Ag Economics Situation & Outlook

Agriculture Division of DowDuPont™

Ag Economics –Situation & Outlook

March 2019

Christopher Taylor

Agriculture Division of DowDuPont™ Confidential

This presentation contains forward-looking statements based on expectations, estimates and projections that are not

guarantees of future performance and involve a number of uncertainties and assumptions.

The content is provided “AS IS,” “AS AVAILABLE.” Pioneer Hi-Bred International, Inc. does not warrant the

accuracy or completeness of the information, text, graphics, links, or other items contained in this communication,

and Pioneer Hi-Bred International, Inc. expressly disclaims liability for errors or omissions in these materials. We

reserve the right to make changes and corrections at any time, without notice.

Pioneer Hi-Bred International, Inc. expressly disclaims all liability for the use or interpretation by others of

information contained in this Pioneer Hi-Bred International, Inc. communication. Decisions based on information

contained in the Pioneer Hi-Bred International, Inc. communication are the sole responsibility of the reader, and in

exchange for using the Pioneer Hi-Bred International, Inc. communication the reader agrees to hold Pioneer Hi-Bred

International, Inc. harmless against any claims for damages arising from any decisions that the reader makes based on

such information. Nothing contained in this Pioneer Hi-Bred International, Inc. communication constitutes

investment advice.

2


• Global Agriculture Dynamics

• 2019 U.S. Planted Area Outlook

• U.S. Crop Economics and Outlook

• Final Thoughts

Agenda

3


0

50

100

150

200

250

300

350

400

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

20

12

2013

2014

2015

2016

2017

20

18

e

Mil MT

World Agricultural Inventories are at High Levels

Corn

Wheat

Soybeans

10%

15%

20%

25%

30%

35%

40%

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018e

Corn Wheat Soybeans

Source: USDA March 2019

Stocks-to-Use RatioEnding Stock Levels

4


CORN WHEAT SOYBEANS

Global Grains Supply & Demand Growth

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

Production

Consumption

Ending Stocks

MMT

5

0

100

200

300

400

500

600

700

800

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

Production

Consumption

Ending Stocks

MMTMMT

0

50

100

150

200

250

300

350

400

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

Production

Consumption

Ending Stocks



CORN WHEAT SOYBEANS

Global Grains Supply & Demand – Excluding China

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

Production

Consumption

Ending Stocks

MMT

6

0

100

200

300

400

500

600

700

800

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

Production

Consumption

Ending Stocks

MMTMMT

0

50

100

150

200

250

300

350

400

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

Production

Consumption

Ending Stocks



0

10

20

30

40

50

60

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018e

Mil MT

Corn

Wheat

Soybeans

0%

10%

20%

30%

40%

50%

60%

20

01

2002

2003

2004

2005

20

06

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Corn

Wheat

Soybeans

Stocks-to-Use RatioEnding Stock Levels

U.S. Inventory Levels

7



▬ USDA expects a shift

from soybeans to corn

and other crops in 2019.

▬ USDA expects flat to

higher average farm

prices.

USDA 2019 Outlook Forum Estimates

8

Source: USDA February 2019

March 2019 2017/18 2018/19e

USDA

Outlook

2019/20e

CORN

Planted Acres mil ac 90.2 89.1 92.0

Avg Prices $/bu 3.36 3.55 3.65

SOYBEANS


Avg Prices $/bu 9.33 8.60 8.80

WHEAT


Avg Prices $/bu 4.72 5.15 5.20


▬ USDA expects an increase in

U.S. corn area in 2019.

▬ Weak ethanol margins are

slowing demand growth for corn

into ethanol.

▬ USDA expects strong corn

exports in 2018/19 and

2019/20.

▬ USDA expects tighter corn

stocks and higher prices for the

2019 crop.

Corn Market

9



0.16

0.30

0.67

0.29

0.19

0.78

0.37

0.130.17

-0.10-0.05

08

/09

09/1

0

10/1

1

11/1

2

12/1

3

13/1

4

14/1

5

15/1

6

16/1

7

17/1

8

18

/19e

-$0.20

-$0.10

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

$0.80

U.S. Corn Ethanol

10

Ethanol Dry Mill Net Operating Returns ($/Gal) U.S. Corn Used in Ethanol Production

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018e

0.0

0.7

1.3

2.0

2.7

3.3

4.0

4.7

5.3

6.0

Tho

usands

Corn Made into Ethanol Percent of Corn Production

Bil Bushels Percent Going to Ethanol


Corn Export Prices From United States, Brazil, Argentina

FOB Corn Prices in U.S. Dollars per Bushel

$3.75

$4.00

$4.25

$4.50

$4.75

$5.00

$5.25

$3.75

$4.00

$4.25

$4.50

$4.75

$5.00

$5.25M

ar-

18

Ap

r-18

May-1

8

Ju

n-1

8

Ju

l-18

Au

g-1

8

Sep

-18

Oct-

18

No

v-1

8

Dec

-18

Jan

-19

Fe

b-1

9

Mar-

19

U.S. FOB Gulf New Orleans

Brazil FOB Port of Paranagua

Argentina FOB River

11

Data Sources: Thomson Reuters


0.00

2.50

5.00

7.50

10.00

12.50

15.00

17.50

20.00

22.50

25.00

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018f

Variable Costs All-Milk Price

-10

-5

0

5

10

15

20

25

30

-200

-100

0

100

200

300

400

500

600

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

20

18

Cattle (Cow - Calf) Hogs (Farrow-to-Finish)

Cattle($/Cow) Hogs($/Cwt) $/Cwt

Livestock and Dairy Net Returns

12

U.S. Milk Input Costs & Output PriceU.S. Beef & Pork Net Returns


Livestock Comments

Cattle:

• Economics and weather encouraged beef cow expansion

• Demand held up well in face of larger supplies

• Indications beef cow herd expansion is slowing

Hogs:

• U.S. hog production has been expanding rapidly

• Domestic demand strength has helped

• Export volume is decent despite tariffs, value has not held up

• Profitability difficult to maintain in 2019

13


3

4

5

6

7

8

9

10

11

1 3 5 7 9

11

13

15

17

19

21

23

25

27

29

31

33

35

37

39

- - - - - - - - - - # of Quarters - - - - - - - - - - -

1982Q4 - 1990Q4

1992Q3 - 2001Q2

2003Q2 - 2008Q2

2009Q4 - ???

How Long Can Low U.S. Unemployment be Sustained?

Wage Growth (Smoothed 3-month Average)U.S. Unemployment (Percent)

0

1

2

3

4

5

6

7

198

3

198

5

19

87

198

9

199

1

199

3

199

5

199

7

199

9

200

1

200

3

200

5

200

7

200

9

20

11

201

3

201

5

201

7

201

9

Sources: Current Population Survey, BLS, and Federal Reserve Bank of Atlanta Calculations

14


U.S. Corn Ending Stocks and Farm Price … 2019?

821 9

89

1,1

28

1,2

32

1,6

24

1,6

73

1,7

08

1,7

31

1,7

37

1,8

35 2,0

27 2

,29

3

0

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

2,500

3.00

3.50

4.00

4.50

5.00

5.50

6.00

6.50

7.00

7.50

12/1

3

11/1

2

10/1

1

13/1

4

07/0

8

08/0

9

09/1

0

14/1

5

15/1

6

18/1

9

17/1

8

16/1

7

1,4411,522

1,6031,684

1,7651,846

1,9272,009

1,000

1,250

1,500

1,750

2,000

2,250

2,500

88

89

90

91

92

93

94

95

SCENARIOS for 2019: Ending Stocks

Estimates (Mil Bu) - Driven By Area

Note: Trend Yield of 177 bu/ac

----- Million Acres Planted in 2019 -----

What 2019 Ending Stocks (Mil Bu) Could Look Like?

15

Farm Price [Left Axis] $/Bu &

Sorted Ending Stocks [Right Axis] Mil Bu


CME Corn Futures Prices – December Contract

300

320

340

360

380

400

420

440

460J

an

Fe

b

Ma

r

Ap

r

Ma

y

Ju

n

Ju

l

Au

g

Sep

Oct

No

v

De

c

Cents per Bu.

2016

2018

2017

2019

16


Soybean Export Prices From United States And Brazil

FOB Soybean Prices in U.S. Dollars per Bushel

$8.00$8.25$8.50$8.75$9.00$9.25$9.50$9.75$10.00$10.25$10.50$10.75$11.00$11.25$11.50$11.75$12.00

$8.00$8.25$8.50$8.75$9.00$9.25$9.50$9.75

$10.00$10.25$10.50$10.75$11.00$11.25$11.50$11.75$12.00

Mar-

18

Ap

r-18

May-1

8

Ju

n-1

8

Ju

l-18

Au

g-1

8

Sep

-18

Oct-

18

No

v-1

8

Dec

-18

Jan

-19

Fe

b-1

9

Mar-

19

U.S. FOB Gulf New Orleans Brazil FOB Port of Paranagua

17

Data Sources: Thomson Reuters


MAJOR SOYBEAN PRODUCERS CHINA USE

0

15

30

45

60

75

90

105

120

135

20

00

2002

2004

2006

2008

2010

2012

2014

2016

2018

Argentina Brazil United States

MMT

Global Soybean Drivers

0

15

30

45

60

75

90

105

120

135

2000

2002

2004

2006

2008

2010

2012

2014

20

16

2018

Production Imports

MMT


18


Share of World Soybean ExportsShare of World Corn Exports

Western Hemisphere Exporters

30

35

40

45

50

55

60

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

20

13

2014

2015

2016

2017

2018e

Percent

USA

Brazil &

Argentina

10

20

30

40

50

60

70

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

20

13

2014

2015

2016

2017

2018e

Percent

USA

Brazil &

Argentina

19



1.50

2.00

2.50

3.00

3.50

4.00

4.50

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

Jan

-15

Jan

-16

Jan

-17

Jan

-18

Jan

-19

20

Key Agriculture Currency Exchange Rates

0

3

6

9

12

15

18

21

24

27

30

33

36

39

42

45

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

Jan

-15

Jan

-16

Jan

-17

Jan

-18

Jan

-19

Argentina Peso Per US$Brazil Real Per US$

6

8

10

12

14

16

18

20

22

24

26

28

30

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

Jan

-15

Jan

-16

Jan

-17

Jan

-18

Jan

-19

Ukraine Hryvna Per US$


▬ USDA expects a drop in

U.S. soybean area in 2019

due to large global

supplies and pressure on

soybean prices.

▬ Exports are biggest

uncertainty for the soybean

market at this time due to

the current trade outlook.

▬ USDA expects only a

modest decline in soybean

ending stocks in 2019/20,

even with the large decline

in planted area.

Soybean Market

21



Farm Price [Left Axis] $/Bu &

Sorted Ending Stocks [Right Axis] Mil Bu92 138

141

151

169

191

197

205

215 3

02

395

900

0

100

200

300

400

500

600

700

800

900

1,000

1,100

7.00

8.00

9.00

10.00

11.00

12.00

13.00

14.00

15.00

13/1

4

08/0

9

12/1

3

09/1

0

11/1

2

14/1

5

15/1

6

07/0

8

10/1

1

16/1

7

17/1

8

18/1

9

776820

865909

954998

10431087

400

500

600

700

800

900

1,000

1,100

82

83

84

85

86

87

88

89

82 83 84 85 86 87 88 89

SCENARIOS for 2019: Ending Stocks

Estimates (Mil Bu) - Driven By Area

Note: Trend Yield of 50 bu/ac

----- Million Acres Planted in 2019 -----

What 2019 Ending Stocks (Mil Bu) Could Look Like?

U.S. Soybean Ending Stocks and Farm Price … 2019?

22


CME Soybean Futures Prices – November Contract

800

850

900

950

1000

1050

1100

1150

1200J

an

Fe

b

Ma

r

Ap

r

Ma

y

Ju

n

Ju

l

Au

g

Sep

Oct

No

v

Cents per Bu.

2016

2018

2017

2019

23


Winter Wheat Area Change 2018 to 2019e: -3.8%

2019 Winter Wheat Area: 31,290

Area Change from 2018: -1,245

24


▬ Poor weather conditions in

late 2018 kept U.S. winter

wheat seedings near multi-

decade lows.

▬ 2019 spring wheat area is

expected to increase vs.

2018 due to poor soybean

economics in some key

wheat growing areas.

▬ Wheat stocks are expected

to remain high by historical

standards.

Wheat Market

25



Soybean-to-Corn CBOT New Crop Price

2.0

2.1

2.2

2.3

2.4

2.5

2.6

2.7

2.0

2.1

2.2

2.3

2.4

2.5

2.6

2.7

May

Ju

ne

Ju

ly

Au

g

Sep

t

Oct

No

v

De

c

Ja

n

Fe

b

Mar

Ap

r

May

2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20

SOYBEANS

The higher

the ratio,

soybeans are

favored over

corn planting

economics.

The converse

is true.

CORN

26


Range of Private Estimates for 2019 Area

70

75

80

85

90

95

200

9

20

10

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9e

USDA Estimate

Actual

High: 87.5

Low: 84.6

USDA Outlook: 85.0

85

87

89

91

93

95

97

99

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9e

USDA Estimate Actual

High: 92.5

Low: 90.0

USDA Outlook: 92.0

Soybeans (Mil Acres)Corn (Mil Acres)

27


U.S. Drought Monitor – Year to Year Difference

March 6, 2018March 5, 2019

28


U.S. Average Value of Cropland

Dollars/Acre Yearly % Change

11.7%10.0% 9.1%

-4.3%

2.3%

10.4%12.4%

13.7%

7.6%

0.7%

-1.0%

0.0% 1.0%

2,3002,530

2,7602,640 2,700

2,980

3,350

3,810

4,100 4,130 4,090 4,090 4,130

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2006

2007

2008

2009

2010

2011

2012

2013

2014

20

15

2016

2017

2018e

Percent Change $/Acre

29

$/Acre Percent Change (Bar)

Source: USDA NASS Land Values 2018 Summary


U.S. Average Cash Rent

Dollars/Acre Yearly % Change

1.9%

-2.5%

10.3%

15.8%

3.0%

8.8%

12.6%

8.8%

3.7%0.7%

-5.6%

0.0%1.5%

80 7886

99 102111

125

136141 144

136 136 138

-10%

-5%

0%

5%

10%

15%

20%

0

20

40

60

80

100

120

140

160

2006

2007

2008

2009

2010

2011

2012

2013

2014

20

15

2016

2017

2018e

Percent Change $/Acre

Source: USDA NASS Land Values 2018 Summary

30

$/Acre Percent Change (Bar)


Dollars Per Acre Per YearDollars Per Acre Per Year

U.S. Cropland Cash Rents – Select States

0

50

100

150

200

250

300

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018e

Iowa Illinois Nebraska Minnesota

0

50

100

150

200

250

300

2006

20

07

2008

2009

2010

2011

2012

20

13

2014

2015

2016

2017

2018e

Wisconsin Ohio Indiana

31

Source: USDA NASS

Agriculture Division of DowDuPont™ Confidential 32

▬ U.S. 10-year interest

rates at multi-year highs.

▬ The short and medium

term outlook is for higher

interest rates – with Fed

in a “pause” for now.

▬ Further interest rate

increases are a risk for

the most highly-

leveraged operations.

Ten Year Rates (Percent)

1.25

1.50

1.75

2.00

2.25

2.50

2.75

3.00

3.25

3.50

Jan

-14

Ma

r-14

Ma

y-1

4

Ju

l-14

Sep

-14

No

v-1

4

Jan

-15

Ma

r-15

Ma

y-1

5

Ju

l-15

Sep

-15

No

v-1

5

Jan

-16

Ma

r-16

Ma

y-1

6

Ju

l-16

Sep

-16

No

v-1

6

Jan

-17

Ma

r-17

Ma

y-1

7

Ju

l-17

Sep

-17

No

v-1

7

Jan

-18

Ma

r-18

Ma

y-1

8

Ju

l-18

Sep

-18

No

v-1

8

Jan

-19

Ma

r-19

Rising U.S. Interest Rates?


Farmland Values in the Future Economic Environment?

Values in Dollars/Acre @ 200 bu/ac Yield

Corn Price ($ per Bushel)

$2.00 $3.00 $4.00 $5.00 $6.00

Cap R

ate

3% 4,000 6,000 8,000 10,000 12,000

4% 3,000 4,500 6,000 7,500 9,000

5% 2,400 3,600 4,800 6,000 7,200

6% 2,000 3,000 4,000 5,000 6,000

7% 1,714 2,571 3,429 4,286 5,143

8% 1,500 2,250 3,000 3,750 4,500

NPV = [(30% of Expected Gross Revenue)/(Expected Capitalization Rate])

Adapted from work by the Omaha Branch of the Kansas City

Federal Reserve by Jason Henderson.

Land investment will be highly influence by:

▬ Commodity corn price

▪ Total Revenue per Bu (Crop Insurance & Policy)

▬ Interest rates

▬ Potential productivity

The first two were covered in the original work

(with adjustment for the price ranges).

What about productivity impact?


Farmland Values in the Future Economic Environment?



$2.00 $3.00 $4.00 $5.00 $6.00

Cap R

ate

3% 4,000 6,000 8,000 10,000 12,000

4% 3,000 4,500 6,000 7,500 9,000

5% 2,400 3,600 4,800 6,000 7,200

6% 2,000 3,000 4,000 5,000 6,000

7% 1,714 2,571 3,429 4,286 5,143

8% 1,500 2,250 3,000 3,750 4,500




$2.00 $3.00 $4.00 $5.00 $6.00

Ca

p R

ate

3% 5,000 7,500 10,000 12,500 15,000

4% 3,750 5,625 7,500 9,375 11,250

5% 3,000 4,500 6,000 7,500 9,000

6% 2,500 3,750 5,000 6,250 7,500

7% 2,143 3,214 4,286 5,357 6,429

8% 1,875 2,813 3,750 4,688 5,625


What about productivity impact?


▬ Evolutionary, not revolutionary

• ARC and PLC are only slightly modified from the 2014 farm bill

• Few changes to crop insurance, at least for major field crops

▬ But, there are some important changes

• Ability for some to update PLC yields

• Trend adjustment in determining ARC benchmark revenues

• Multiple opportunities to make new ARC/PLC elections

• Higher loan rates for many crops

• Changes in payment limitation rules

• Restructuring of dairy margin program

• Conservation program restructuring

The New Farm Bill – Agriculture Improvement Act of 2018


Summary – Longer Term Global Agriculture Outlook

These Factors Will Be With Us For A While

▬ Global consumption of agriculture products continues to set records.

▬ Large global and domestic supplies of agriculture products are

perceived as more than adequate to meet demand needs.

▬ Agriculture fundamentals, and increasingly non-agriculture

fundamentals, are impacting prices and producer net returns.

▬ Key Global Export Markets - Highly competitive environment as the

sector adjusts to steady growth outlook.

▬ Productivity is Rewarded in the Markets, Land Prices and Policy.

36


This presentation contains forward-looking statements based on expectations, estimates and projections that are not

guarantees of future performance and involve a number of uncertainties and assumptions.

The content is provided “AS IS,” “AS AVAILABLE.” Pioneer Hi-Bred International, Inc. does not warrant the

accuracy or completeness of the information, text, graphics, links, or other items contained in this communication,

and Pioneer Hi-Bred International, Inc. expressly disclaims liability for errors or omissions in these materials. We

reserve the right to make changes and corrections at any time, without notice.

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Ag Economics Situation & Outlook

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