Brazil Ag Market Fundamentals September 2014
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 (13 August 2014). 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 Brazil Ag Market Fundamentals September 2014
Agribusiness: Key for GDP and trade balance Brazil 100.0 80.0 60.0 40.0 20.0 0.0-20.0-40.0-60.0-80.0-100.0 Brazilian Trade Balance Billions, USD '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 Ag Non Ag Total Source: SECEX / MDIC 3 Brazil Ag Market Fundamentals September 2014
Agricultural growth potential Brazil Grains 56 million hectares Planted forest 6 million hectares Pasture 92 million hectares Degraded pasture 100 million hectares Native forest & other 597 million hectares Source: EMBRAPA 4 Brazil Ag Market Fundamentals September 2014
Global commodity supplier Brazil % of Global Exports Commodity Production Export Sugar 51% Soybean #2 #1 Coffee #1 #1 Chicken Soybeans Coffee Beef 27% 25% 30% 41% Sugar #1 #1 Orange Juice #1 #1 Beef #2 #1 Poultry #2 #1 Ethanol #2 #2 Corn #3 #3 Source: USDA Pork Corn 12% 10% Cotton #4 #3 Pork #4 #4 Rice #9 #8 Wheat #12 #8 5 Brazil Ag Market Fundamentals September 2014
Government support for agriculture Brazil Agriculture & Livestock Plan (billion Reais) Moderfrota+PSI credit amount (billion Reais) 180 160 156 14 Original Budget Additional budget 140 136 12 120 100 93 115 107 100 10 8 6 6 80 60 40 20 27 39 44 50 58 65 6 4 2 2 3 2 2 4 4 6 6 8 - '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 0 '09/'10 '10/'11 '11/'12 '12/'13 '13/'14 '14/'15 Source: MAPA 6 Brazil Ag Market Fundamentals September 2014
Segments that matter Latin America Sugarcane Soybeans Livestock 7 Brazil Ag Market Fundamentals September 2014
Importance of soybeans Soybeans for protein Food for poultry and hogs, primary meat source for 4.5 billion people Primary plant protein tied to population growth Expansion driving equipment demand and advances in production practices 8 Brazil Ag Market Fundamentals September 2014
World soybean production Soybean Production Million metric tons 56% of world s production in Latin America 34 95 161 Source: IHS Global Insights Latin America US/CA/AU/NZ Rest of World 9 Brazil Ag Market Fundamentals September 2014
Soybean farm size and production Brazil > 2,500ha 1% 29% 27% 500-2,500ha 4% 32% 31% 100-500ha 21% 22% 11% 0-100ha 18% 20% 83% % of Production % of Hectares % of Farms Source: COGO Consulting, July 2014 (Censo Agropecuário) 10 Brazil Ag Market Fundamentals September 2014
Importance of sugarcane Sugarcane for energy Highest throughput of any field crop Most important renewable energy source 9 million hectares planted in Brazil Mechanization and production improvements will drive increased demand for planting, harvesting and technology solutions 11 Brazil Ag Market Fundamentals September 2014
Sugarcane mechanization Brazil Sugarcane mechanization Sugarcane Planting 5% 59% 90% Sugarcane Harvesting 13% 88% 90% 2004 2014 2020 Sources: COGO Consulting, UNICA, RPA Consulting, Internal estimates 12 Brazil Ag Market Fundamentals September 2014
World sugarcane production Sugarcane Production Million metric tons 55% of world s production in Latin America 680 915 56 Source: IHS Global Insights Latin America US/CA/AU/NZ Rest of World 13 Brazil Ag Market Fundamentals September 2014
Sugarcane production Brazil 16,000 sugarcane growers in Brazil 4 growers over 200,000 hectares Top 6 produce 30% of sugarcane Sources: COGO Consulting, UNICA, RPA Consulting 14 Brazil Ag Market Fundamentals September 2014
Key farming practices in Brazil
Multi-crop farming Two or more crops per year Primarily in the Cerrados region 1 st crop typically soybeans 2 nd & 3 rd crops corn and cotton Narrow window between crops Uptime is critical 16 Brazil Ag Market Fundamentals September 2014
Sugarcane production 24 x 7 x 8 Production operations run 24 hours per day, 7 days per week, 8 months per year Equipment used 3,000 4,000 hours per year Steps in the production process: Field planning Land prep Planting Crop care Harvesting Haulage Biomass collection 17 Brazil Ag Market Fundamentals September 2014
Non-stop agriculture Continuous farming 3 rd revolution in Brazilian agriculture 1. No-till planting 2.2 nd season crops in the Cerrados 3. Integration of livestock, crops & forestry Over 100 million hectares of degraded pasture Goal of 10 million to be recovered between 2010 and 2020 Focused on sustainability Social Environmental Economic 18 Brazil Ag Market Fundamentals September 2014
Historical market performance
Brazil market evolution Tractors 70,000 25% Industry Units 60,000 50,000 40,000 30,000 20,000 10,000 20% 15% 10% 5% Market Share - 2005 2006 2007 2008 2009 2010 2011 2012 2013 Aug '14 CYTD 0% Source: ANFAVEA, September 2014 Industry Market Share 20 Brazil Ag Market Fundamentals September 2014
Brazil market evolution Combines Industry Units 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% Market Share - 2005 2006 2007 2008 2009 2010 2011 2012 2013 Aug '14 CYTD 0% Source: ANFAVEA, September 2014 Industry Market Share 21 Brazil Ag Market Fundamentals September 2014
Key investments to fuel future growth
Portfolio investments Localization supporting the growth S Series combine Flex draper DB planter Sprayer 8R tractor Catalão factory expansion Parts distribution center expansion 23 Brazil Ag Market Fundamentals September 2014
Technology s role in Brazilian agriculture
Technology John Deere FarmSight Customer s equipment + Our technology solutions + Dealer services Machine optimization Job optimization Agronomic decision support 25 Brazil Ag Market Fundamentals September 2014
Technology Fleet management solutions Partnership with Auteq Machine logistics, optimization & decision making tool Mixed fleet capabilities In-field automation Alternative solutions for data transfer 26 Brazil Ag Market Fundamentals September 2014
John Deere dealer channel
Dealer channel Brazil 50 owner groups Over 250 locations Over 7,000 employees Developing one of our most sustainable differentiators through the Dealer of Tomorrow strategy 28 Brazil Ag Market Fundamentals September 2014
Obrigado! 29 Brazil Ag Market Fundamentals September 2014