On Wednesday, 14 May 2025, Corteva Inc. (NYSE:CTVA) presented at the BMO Global Farm to Market Conference, sharing a robust outlook for 2024. The company reported a strong start to the year, with a 15% increase in Q1 EBITDA, but acknowledged challenges such as currency exchange rates and crop protection pricing. Corteva emphasized its commitment to innovation and shareholder returns, setting a positive tone for the future.
Key Takeaways
- Corteva reported a 15% year-over-year increase in Q1 2024 EBITDA, totaling $1.2 billion.
- The company reaffirmed its full-year EBITDA guidance of a 10% increase to $3.7 billion.
- Strategic acquisitions, technological advancements, and a focus on cost efficiency are driving growth.
- The impact of foreign exchange, particularly the Brazilian Real, remains a challenge.
- Corteva is committed to shareholder returns with $1 billion in share repurchases planned.
Financial Results
Q1 2024 Performance:
- EBITDA rose by 15% to $1.2 billion, driven by crop protection volume growth and cost improvements.
- Achieved $200 million in positive year-over-year cost improvements.
- Foreign exchange posed a $90 million headwind.
Full-Year 2024 Guidance:
- EBITDA expected to grow by 10% to $3.7 billion.
- Projected $400 million in cost improvements for the year.
- Anticipated $275 million negative impact from foreign exchange.
- Crop protection pricing expected to decline slightly in the second half.
Capital Allocation:
- Committed to $1 billion in share repurchases.
- Plans to allocate $400-500 million for dividends.
- First quarter free cash flow exceeded last year by over $500 million.
Operational Updates
Crop Protection and Biologicals:
- New products and biologicals saw double-digit growth in Q1.
- Acquisitions of Stoller and Symborg are enhancing the biologicals platform.
Tariffs:
- Estimated tariff impact of $25-30 million, down from an initial $50 million due to exemptions.
South America:
- Expecting a rebound in Brazilian acreage with a low to mid-single digit price mix lift in the second half.
Future Outlook
Technology and Innovation:
- Gene editing and hybrid wheat are key growth drivers, with hybrid wheat launch planned for 2027.
- Winter canola project offers farmers additional revenue streams and supports sustainable agriculture.
Royalty Neutrality:
- Aiming for royalty neutrality by 2028, with potential out-licensing in corn and soy.
Q&A Highlights
- Market share shifts observed in the South due to Bayer’s Dicamba challenges.
- Commodity costs remain stable in Europe, comprising 50% of total COGS.
- Corn yields continue to rise, with gene editing expected to double yield gains over the next decade.
In conclusion, Corteva’s strategic focus on innovation, cost management, and shareholder returns positions it well for future growth. For more details, refer to the full transcript.
Full transcript - BMO Global Farm to Market Conference:
Joel, Unidentified role: All right, everyone. Let’s do our next session here. We’re going do a fireside chat with Corteva. Just reported last week, had a nice update. And of course, Corteva is a very leading seed and crop protection company.
So we’re happy to have the CFO, David Johnson, and Sam Eathington, who’s the CTO, to talk about the company. So we’d like you to make it interactive. Please submit questions on the app if you like, and I’ll integrate them into the conversation. David, maybe we could talk about you just reported last week, gave a nice update. Why don’t you give a brief overview of the business and the outlook right now as you see it currently?
David Johnson, CFO, Corteva: All right. Excellent. Thank you, Joel. Thanks, everyone, for coming. Really appreciate being here.
Last week we announced a really nice start to the year for us in the first quarter. So we were up 15% in EBITDA over last year, so $1,200,000,000 So I think again a good start. When you look at kind of what generated that increase year over year, Joel pricing was pretty much in line where we expected it, so up in seed, a little bit down single digits in crop protection. So again, very much in line where we expected it. I think for us the two elements that were really I think positive would be the volume.
So overall in CP, our new products and our biologicals were up double digits. So we’re seeing nice momentum in our growth initiatives there. We’re up slightly in our royalty income. So again, a nice little uptick there. And then for 2025, ’1 of our big drivers overall, if you know us, will be our cost improvement.
So a lot of that has to do with reduced input costs in CP, but also in seed in the commodity element of our COGS. So overall, 400,000,000 for the year. The first quarter, we showed $200,000,000 of positive year over year improvement, so again a nice start there. Some would say why $400 2 hundred million it’s a little bit we always knew it’s going be front end loaded and we saw that in the first quarter. The only one big headwind for us in the first quarter, which is one we knew about, which is FX.
So in total, was about $90,000,000,000 which is pretty significant headwind going into the quarter. But again, pretty much online, so we’re very happy with the start, again up 15% year over year.
Joel, Unidentified role: So I mean the feedback that you guys heard and I heard was being too conservative, right? And Chuck, the CEO would say, well, we don’t like to update guidance in May into the crops in the ground, the crops maybe twothree of the ground now, right? And I think said that before, but I think there was a view that maybe you guys are being a little conservative. Maybe we could go through some of the components because what you’ve really raised as an element to be conservative is that CP pressure, crop protection, chemicals pricing pressure, excuse me, is a little bit of a concern. Maybe you can talk about that a bit more?
David Johnson, CFO, Corteva: Yes, absolutely. Learning the ag business a little bit, I’m fairly new to the industry. But one thing I have learned is the first quarter doesn’t make the year. So and I think we tend to look at our businesses on halves. And a lot of that has to do with timing, weather and what have you between March and April can be a significant driver of our business.
So when we look at the business, we do look at in half. So although we’re very happy with the first quarter, that doesn’t mean the year is going to lay out exactly the way we want to. So if you step back, our overall guidance, we’re saying up 10% in EBITDA this year. So we think that’s a very strong guide going to $3,700,000,000 in EBITDA. And so when we think about the elements of where we’re going to get that growth over year over year, which is over $300,000,000 we talked about the cost improvements.
Think we’re started out pretty strong there, but we knew they were going to be front end loaded. So we think right now we’re kind of balanced on cost improvements. To your point Joel, the one element that we would say is a little bit negative from where our original thoughts were is probably the back half of the year in CP pricing. So now we’re thinking more low single digit negative where perhaps before we were more flat year over year. So that would be the one offsetting that would be volume.
And we’re seeing some pickup again, we talked about the double digits in biologicals and new products. So those two pretty much offset each other. I know some people have a certain opinion on our guide regarding FX being negative $275,000,000 for the year. We started off with a $90,000,000
Joel, Unidentified role: That’s being too punitive.
David Johnson, CFO, Corteva: It’s being too conservative perhaps. I think I would only remind everyone right now is the exposures are different as you go through the year. So the first half of the year, it’s more Canadian dollar, Turkish lira exposure and we saw that in the first quarter. The back half of the year is more BRL and we did say that we have been about a six times against U. S.
For the back half of the year. And right now the BRL, the spot rate is lower than However, if you’re going to forward hedge that right now, it’s about a 5.96%. So could there be a little bit of upside there? There could be, but it’s not too significant number to where we feel like we’re going to change our guide in the first quarter.
Joel, Unidentified role: Actually, guys had a really good Q1 for CP. Like if you look at some of your competitors like FMC and Bayer, you guys had a really great I think you’re up 15% in Q1. The other competitors there or major competitor competitors had contracted. Any view why you guys are so much better or just really mix and product portfolio? Mean FMC has its own unique challenges, but Bayer was also kind of contracting in Q1 too.
David Johnson, CFO, Corteva: Yes. Think my opinion would be a couple of things. One, I think more planted acres, I think farmers are using the products. So I think that’s definitely the demands there. I think our new products are doing really well.
I mean double digit increases for new products and biologicals, albeit this is a small quarter typically for biologicals. I think those are the two strengths. And I think that the cost work that the team has done on productivity footprint, all this sort of thing, You’ve seen those benefits kind of in the last half of last year, but you see this also Joel continuing into the first part of this year. So I think that’s what’s really driving our business at this point in time.
Joel, Unidentified role: And you guys also talked about how tariffs might impact the business by maybe about $50,000,000 It’s on your guide and you think you can maybe mitigate it, maybe any elaboration on that?
David Johnson, CFO, Corteva: Yes. Of course, that was last week. So it does change. I haven’t checked this morning, but I assume Monday was the last time we changed tariffs, but yes, so The days early. Yes, exactly.
So if you step back, one good thing about our supply chain is our imports into The U. S. From China are about 2% of our COGS, it’s called a couple of hundred million dollars. So it’s pretty insignificant. And then when you look at all the tariff reductions and what have you that you can see, that’s where we came up with the $50,000,000 input.
The other thing that’s I think really advantages us a little bit Joel is the fact that of that 2%, seventy % of that is multi sourced, okay. So we’re not sole sourced and our two largest franchises, Enlist and Spinosyns for CP are U. S. Made. So we’re a little bit less exposed perhaps than others.
So we feel like we’re in a pretty good position there regarding tariffs. And so I think the $50,000,000 we said that we will look at mitigating actions and some of those mitigating actions are the same playbook that anyone else would have. We’re going to look at really exercising our supply chain options to see if we can reduce that impact. We’re also going to look at further cost reductions we can do to offset and then pricing would probably be also an option. The good thing for us given the magnitude, it wouldn’t take much of a price increase offset that $50,000,000 so I think that’s good.
Two other quick notes, this is mainly a CP issue for 2025. Really seed, the only exposure seed might have would be in the future on seed treatment, but for 2026, we’re really not commenting given the changing nature of this particular issue. As of Monday, with the ninety day delay and all these sort of things, and I would say, I wanted to shout out to our teams who do a lot of work. As you can imagine, they’ve been very busy going through these exemptions and what have you, probably more of a $25,000,000 to $30,000,000 item now Joel versus the $50,000,000 So when we say it was manageable, we have offsets, we’re looking at ways to manage it, I think that still holds true today.
Joel, Unidentified role: Mitigation, just wait a couple of days and see how that works.
David Johnson, CFO, Corteva: We’ll see how it goes. Part of our mitigation
Unidentified speaker: is We mitigated, yes, we’re so
Joel, Unidentified role: great. Yes, exactly. And maybe Sam, you can chime in this too. So let’s talk about current grower sentiment. This spring, how is the farmer feeling in all these things?
You see any changes in purchasing behaviors, just in time, whatever, like some of the things we’ve seen, anything different this spring than other springs?
Sam Eathington, CTO, Corteva: Yes. No. So first of all, thanks, Joel, for letting us come here and chat a little bit, really appreciate it. Actually, was just out Monday with a bunch of reps and talking about how their experience with the growers have gone. And in general, I’d say growers are still fairly positive out there.
I mean, the corn acres are going in from everything we can see. There’s probably a little bit of replant coming on some soybeans where we got some heavy rains here and there. But we haven’t seen a shift in mix. Farmers are not trading out genetics yet for anything else. So everything continues to look good on that front from a seed and crop protection for what we’re seeing.
Joel, Unidentified role: And do you believe the USDA asked for 95,000,000 acres for corn?
Sam Eathington, CTO, Corteva: I’d say it feels pretty close. I mean there’s still some acres that got to go in the ground, so we’re not completely in yet. But again, I was chatting with some of our farmers and reps and they were all believing that number is pretty close and the order books would say that feels like it’s pretty close. So always got to wait and see until you get that last little bit. Ohio was they’re behind with all the rain they’ve had.
And of course, you got to watch the Dakotas, but they’re actually doing pretty good right now.
Joel, Unidentified role: And any views on South America, Brazil, what you’re seeing down there, getting into Sicerina?
Sam Eathington, CTO, Corteva: No. I think we’re going to see some acres respond down there and bounce back. We’re waiting to see what that number could look like, but we’re in a good position if we get to see a little bit of growth there.
Joel, Unidentified role: And in your guide, I think you’re talking about low to mid single digit price mix lift in the second half of the year, right? That’s kind of a comment in South America more than anything, right?
David Johnson, CFO, Corteva: Yes. Yes. So it is probably a little bit of a function of what happened what we did last half of the year in seed last year. So if you may recall in the seed last year, had quite a bit of, I would say, high cost inventory that we wanted to work through. We wanted to make sure we get that out of our inventories by the end of the year.
So we did lower our price, increased our volume and push that seat out so that we’ve started the year, I would say in a good position. So when you look at that year over year, it’s going to look like an uplift in price because we did reduce the price last year Joel. And then you also see I would say a little bit reduction in cost and we do expect volumes to be pretty strong. I mean I think it’s moving a little bit more towards corn which is good for us and I think the ethanol market in Brazil is strong and so it might continue to be strong for quite a long time. So we’re pretty excited about that.
Joel, Unidentified role: So I permit you to submit questions on the app so I can ask the team here. And something else in South America. Okay. Before we get into a little more discussion on technology and going maybe talk about free cash flow. You’re a relatively new CFO.
How do feel about free cash flow conversion targets, where you can go over time?
David Johnson, CFO, Corteva: Thanks for the question because one of the things that I think Corteva really sets us apart is the strength of our balance sheet. So the other thing that’s new to me coming from the industrial world, I’m not used to the seasonality of cash flows that we have, which is pretty significant, right. So first quarter I would say we’re $500,000,000 plus ahead of where we were last year, so I think that’s trending really well. The things we control in free cash flow obviously would be working capital and I think that we’re in a really good spot on working capital. And on CapEx, as we’ve grown the business over time, I think we’ve been very judicious in the way we handle CapEx, keeping it around that $600,000,000 So I think I feel really good about the fact that we have a strong balance sheet with strong beginning of the year.
That being said, when you get later in the year, it really comes down to this cash credit mix that happens right at the end of the year that really determines our overall number. But I think there’s no reason to think that wouldn’t be anything other than typical and therefore I think we’ll have a strong cash flow year this year. The other thing too, think Joel you’ll know is we do I think a pretty good job of deploying capital back out to our shareholders. We’re committed to $1,000,000,000 of repurchases this year and we do offer a dividend. We’ll spend between 400 and $500,000,000 on that.
Joel, Unidentified role: One of the things also thinking about the bridge for this year was we know that Bayer has had a lot of challenges with Dicamba, the over the top registration label in The States dragging on. It’s cost them some royalty revenue. They talk about the hit to their earnings. You guys really haven’t talked about whether you have upside to that. Do you have upside to that?
Are you seeing upside to that? Is in your back pocket? Like what are you seeing?
David Johnson, CFO, Corteva: I appreciate all the upside questions. But I will say that in all seriousness, we are seeing a little bit more of our order book being strong in the South. And I think that’s in the
Sam Eathington, CTO, Corteva: South, which is
David Johnson, CFO, Corteva: typically where our competitors would be strong. On soybeans? On soybeans. And so you would say in this trait, we always say about 65% market share. Could it be up a couple of three points?
It could be. Is it overall material to our business? Probably not. I don’t know No,
Sam Eathington, CTO, Corteva: think you’re spot on. That Southern market is historically a very strong dicamba market and we’re seeing slight shifts in soy and cotton. Sorry,
Joel, Unidentified role: you’re seeing maybe you said I think you said like a 3% share gain maybe in the South in that part, yes, little bit. Okay. Let’s say that, that registration my personal view is it will get solved. But let’s say it doesn’t get solved indefinitely. Is there more share to gain?
Sam Eathington, CTO, Corteva: We’re probably starting to reach a limit with what where farmers are and what optionality they want, depending on what we controls are trying to kind of deal with. So if we maybe get a few more points here and there, you’re we’re probably starting to hit the limit.
David Johnson, CFO, Corteva: But farmers do have options, right, That’s right.
Sam Eathington, CTO, Corteva: Because remember, you can also use glufosinate and still use Roundup and so there’s optionality out there.
Joel, Unidentified role: I know what got a lot of investors excited last year on Corteva was the opportunity for seed cost deflation. And you guys talked about your Investor Day in November about cost deflation coming up on the CP side and the seed side. Can you talk about that? I mean, we have corn prices come back a bit, but how much embedded 25%, see cost deflation? How much could you see in the next couple of years?
David Johnson, CFO, Corteva: Yes. So stepping back to our Investor Day, we did show a three year plan of increasing EBITDA by $1,000,000,000. So and a lot of that $1,000,000,000 was this cost element on seed and CP. Of that, you know, billion dollars about 700,000,000 was cost oriented and about 400,000,000 is in our current guide. So I think it’s pretty rolling out the way that we would expect.
I think one of maybe the misnomers about this commodity impact to the seed COGS is the fact that it’s mainly it’s only 50% of the total COGS, all right. So it is a driver of that reduction and we’re seeing that through our COGS number, but it’s only half. And the other half would be things like labor, transportation, all these other sort of things which I would say and generally speaking have been inflating over time, Okay, so there’s a little bit of a headwind there. The second thing I will also say is in Europe, a little bit different story. The commodity costs have not gone down in Europe.
So when we talk about deflation, it’s typically mostly for us, the material size of it would be in North America. And so it is a real item for us. That’s why we’re driving the 10% EBITDA growth rate this year. And actually if you look over that three years, it’s a 10% growth rate over those three years.
Joel, Unidentified role: Okay. Why don’t we talk a bit now about some of your longer term plans, some stuff in the pipeline next few years? First thing I want to talk about is just genetic gains. So typically, we’ve seen trend yield goes up, I don’t know, 1% a year, seems pretty reliable. It’s always weather shifts, but anyways, trend yield.
We’ve got maybe something in corn happening in the next bunch of years between reduced stature, short stature corn. But like are there limits to the current system? If we don’t go to short reduced stature corn, can we keep pushing yields higher? Or do we have to and this the new systems might be a step up? Like how do think about it?
Sam Eathington, CTO, Corteva: Yes. No, great question. So if you kind of step back, remember, as Joel said, corn yields historically have gone up, let’s say one percent, one point five percent on aggregate. So The U. S.
Average has gone up and it varies by regions. Some areas like Illinois, Iowa for example would have a little faster growth rate than maybe some of the dry land market would have at the end of the day. And the way we’ve historically increased that yield is farmers put out more plants per acre. So they increase their what we call their plant density. So they one year they plant 30,000 seeds and next year they might plant 30,300 seeds and the next year is 30,500 seeds.
So we’ve bred corn to actually just tolerate higher plant density, which lets it then produce more yield. We don’t see a limit to that today. Average yields in The U. S. Are, let’s call it 180.
Record corn yields are six thirty seven I think right now. Plant physiology studies would say corn yields could be a 1,000 bushels per acre and we still keep seeing in our research plots, we just keep seeing our ability to increase yield year over year. So what are the impacts to the system then, right? And so what happens typically if you think about planting and mainly let’s just talk U. S.
Corn, row spaces used to be 40 inches and they went to 38, they went to 36 and they’re kind of 30 and that has allowed us to space the plants out better within the row. And you start to get to, let’s say, 42, 40 four thousand plants per acre, that row spacing becomes a problem and we’re going to have to do something to change that in the system again. But before we get there, this is where reduced extra corn is really nice. If we make that plant more tolerant to pressure of higher plant density, we can actually put more plants out there per acre. So we are going to see I think a little bit of a step change in that plant density, which changes in the yield potential of that crop.
Farmers will be able to manage it the same way, the same equipment for quite a while. And then some point down the road, we’re going to have to talk about changing row spacing again in agriculture, but we’re not there yet. So no limits, I haven’t seen one yet. I’ll be retired, probably dead before we had a limit in corn.
Joel, Unidentified role: And I mean, gene editing is getting a little more interest lately, some regulatory hurdles maybe will start to come down. I think Chuck’s about to he needs a license to operate, but how might gene editing affect that and some of your stuff in your pipeline?
Sam Eathington, CTO, Corteva: Yes. No, you’re spot on. And of course, the regulatory world continues to be pretty dynamic, maybe not quite as much as tariffs, but pretty close. We know Europe, they have now entered what is called the trialogue phase where the three bodies are negotiating the last stage of the gene editing regulatory. And every indication is probably Europe will probably reach some agreement this year that they would actually be in a position to say you could use gene editing in agriculture in Europe.
Now it’d be still a few years as they work out how to implement all the policy and the laws and the process, But that’s a huge shift, right? I mean they’ve never allowed biotech to be, grown in Europe other than a few small places in Spain, for example. But the ability to use gene editing not only import but cultivation in Europe would change the game. We’re seeing a lot of positive movements in China around their gene editing policy. India, if you just watch the news, they came out and talked about they’ve created some gene edited rice that’s going to help in their productivity.
So you’re seeing a lot of positive movements. Why that matters is because in gene editing is really the next extension of plant breeding. It’s the next way we get to accelerate our plant breeding programs. Just like twenty five years ago, it was DNA and marker assisted plant breeding. Now it’s gene editing is the next wave.
So we’re doing a lot. We talked about our Genlytics platform at the November investor event where we’re we’ve built a whole ecosystem around it, we’re investing in it, we’re doing all sorts of experiments, we’ve got a lot of stuff in the field, we’re focused on changing disease and changing yield potential of the crop. And I think what it lets us do is accelerate that genetic gain instead of 1% a year, how do we get this to 2% or a little bit more per year? And that’s what it ultimately can do.
Joel, Unidentified role: When you think first start really communicating some results, synergy netting work?
Sam Eathington, CTO, Corteva: Yes. We chatted a little bit in November about the platform, the scale and the scope and our targets. We showed some results about our disease program. So what we did in the disease area which you have more of the challenges still in plants is as the environment changes, pests move and so we see more and more pressure from insects and disease problems on growing any crop anywhere in the world, not just corn but any of your crops. And that’s always a challenge as a plant breeder to work with all that disease resistance that’s genetically in the plants and so we simplified that, we call it our disease super locus where we took all this genetic resistance that’s in plants naturally and we put it all in one spot in the DNA so it’s really simple for us to work with it.
That works. We you can come to Iowa and see it if you want. It’s quite impressive. I mean, so that’s in the field, it’s in plants, it’s in products. We’re just working through the last steps of regulatory around the world so that if a farmer grows it, that grain could go to Mexico or Chile or China, excuse me, wherever it may end up in.
The yield stuff, we’ll probably we got a lot of stuff in yield trials going right now, probably in 2026 when we have our next big showcase one hundred year Pioneer celebration, we’ll probably let you all see some of that actually in the field.
Joel, Unidentified role: Day one, we’re Day one,
Sam Eathington, CTO, Corteva: okay. Yes.
Joel, Unidentified role: So we talked about gene editing, let’s talk about you talked about a lot of sort of post-twenty twenty seven growth drivers at your event in November. I’m going name them all to sound smart, okay? But gene editing, reduced stature corn, which is kind of gene editing biofuels, hybrid wheat, biologicals growth, although you have some of that now, some new traits, Harvisa, Kinrassa. So which bucket do you think has the highest expected magnitude of contribution? What’s the biggest blockbuster there?
Sam Eathington, CTO, Corteva: Maybe put it in timeframes. If you think about, say, next five years, AVESA is going to be a great molecule, it’s a fungicide for us for Asian soy rust, we’ll be launching it in 2026, it’s going into Brazil, that’s a big product for us. Can raise a with it’s an insecticide will hit later in the decade, it’s going to be a great product for us. And put in perspective, Avizas, we’ve talked about that fungicide being $1,000,000,000 sort of franchise as part of that. On the seed side, hybrid wheat, where our plan is still to launch in 2027, it looks great.
You’ve probably heard a lot of people talk about hybrid wheat, what we announced was a very different hybrid wheat. We did a very different genetic mechanism to make ours very stable and usable. The problem with hybrid wheat has been you can’t get sterility and you can’t get seed production and so the cost of goods just chews up all the advantage that you get from the yield increase. We think we’ve solved that. We created a different mousetrap.
We’ve tested it now for three or four years across lots of germplasm, lots of different backgrounds, it looks great. You can come see that if you want to come look at it in Iowa or Kansas, wherever we got trials. And we see that 10% to 12% yield increase, but we can actually go ahead and produce it and that’s why we’re so excited about that. So that one gets rolling, that’s a billion dollar product we think, probably doesn’t peak until we get into the next decade by the time we ramp up and convert things. But total magnitude, you give us a decade gene editing is a big, big deal, right?
I mean if we double yield gains in crops, there’s a lot of value creation.
Joel, Unidentified role: Double yield gains,
Sam Eathington, CTO, Corteva: so two And change disease profiles, quality profiles, gene editing is a big deal.
Joel, Unidentified role: I mean it’s great for humanity if you can double the 2%, three % yield growth. It’s bad for commodity prices? Bad for your returns? Like how do you think of it? Is it circular?
Sam Eathington, CTO, Corteva: Look, it could be and of course, the hybrid wheat, we think we’re to get a 10% to 12% yield increase there. What I think it opens up though is optionality of what you do at farmland. So think about hybrid wheat, the winter crop, we’re actually now have our biofuels or winter canola concept that can slot right into those acres. So part of what we’re doing is creating optionality of what you do with that land, whether you want to produce different foods, you want to go ahead and use that commodity different ways or you want to produce energy, we’re creating that scenario. And I think that’s a good thing at the end of the day.
David Johnson, CFO, Corteva: And I’ll just add the demand for crops and continues to go up every year. I think there are different drivers to that. The biofuels are definitely And so assuming that that trajectory of demand keeps on there, think that with the gains in yield, commodity prices will
Joel, Unidentified role: be fine. You guys introduced like not necessarily a concept, you gave it a name. It was in November, it was food for the summer, fuel for the winter, right, because you’d growing a cover crop and then hopefully not just to keep carbon emissions down, but then be able to sell maybe get a carbon credit for that, but then be able to sell a good decent cover crop and make money on it. Can you
Sam Eathington, CTO, Corteva: So this is what we call our winter canola project today. It’s a collaboration with Bunge. We go down into Tennessee, Kentucky, kind of the Mid South is where we started. This last year, we have 35,000 acres out with growers. So our winter canola, which is a crop we grow in Europe, it’s called oilseed rape, we can bring that to The U.
S, a farmer can plant that in say September, October, it grows, it is a cover crop officially, but it produces an oil crop and we’re getting about 50 to 60 bushels per acre on our trials and even the last couple of years results. And so it’s a great cash crop for farmers. They get to harvest it in right about now, so they can still plant soybeans if they want to come back in, which is what a lot of them are doing. But then they’re able to take that oil and our current collaboration Bunge takes it and crushes it and then we basically that can go into a biofuels market opportunity. And so what’s nice about it is there could be subsidies around the, you know, being a cover crop, but actually you don’t need it to make money as a farmer.
So they’re actually making a nice return on that crop even more than they were on their hybrid wheat excuse me, their winter wheat.
Joel, Unidentified role: Well, because it does feel like I mean, did a lot of work on thematic two years ago, three years ago about no till cover crop, all these carbon programs, but it was difficult. Farmers don’t seem to want to do it. Worried it could be a burden. The yields might go down for a bunch of years. The incentives weren’t great.
Obviously, there’s been a bit of a less focus on ESG in the last couple
David Johnson, CFO, Corteva: of
Joel, Unidentified role: makes sense that you’d have to actually try to grow a crop in the winter that you make Yeah.
Sam Eathington, CTO, Corteva: No. This crop we started with the goal that a farmer has to be able to make money without subsidies on it, that’s what they can do.
Joel, Unidentified role: And they’ll probably get subsidies in the end anyways, right? A take if you get it.
David Johnson, CFO, Corteva: Yeah. Yeah. For sure. Okay.
Joel, Unidentified role: So biologicals a bit, maybe before we talk about so you did a couple of acquisitions over the last couple of years, Stoller and Symborg. Maybe talk about that, how is that integration going? What lessons have you learned? What’s the remaining low hanging fruit?
Sam Eathington, CTO, Corteva: Yes. So Stoller, obviously a Brazil company had a really big footprint in biologics in Brazil, had a very novel way of how to interact and sell with the customers out there. And Symborg was a startup in Spain that had some neat technology, which we call Nutricia N, which is a microbe that helps produce more nitrogen in the plant. There’s a neat story of how those came together because as we’ve integrated them, we brought our regulatory and formulation capabilities to expand the platform of Nutrishnan. So we’ve actually improved cost of goods, we’ve improved stability, we’ve deregulated it on a lot more crops and applications.
And Stoller has been able now to take that to the field, especially in Brazil. And we’re seeing four or six bushel yield advantages in corn and soybeans in Brazil. So we’re excited about this year. We think this is a good year to really test it in Brazil. We’ve seen good uptake so far.
We’ll see how the rest of the year goes. But it was a nice learning of a company with the right technology, but they didn’t have the scale and the ability to do anything with our ability to apply certain technology to make it better and then a sales force that could actually go out and deliver we’re seeing a nice uptake there.
Joel, Unidentified role: Stolr got you the channel, right?
Sam Eathington, CTO, Corteva: That’s right. And Simborg got you a lot of IP? Simborg had the microbe that was turned into nutrition. And so they had the organism, had done the initial research, testing, proved it work and then we helped scale it and deregulate it. Okay.
Joel, Unidentified role: One of the things you guys also talked about last year was you were increasing the R and D spend but decreasing the SG and A spend. Maybe talk a little bit about that balance?
David Johnson, CFO, Corteva: Yes. Mean, now, we’re basically, I would say, in 25% as a percentage of sales, Joel, about flat. So our R and D will be about 8% and I think 22% or whatever in total for SG and A. So I think right now it’s fairly stable growing but less than our sales growth. I think the most important thing Sam and his team are doing is getting more for those dollars than we’ve had in the past.
I think we’re using artificial intelligence, all these other different tools to make that spend really valuable
Sam Eathington, CTO, Corteva: for us. Yes, we’re constantly looking at driving efficiency in the R and D program. Look, I’ll go put our results up against anybody in the industry, I think for what we spend our output, the effectiveness is quite good. And but we continue to pressure test that and make sure it’s right. And then even every year we take a hard look at every project.
So the capital allocation on every project has to be reviewed every year, not only technical feasibility, but the business feasibility. And so there are projects we stop, there are projects we invest more in.
David Johnson, CFO, Corteva: And just to give everyone a magnitude scale, that’s about a $1,400,000,000 spend in a year.
Joel, Unidentified role: Actually, I’m talking about another deal like that’s upside, another one of an upside. The royalty, the seed royalty, excuse me, opportunity, which you’ve reduced your outflow by 100,000,000 maybe $05,000,000,000 the last number of years. You have another sub $300,000,000 to go. You’ve wanted to hit royalty neutrality in, I think, you’re saying by ’29, yes, ’28. Talk about to get that because now it’s about the next step it seems to be about licensing your own traits and growing a How about the next step, not just reducing your outflow to Bayer and others, but now actually getting paid for your technology and how do you get that, the next step?
Sam Eathington, CTO, Corteva: Yes, no, you’re spot on. So we went from an in licensing company and paying a lot of royalties to
David Johnson, CFO, Corteva: We’re net 700,000,000 and now we’re net 200,000,000 at the
Joel, Unidentified role: end of last year.
Sam Eathington, CTO, Corteva: To where really if you kind of look at where we’ve moved to as a company, we’ve developed and we’ve co developed some of the traits we have currently. And as we get to the end of the decade, these are 100% developed by Corteva. And so the ones that matter, corn insect control, which we have our own above ground and below ground traits, so we can go ahead to your point Joel and out license those traits now to other companies. We have soybean insect control that builds off our Conquesta in Latin America. We have another HT4 herbicide combination coming that builds off of Enlist.
And so the key ones of herbicide and insect control, corn, soy and cotton, as we turn the sort of corner in the decade will actually be proprietary our traits. Now we still may in license somebody else’s trade to make the right stacks and combinations and durability, but we now have a whole bunch of trades we get to out license and charge to other people too.
David Johnson, CFO, Corteva: It’s a multi billion dollar opportunity that we haven’t really participated too much in. It’s about North America, Latin America, and it’s essentially the market today.
Joel, Unidentified role: To get to net royalty, whatever zero, net zero, by ’28, does that incorporate do you need to be able to sell some of your germ to private label seed players like some of the retailers? Or can you get there by 28% without doing that?
Sam Eathington, CTO, Corteva: We would have a small amount of out licensing in corn in that number. We would have some out licensing in
Joel, Unidentified role: soy Which you don’t have now?
Sam Eathington, CTO, Corteva: That we’re growing right now. But you are growing, yes. But it again, it looks quite feasible, and it’s not a very big number at the end of day.
Joel, Unidentified role: So it’s not it’s a small part
Sam Eathington, CTO, Corteva: of the dairy feed, exactly.
Joel, Unidentified role: Fair enough. Okay. So when are we okay. Because I think that’s interesting. I think one of the goals was like Monsanto, Bayer is very good at getting their German to lots of private label.
You’d think with Pioneer being such a strong competitor and product that there could be a lot of upside to that opportunity. And especially Chuck, knowing the retail game, you would think he would be pushing that more. That’s always been a fascinating topic for me.
Sam Eathington, CTO, Corteva: Yes. And of course, we created Brevant brand, which is the brand we go into with retail.
Joel, Unidentified role: That was the Dow what was it, my good tech brand And then you replace it with better
Sam Eathington, CTO, Corteva: Genetics. DuPont.
Joel, Unidentified role: Let’s just say, DuPont Genetics.
Sam Eathington, CTO, Corteva: Yes, exactly. We moved Pioneer type performance into Brevant with our PowerCore and Lists and Vorsi not Vorsi, PowerCore and Lists and Chrome type products. And we’ve seen great performance. I would say the retailers, they go out and test and evaluate and check and make sure it’s right. The feedback has been very positive about the performance they’re seeing.
So we think there’s upside there in the future as we continue down that path.
Joel, Unidentified role: So I mean Corteva has been a good stock. It’s outperformed a tough crop input space for a lot of years. This year is obviously a good year for crop input stocks, but I mean the last few years. What do you think is the biggest misconception? I mean you’re newer to What do think is the biggest misconception about Corteva when you talk to investors that you want to correct?
David Johnson, CFO, Corteva: I guess for me it’s just it’s a technology company and I think sometimes when you get into the ag space, maybe they don’t realize that as much. I mean, everything Sam’s doing. I mean, how many companies have multiple growth opportunities that start with a billion dollar opportunity here and there. I think that the thing that takes a little bit of time is these things are I’m not used to, you know, in my old days, you know, long term was two to three years and now we’re talking thirties and 30 first thing I asked Sam when he gets excited about things is like 36.
Unidentified speaker: Yeah. Exactly.
David Johnson, CFO, Corteva: He’s like So talking about 30 or 36 and all that. But I think all this layer on top of
Unidentified speaker: each other.
David Johnson, CFO, Corteva: And I think we have a lot of we’re controlling our controllables. I think we’re a really well run company, which is on one end, but we are a technology company on the other hand. And so I think it’s a really exciting place to be.
Joel, Unidentified role: All right. Thank you very much guys.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.