbook, 2011 est. Source: IHS Global Insight

28 F $ Billions China Ag Economic Data $250 Crop Value of Production Utilized agricultural area ~ 520 million hectares Arable land & permanent crops ~ 126 million hectares 121 million hectares cultivated in 2011 $200 $150 $100 $50 $0 Rural population % of total declined 13% Average farm size ~ 0.5 hectares Number of farms ~ 252 million Key crops: corn, wheat, rice, oilseeds, and cotton Source: IHS Global Insight 2013 Share of the World Market Production Net Exports Total Grains 21% 0.5% Wheat 18% 0.7% Corn 24% 0.05% Rice 31% 0.8% Cotton 29% 0.2% Source: USDA, 2013; average Source: FAO, IHS Global Insight, China National Bureau of Statistics 28

29 China Government Support of Agriculture 2013E Material Subsidy (basic subsidy for purchase of inputs) Grain Direct Subsidy (for growing encouraged crops) Seed Subsidy (for purchasing high-performing seed) Equipment Subsidy (for purchasing encouraged equipment) RMB (in billions) Source: China Ministry of Agriculture 29

30 India Macroeconomic Data GDP Composition F Interest rate (%) 10.2% 10.3% 9.8% Inflation - WPI (%) 9.5% 7.5% 6.6% Unemployment (%) 8.4% 8.5% 8.4% 64% 18% 18% GDP Growth (%) F Agriculture Industry Services Source: IHS Global Insight, 2010 est. Labor Composition 28% 53% 19% Agriculture Industry Services Source: The World Factbook, 2011 est. Source: IHS Global Insight

31 F $ Billions India Ag Economic Data $150 Crop Value of Production Utilized agricultural area ~ 180 million hectares Arable land ~ 157 million hectares 140 million hectares net area sown (2007/08) $120 $90 $60 $30 $0 Annual industry tractor sales > 500,000 units Average farm size ~ 1.2 hectares Number of farms ~ 129 million Key crops: corn, wheat, rice, oilseeds, cotton Source: IHS Global Insight 2013 Share of the World Market Production Net Exports Total Grains 10% 6% Wheat 14% 6% Corn 2% 3% Rice 22% 20% Cotton 21% 13% Source: USDA, 2013; average Source: FAO, Tractor Manufacturers Association of India, Indian Ministry of Agriculture 31

32 India Government Support of Agriculture , , , , , ,191 Fertilizer Subsidy Food Subsidy (for households) Interest Rate Subsidy (for farmers) Irrigation Subsidy Electricity Subsidy Other Subsidies (mainly for seeds) ,000 1,500 2,000 2,500 Rupees (in billions) Source: India Ministry of Agriculture ( ), India Ministry of Finance ( ) 32

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