Market Fundamentals August October 2017 1
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. Past performance may not be representative of future results. Guidance noted in the following slides was effective as of the company s most recent earnings release and earnings call (18 August 2017). 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
Table of Contents Slide Agriculture Fundamentals 4 Construction & Forestry Fundamentals 21 3
4 Agriculture Fundamentals
Global Stocks-to-Use Ratios 60% 120% 50% 100% 40% Wheat Cotton 80% 30% 20% Corn Soybeans 60% 40% Cotton Ratios 10% 20% 0% 1996 1999 2002 2005 2008 2011 2014 2017P 0% Source: USDA, 10 August 2017 5
Global Grain Supply and Demand 3,000 2,500 Million Metric Tons 2,000 1,500 1,000 500 0 93/94 95/96 97/98 99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/14 15/16 17/18 Consumption Production Source: USDA, 10 August 2017 6
Global Grain Demand With and Without Biofuel Use 3,000 3,000 Million Metric Tons 2,000 1,000 Million Metric Tons 2,000 1,000 0 2005 2007 2009 2011 2013 2015 2017F 0 2005 2007 2009 2011 2013 2015 2017F Consumption with biofuel use Consumption without biofuel use * Compound Annual Growth Rate Source: OECD-FAO Agricultural Outlook 2016-2025, July 2016 7
U.S. Farm Cash Receipts $500 $400 $ Billions $300 $200 $100 $0 2001 2003 2005 2007 2009 2011 2013 2015 2017F Crops Livestock Government Payments Source: 2001 2015: USDA, 7 February 2017 2016F 2017F: Deere & Company forecast as of 18 August 2017 8
U.S. Farm Balance Sheet $3,500 30% $3,000 $2,500 25% $ Billions $2,000 $1,500 20% $1,000 15% $500 $0 10% 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013 2017F Farm Debt Farm Equity Debt to Equity Ratio (%) Debt to Asset Ratio (%) Source: 1973 2015: USDA, 7 February 2017 2016F 2017F: Deere & Company forecast as of 18 August 2017 9
Agricultural Growth Energy U.S. Corn Used in Ethanol 6,000 5,000 Millions of Bushels 4,000 3,000 2,000 1,000 0 00/01 02/03 04/05 06/07 08/09 10/11 12/13 14/15 16/17F Source: Informa, August 2017 10
EU 28 Macroeconomic Data 16% GDP Composition 2% 12% 8% 24% 4% 0% 74% -4% -8% Services Industry Agriculture Source: The World Factbook, 2015 est. -12% Interest Rate Inflation Unemployment GDP Growth Germany UK France GDP Growth Major Economies 2015 2016 2017F Source: IHS Global Insight, July 2017 11
EU 28 Ag Economic Data Utilized agricultural area ~ 190 million hectares Arable land ~ 110 million hectares Growth potential for Western Ag equipment industry in Central & Eastern Europe Ongoing farm & Ag land consolidation and yield improvements US$ Billions $150 $120 $90 $60 $30 $0 Crop Value of Production 2008 2011 2014 2017F Average farm size ~ 16 hectares Number of farms ~ 11 million Includes wheat, barley, corn, sunflower seed, rapeseed, soybean, sugar beet, cotton, rice Source: IHS Global Insight, May 2017 Share of the World Market Production Net Exports Total Grains 15% 12% Wheat 21% 19% Barley 42% 29% Pork Meat 21% 34% Cow Milk 30% 44% Source: FAO, Eurostat Agricultural Census 2013 Source: USDA, July 2017; average 2014-2016 (Total Grains: excludes rice; Cow Milk: net exports of cheese) 12
Brazil Macroeconomic Data 16% GDP Composition 12% 5% 8% 23% 4% 0% 72% -4% -8% Services Industry Agriculture -12% Interest Rate CPI Inflation Unemployment GDP Growth Source: Brazilian Institute of Geography and Statistics (IBGE), 2015 2015 2016 2017F Source: IHS Global Insight, July 2017 13
Brazil Ag Economic Data Agricultural area ~ 279 million hectares* Arable land & permanent crop ~ 83 million hectares ~ 17 million hectares brought into production from 2002-2012 (~ half from pasture) ~ 25 million hectares will be brought into production from 2013-2025 US$ Billions $150 $120 $90 $60 $30 $0 Crop Value of Production 2008 2011 2014 2017F ~ 12% CAGR in industry equipment sales through the end of the decade** Average farm size ~ 64 hectares Number of farms ~ 5 million * Includes pasture, excludes double crop ** Deere & Company forecast as of 18 August 2017 (volume only, compared with 2016 actual volume) Source: FAO, Conab, Brazilian Institute of Geography and Statistics (IBGE) Includes key grains, ethanol, sugar Source: IHS Global Insight, May 2017 Share of the World Market Production Net Exports Soybean 31% 41% Corn 8% 18% Sugar 20% 44% Beef 16% 18% Chicken 14% 36% Source: IHS Global Insight, May 2017; average 14/15-15/16 14
CIS Macroeconomic Data 16% GDP Composition (Russia) 12% 4% 8% 4% 36% 0% 60% -4% -8% Services Industry Agriculture Source: The World Factbook, 2015 est. -12% Interest Rate Inflation Unemployment GDP Growth Russia Ukraine Kazakhstan GDP Growth Major Economies 2015 2016 2017F Source: IHS Global Insight, July 2017 15
CIS Ag Economic Data Utilized agricultural area ~ 560 million hectares Arable land ~ 195 million hectares Significant opportunities to improve yield rates in all major crops* Land under cultivation (sown crops) expected to remain nearly flat over the next decade Western-style equipment used on <25% of farm land Average farm size ~ 995 hectares Number of farms ~ 0.5 million US$ Billions $150 $120 $90 $60 $30 $0 Crop Value of Production 2008 2011 2014 2017F Includes wheat, barley, corn, sunflower seed, rapeseed, soybean, sugar beet Source: IHS Global Insight, May 2017 Share of the World Market Production Net Exports Total Grains 10% 23% Wheat 16% 28% Barley 24% 35% Corn 4% 17% Sunflower 54% 39% * Deere & Company forecast as of 18 August 2017 Source: FAO, CIS farm statistics 2006-2007 (Russia, Ukraine and Kazakhstan) Source: USDA, July 2017; average 2014-2016 (Total Grains: excludes rice) 16
China Macroeconomic Data 16% GDP Composition 12% 9% 8% 4% 48% 43% 0% -4% -8% Services Industry Agriculture Source: The World Factbook, 2015 est. -12% Interest Rate Inflation Unemployment GDP Growth 2015 2016 2017F Source: IHS Global Insight, July 2017 17
China Ag Economic Data Utilized agricultural area ~ 515 million hectares $300 Crop Value of Production Arable land & permanent crops ~ 122 million hectares Annual industry tractor sales ~ 300,000 units Rural population % of total declined 15% from 2003-2014 Average farm size ~ 0.47 hectares Number of farms ~ 257.7 million in 2012 US$ Billions $225 $150 $75 $0 2008 2011 2014 2017F Includes corn, wheat, rice, barley, sorghum, oilseeds, peanut, sugar, cotton Source: IHS Global Insight, May 2017 Share of the World Market Production Exports Total Grains 17% 0.3% Wheat 17% 0.5% Corn 22% 0.0% Rice 30% 0.8% Cotton 23% 0.2% Source: FAO, IHS Global Insight, China National Bureau of Statistics Source: IHS Global Insight, July 2017; average 2014-2016 18
India Macroeconomic Data 16% GDP Composition 12% 16% 8% 4% 0% 30% 54% -4% -8% Services Industry Agriculture Source: The World Factbook, 2015 est. -12% Interest Rate Inflation Unemployment GDP Growth 2015 2016 2017F Source: IHS Global Insight, July 2017 19
India Ag Economic Data Utilized agricultural area ~ 180 million hectares Arable land ~ 157 million hectares Annual industry tractor sales ~ 550,000 units Average farm size ~ 1.2 hectares Number of farms ~ 129 million US$ Billions $300 $225 $150 $75 $0 Crop Value of Production 2008 2011 2014 2017F Includes corn, wheat, rice, barley, sorghum, oilseeds, peanut, sugar, cotton Source: IHS Global Insight, May 2017 Share of the World Market Production Exports Total Grains 6% 3% Wheat 12% 1% Corn 2% 1% Rice 26% 26% Cotton 26% 13% Source: FAO, Tractor Manufacturers Association of India, Indian Ministry of Agriculture Source: IHS Global Insight, July 2017; average 2014-2016 20
21 Construction & Forestry Fundamentals
U.S. Housing Starts 2.5 2.0 Millions of Units 1.5 1.0 0.5 0.0 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 2017F Multi-Family Housing Starts Single-Family Housing Starts Source: 1967 2015: U.S. Census Bureau, July 2017 2016F 2017F: Deere & Company forecast as of 18 August 2017 22
U.S. Construction Spending $ Billions* $2,400 $2,000 $1,600 $1,200 $800 $400 60% 40% 20% 0% -20% -40% -60% -80% -100% -120% -140% % Total Construction Spend $0-160% 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017F Government Infrastructure Investment Nonresidential Investment in Structures * 2009$ base Source: 1997 2015: U.S. Bureau of Economic Analysis, July 2017 2016F 2017F: Deere & Company forecast as of 18 August 2017 Government Investment in Structures Residential Investment in Structures 23