Monsanto Company's CEO Discusses F3Q13 Results - Earnings Call Transcript

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Monsanto Company (MON)

F3Q13 Earnings Conference Call

June 26, 2013 9:30 am ET

Executives

Bryan Hurley – Investor Relations

Hugh Grant – Chairman and Chief Executive Officer

Brett D. Begemann – President and Chief Commercial Officer

Pierre Courduroux – Senior Vice President and Chief Financial Officer

Analysts

Michael Cox – Piper Jaffray

Don D. Carson – Susquehanna Financial Group

Frank Mitsch – Wells Fargo Securities, LLC

Kevin W. McCarthy – Bank of America Merrill Lynch

Vincent Andrews – Morgan Stanley & Co. LLC

Robert A. Koort – Goldman Sachs & Co.

Mark R. Gulley – BGC Financial LP

David I. Begleiter – Deutsche Bank Securities, Inc.

Jeffrey Zekauskas – JPMorgan Securities LLC

P.J. Juvekar – Citigroup Global Markets Inc.

John E. Roberts – UBS Securities LLC

Presentation

Operator

Greetings and welcome to the Third Quarter 2013 Monsanto Company Earnings Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator instructions) As a reminder this conference is being recorded. It is now my pleasure to introduce your host Bryan Hurley, Investor Relations Lead for Monsanto.

Thank you Mr. Hurley, you may begin.

Bryan Hurley

Thanks Christine, and good morning to everyone. Thank you for joining Monsanto’s third quarter earnings update. I’m joined this morning by Hugh Grant, our Chairman and CEO; Brett Begemann, our President and Chief Commercial Officer; and Pierre Courduroux, our CFO. Also joining me from the IR team are Manny Cruz, Ashley Wissmann and Tim Baker.

As usual, this call is being webcast, and you can access the webcast and the supporting slides at monsanto.com. The replay will also be available at that address. We’re providing you today with EPS measures on both the GAAP basis and on an ongoing business basis. Where we refer to non-GAAP financial measures, we reconcile to the GAAP in the slides and in the press release, both of which are posted to our website.

This call will include statements concerning future events and financial results. Because these statements are based on assumptions and factors that involve risks and uncertainty, the Company’s actual performance and results may vary in a material way from those expressed or implied in any forward-looking statements. A description of the factors that may cause such a variance is included in the Safe Harbor language in our most recent 10-K and in today’s press release.

With our guidance update last month, we provided an early read on the factors in the quarter. So this call will be more forward-looking as we focused on growth into next year and in the next several years. Hugh will lead that with a strategic view on our growth opportunity. Brett will fill in the milestones that translate that opportunity into our 2014 operational plans and Pierre will bring this together in the translation to our current financials and guidance outlook.

Let me start by grounding the conversation in the basic financials. There is a brief of the financial results for the third quarter on slide four. As a part of our guidance update, we increased our full year outlook to $4.50 to $4.55 of ongoing EPS, reflecting greater than 20% growth for the full year. We recognize that there would be some shifting in our earnings pattern particularly in Q3 from some of the factors in play this year and the Q3 numbers reflect those trend factors we highlighted.

On going earnings for the quarter is $1.66 per share, which is slightly above our expectation in our guidance update and slightly ahead of Q3 in 2012. This quarter reflects some of the expected effects from the Brazilian soybean business, lower overall planted cotton acres and the more visible effect of the higher drought-related corn production costs. Those effects were partially offset as we saw continued strength in Ag Productivity and the practical benefit as we had the full positive effect of the discrete tax item flow through into this particular quarter.

On the cash side, through the quarter we’ve generated $399 million in free cash flow compared with free cash flow of $311 million through the first nine months of 2012. That increase tracks with the improvement we’ve seen in the overall business balanced against some of the growth in working capital and our conscious deployment of capital investment to support the business growth we talked about going into the year.

So with that, let me turn it to Hugh to layout how we view our growth story over the long-term.

Hugh Grant

Thanks, Bryan and good morning to everybody on the line. As Bryan indicated, our results this quarter came in slightly ahead of our guidance update on the track with our outlook for how the year plays out in total. So the power of our conversation today probably lies less in the direct results and more and the color we see behind the numbers through the trends and how those translate to our confidence. The third quarter provides a unique view with three quarters behind us. We are close to finalizing another year of growth, but more importantly we have enough visibility in our plans and drivers to confidently begin to project the growth arc that continues in 2014 and carries for a multiple year horizon.

If I start with the reflection on fiscal year 2013 on slide five, the headline is we expect to deliver another year of 20% plus ongoing earnings growth, and that's our third in a row. That's the clear statement of growth, but it's a more profound statement on the ascension and the strength of our portfolio. Most years the results come together differently than you draw them up during planning, but that's actually been an area of strength for us this year. Our 20% plus growth comes after we have excluded the historic $0.25 of EPS from the Brazilian soybean business and work through the significant effects of the 2012 drought in corn and the pullback in planted acres in cotton.

At the same time we have a different elements and the portfolio really step up ranging from the strength of the Ag Productivity business to contribution from our international businesses, and that's what really matters. I’m particularly proud of the resilience of our portfolio. Our growth is more global and it's more balanced. And because of that we now have a portfolio that can manage the practical variability inherent to agriculture better than we have been able to do so in the past.

If I broaden our prospectus to our next fiscal year, we’ve reinforced the opportunity to grow mid-teens ongoing earnings again in 2014. Our confidence in making our projection at this relatively early point. It’s a reflection of the continuing momentum, the underlying growth and the layers of opportunity that come together in our global portfolio.

In fact, without an inflection point, as for the visibility on these drivers isn’t just about 2014, we expect to also drives growth into 2015 as well. And we are in a better position than we’d been in sometime to project the growth path over multiple years as shown in slide six. In fact, we have accomplished a couple of key things this year that set the strategic course for at least the next 24 months.

First, with the approval for Intacta now in hand, it’s the catalyst for unlocking a completely new wave of growth in soybeans. It’s much bigger than Brazil alone and it sets up a target market opportunity across our total soybean trade portfolio of more than 200 million acres across the Americas as soybeans officially enter the multi-stack, multi-country opportunity more typically associated with corn.

Second, the agreement that we reached with DuPont in the sub-quarter rewrites the U.S. soybean opportunity for us. It also replaces a difficult relationship with a much more positive dynamics that has the potential to expand beyond soybeans.

Third our international businesses have taken center stage this year, and now reflect a significant source of strategic and financial growth. While we often get caught in the debate of acres and products in the U.S., the reality is that this year some of our strongest growth from key platforms like corn has come outside of the U.S. borders.

And finally in slide seven, we are demonstrating the early promise of some of the next generation technologies that have the potential to be the next wave of growth drivers that carry us beyond this decade.

For me, the prototype of this next generation technology is our Integrated Farming Systems or IFS. IFS, is in Ground Breakers this year and with planting, we’ve already passed a breakthrough milestone. The prescriptions for more than 40,000 acres were successfully transmitted and put into action for planting this spring. That validates that data can transform to something that is time on of this planting practice, but we think it has the bigger potential to transform how we help farmers make decisions about increasing yield.

That same approach to unlocking yield is playing out on our other platforms, whether that’s our trait pipeline or our new AG Biological Research. So I think this even mix of key for early R&D milestones that foreshadow ongoing growth.

Brett will walk through more of the color and milestones for these drivers, but in the near-term, the beauty of our overall strategy is it carries forward in 2014, the momentum that has driven our success this year. We’ve made a conscious effort to reconnect with our customers, develop and drive products that deliver more yield and multiply our business on to a global stage.

Coupled this with the backdrop of the global need for improved productivity shown in slide eight. And, you can see that the significant opportunity for innovators like Monsanto to create a lot of value. Things like yields, acres, and prices will fluctuate from year-to-year. But structurally, the business drivers that we’re focused on continue to play out for an expanded time horizon.

And I think that really underlines our core opportunity. If I summarize where we are at this third quarter, there is three points I’d emphasize. First, with the conclusion of this year now in sight, we don’t try to deliver a sub consecutive year of greater than 20% ongoing earnings growth. Secondly, and just as important, the significant opportunity ahead, we’ve made an early or an typical declaration on the earnings growth in 2014 and that's a reflection of the moment coming out of this year and the opportunity that we see and our ability to unlock successive years of growth going forward.

It now leads to my final point, as good as I feel about this year and as confident as I feel about how 2014 sets up, what I like about our position is that we have good visibility on the critical drivers that carry Monsanto for the next several years in a row.

So with that, I’ll hand the time over to Brett to walk you through in more detail the strategic business milestones that set up these new term opportunities. Brett?

Brett D. Begemann

Thank you and good morning to everyone. Let me start off today by highlighting that our renewed focus on our customers is that the core of our overall opportunity. Our success depends on the success of our farmer customers, that's why our ability to deliver better performing products and a consistent pricing strategy is so important, and when those two things are done right we see two desired business outcomes shown on slide nine.

Number one, we see volume growth. The best example of this is our global corn portfolio in which we expect to hit a third consecutive year of record total volumes. Even with the possibility that U.S. planted corn acres come in lower than initial estimates. That continues in 2014 and we expect to set another record with our global corn volumes.

And number two, we see pricing opportunity. Unlike the fact that every year we see incremental pricing opportunity backed by the fundamentals of our business, the mix upgrade is our biggest overall driver, whether that's our global germplasm portfolio or the acceleration of traits. And the consistent approach we’ve taken to pricing has resonated very well with our customers. This year is a good example. We’ve absorbed some additional costs associated with the effects of last year’s drought and we chose not to pass that on to our customers. While this cost pressure has a short-term effect on our financials, it’s the right tradeoff as it gives us the business flexibility to supply our customers and stay focused on our long-term pricing strategy. Over the last few years we’ve worked hard to find the sweet spot with our pricing philosophy that allows us to remain focused on our customers and grow the business.

Now let me tell you how these key themes, pricing opportunity and volume, come together in our growth drivers for next year. We expect the biggest growth driver for Seeds & Genomics in 2014 will be the same as 2013 and that’s our corn germplasm platform and the power of the global upgrade on slide 10. Every year we upgrade a significant portion of our portfolio across key geographies with the newest, highest value hybrids and going into 2014 this germplasm refresh will certainly be as important to growth as it was this year.

Coming into this year, we projected a total seed portfolio price lift in corn in the range of 5% to 10% from this refresh and that played out as planned. And while we haven’t communicated specific pricing, we project that same 5% to 10% range in price lift in our corn seed portfolio for 2014. This speaks to the consistency we want to reinforce with our farmer customers. The predictable financial benefit of this annual upgrade as well as why our practical approach to pricing creates a positive lift even in a variety of commodity price environment.

The next layer of the overall corn upgrade opportunity comes as we accelerate trade penetration. If you move to slide 11, you can see that there is significant opportunity in corn across the Americas. There are approximately 150 million acres of corn in this region, and with our leading share position, the Americas provide a significant runway for upgrades.

We’ve seen strong demand in the U.S. for our reduced refuge family and corn. In fact, we now project this family will come in at or above the high end of our initial range of 36 million to 38 million acres. We expect to continue to add incremental acres into that reduced refuge family next year, and we’ll focus further on the compounding benefit we get through the upgrade within the family, as the highest performing, highest value products become an even bigger part of the family portfolio.

If you move south of the equator, there’s nowhere in the world that can touch the pace and impact of upgrades we’re seeing in Latin American corn. We’re still in the early phases of the ramp up of trades in Brazil. This year VT PRO 2 reached nearly one-third of our branded portfolio, and this growth continues as we project it reaches nearly half of our portfolio next year.

In Argentina, the upgrade is through the triple stack, but the storyline is the same as Brazil. This year, we had Triple PRO on about 40% of our brands and in 2014, expect that to accelerate to roughly 60% of our portfolio. These upgrades are important and powerful in the financials, as they create significant margin lift on each acre that layers on top of our normal mix upgrade from germplasm creating an additive benefit.

As we round up the corn contribution, I’d highlight the last of our fundamental growth drivers in Eastern Europe on slide 12. The corn footprint in Eastern Europe is as big as Brazil and has been expanding.

Our breeding efforts are fast tracked given that our U.S. corn germplasm fits nicely with Eastern Europe’s growing conditions. And with our ability to upgrade our offerings every year and our current business investments to support this growing business, we expect this is another of the fastest growing businesses in our global portfolio. If we shift from corn to soybean, I’d highlight some of the layers of growth that’s start coming online in 2014 on slide 13.

With the last remaining key import approval for Intacta in hand we officially enter the decade of the soybean. As the cumulative power of our next generation soybean platform drives our financials in meaningful ways. We have three breakthrough soybean technologies to build out our commercial portfolio. Roundup Ready 2 Yield that boost yield, Intacta that should revolutionize insect control and Roundup Ready Xtend that is a whole new weed control platform. We expect these three come together as a multi billion dollar driver in the next five years.

On this slide, you see that there are $200 million acres of soybeans planted in North and South America. This year, we touched only about 20% of that massive opportunity with these next generation products, and that was exclusively in the form of Roundup Ready 2 Yield in the U.S. and just like we’re seeing with the reduced family and corn. The demand for Roundup Ready 2 Yield means we will be at or above the high end of our original 39 million acre to 41 million acre range this year, and the opportunity is growing, as there are significant headroom here, and here is, how I think about how that contributes in 2014.

In the U.S., the deal we struck with DuPont completely rewrites the landscape of Roundup Ready 2 Yield. We now effectively reached a 100% of the market opportunity. As I look at the total acre fit now touching the total U.S base of around 75 million acres, that second wave ramp up begins in 2014. Just as importantly we get the first of our fixed royalty payments from DuPont in 2014, providing a reliable new licensing stream that boost our soybean portfolio contribution. Then you shift to Latin America, where we are officially on the verge of launching Intacta, the first of our new 100 million acre opportunities.

On the product side, we now have the final data from our second year of Ground Breakers, which are shown on slide 14. The second year results confirm the better than 4 bushels an acre advantage on more than 1,000 locations. That’s double the number tested last year. That’s created good buzz, a strong base of support from our customers and some unique pool as I believe farmers are as anxious as we are to see Intacta in commercial fields.

On the process side, with the China import approval our teams are now focused on the commercial rollout of Intacta. The approval gives us ample time to position of seed with key customers and get everything in place for our planned fiscal 2014 launch.

With the upcoming Latin American planting season in sight, we are officially targeting around 3 million acres for the launch of Intacta, which would make this not only the largest soybean trait launched today, but it will effectively double our largest previous first year opportunity.

In addition, we’ve been working with our customers in Brazil and we will start rolling out official price cards soon in anticipation of our first year sales. We won’t get ahead of our customer communication. We are generally speaking for 2014, our planning projects retail prices that reflect the value we’ve seen to Ground Breakers and talked about for the past couple of years. It’s the pricing approach that we believe gives Brazilian farmers the right opportunity to see the value of our breakthrough new technology, while simultaneously supporting the opportunity for us from our fastest ever soybean trait ramp up.

The cumulative opportunity makes our next-generation soybean platform one of our biggest growth drivers and the strategic milestones are right on track. Against the backdrop of those incremental drivers of growth, we recognize one of the elements that added to the strength of our portfolio in 2013 was our Ag Productivity business. After the challenges of the commodity cycle through 2010 Ag Productivity and the Roundup business in particular has emerged nicely and our strategy is working well.

As we approach the conclusion of this 2013 season, the market environment has held strong and our conscious efforts to layer our branded pricing on top of generics is providing some stability and added financial contribution. With the next season around the corner, our line of sight is better than it was a quarter ago, but I look at this one year at a time, and we see the Ag Productivity business in 2014 is a relatively stable contributor to the portfolio.

Let me wrap up by giving you my sense of how that portfolio comes together, and more importantly how it drives the next level of incremental growth. First, I'd say that the last few years have been important in confirming our strategy and speak to the renewed focus on our farmer customers. It’s this strategy and an expanding toolkit to deliver better performing products that underpins our confidence in the future. So we won't lose sight of our farmer customers.

Second, we felt a lot of momentum in the areas of our business that matter. I think that momentum continues, creating a tailwind that I can feel throughout our organization.

And finally, we are confident because this growth is in our wheel house. It’s in the areas that we know well, with the strategy our teams own and that comes through drivers we’ve shown we can deliver on.

With that, let me turn it over to Pierre to walk you how all this comes together in the financials. Pierre?

Pierre Courduroux

Thanks, Brett and good morning to everyone. Hugh and Brett talked a lot about the strategic elements that drove our growth over the last few years and that gives us confidence in further growth going forward.

I’ll provide some early color on how I see this is reinforced by some key themes in the numbers for next year. Then, I’ll end on how we see that growth translating into cash in guiding our strategy for cash deployments. But before I do that, let me reinforce our fiscal year 2013 guidance and use the year-to-date data to complete the financial picture of our view on the year.

I’ll start with a walkthrough of our guidance on slide 15. As Hugh said, every year plays out a little differently and between factors like the exclusion of the historic Roundup Ready soybeans revenue in Brazil or the accelerated first half growth from the early U.S. season, 2013 has definitely developed in a very different way than our historical earnings pattern and that continues to be true in the third quarter where the quarterly results magnify some of these factors. So to get the best view of our performance and guidance, it’s most useful to focus on the year-to-date financials.

Within the year-to-date results, I will emphasize the key drivers, starting with our global corn business. It is the biggest contributor to overall earnings in the year and it is also the one driver that we have seen contributing to growth across the board. For the year-to-date, our corn sales growth is 14%, combined with a strong outlook for corn going into the fourth quarter Latin American season that keeps us on track for mid-teens sales growth across corn for the full year.

From my perspective, seeing that consistent growth is critically important not just to delivering our numbers this year, but also for supporting our confidence in the next few years. As Brett mentioned, this year we have made some conscious investments in our customers related to our corn cost of goods and the full cost from the effect of last year’s drop in our production are now reflected in our results this quarter.

So against our overall sales growth, we now have the visibility to say that we expect full year margins to pull back a couple of points from last year’s levels. We absorb much of that cost, took care of our customers and still delivered our bottom line company growth. Just as importantly, these are not structural costs, as they come from the special circumstances caused by the draughts. So we expect there is some potential incremental benefit in 2014, as we return to more normalized conditions.

The strength we have seen in corn is complemented by better than expected results in that productivity and to run the business in particular. We’ve seen generic glyphosate prices affirm into the second half of this year and as we stay focused on our strategy, we have managed to capture the practical upsides from this positive pricing environment.

With that expected continued contribution, we expect the full year Ag Productivity gross profit to come in above the $1.4 billion that reflected the high end of our previous range. Just as important, with the visibility we now have, we expect the contribution from this segment to stay strong going in 2014.

The other significant area to highlight from a gross profit perspective is soybeans. We have seen strong growth in the U.S. as we’ve seen the mixed benefit from the upgrade on Roundup Ready 2 Yield soybeans. However these positive drivers offset that the effect of Roundup Ready 1 soybeans in Brazil, which was excluded from guidance earlier in the year. And you see these effect both in the year-to-date results and for the quarter as Q3 is the largest quarter where the Brazil soybean contribution historically flows through our P&L.

The fact that we were able to balance against these moving parts through our global portfolio speaks to the strength and the momentum we see in our business and with the majority of earnings in hand for the year we are targeting to deliver $7.7 billion to $7.75 billion in overall gross profit.

I will stay to the same year-to-date look as we move below the line. As we look at the SG&A and R&D spending, we expect to see positive earnings leverage for the full year, with total operating expense on track to grow year-over-year about mid-single-digits as our total sales growth outpaces spending.

In the quarter, our SG&A expenses came lower than our earlier expectation as a result of a shift in the timing of expenses, creating a timing benefit of a few cents in Q3 from SG&A.

The last key piece in the P&L comes from tax. As we enter the year, we anticipated a tax rate in the range starting at about 30%. Through the first half of the year, we’ve already seen most of the benefits of the discrete tax items we anticipated coming into the year, and in Q3, we realized a significant cumulative benefit that impacts our effective tax rate.

I know expect our full year rate will come in a couple of points below our original 30% guidance as our [owing] tax benefits are now likely to be more pronounced than what we expect for in a typical year. Practically, I would also expect a more normalized rate in Q4 as well as for fiscal year 2014.

From here, we are one quarter less to close out the year. With the improved second half outlook from last month’s guidance update and the final Q3 results, we expect Q4 will land relatively close to last year’s fourth quarter. We’ll see how much of the upside in Q3 may flow through to the full year, but what’s important to highlight is that Q4 is really a function of the contribution from our international corn portfolio with a strong start of a new growing season in Latin America and the expected continued contribution from Ag Productivity.

Looking into next year, here are some key themes I see in the numbers. These themes are summarized on slide 16. First, our expected growth comes on the back of our Seeds & Genomics business. With our expectation that Ag Productivity is relatively stable in FY 2014, it isn’t a major factor in our growth projection. So we are really focused on driving growth from our seeds and traits engine and that is a continuation of the things we consistently do best, like creating annually mix upgrade through germplasm and trait acceleration.

Second, our growth really continues to reflect the strength of a global portfolio. Our portfolio is built on our core U.S. business and an expanded global position as the acceleration and mix benefits in growing regions like Latin America and Eastern Europe [step up] contributions.

Third, the strength of our portfolio gets compounded. Completely new growth layers start to come online next year, most notably the expanded opportunity with Roundup Ready 2 Yield in the U.S. and Intacta in Brazil. These early trends signify more global business with more opportunities coming from a bigger portfolio than we’ve ever had. And that reinforces our confidence in our financial outlook to deliver mid-teens ongoing earnings growth for fiscal year 2014, off of this higher fiscal 2013 base.

The last point I want to emphasize today is the continuing evolution of our cash strategy on slide 17. With the strong cash generation we’ve seen to-date, we are on track to meet our guidance range of $1.8 billion to $2 billion of free cash flow for the year. Another year of strong performance further highlights our ability as a technology company to consistently deliver strong cash flow. And with that strong cash position, we’re continuing to evolve our approach to cash use.

Last quarter, I indicated we’d be more aggressive in using excess cash. Practically, our cash strategy still focuses on reinvestment in the business to support our global growth opportunity, but we’re also moving to use cash over and above our current levels to further prioritize our share buybacks and dividend programs. The best example of that more aggressive approach is the recent authorization by our Board of a new $2 billion three-year buyback program.

Practically, this is the first time in our Company’s history where we’ve doubled the size of our buyback program. Our current program was approved in June of last year. So, between what we spend for Q3, additional spending in the first month of Q4 and our expected program for the remainder of the quarter, we have accelerated the current buyback program.

Let me conclude by telling you that there are two things I take away from this third quarter. First, this quarter servers as an early capstone for the year and with an expected full-year of greater than 20% earnings growth, it confirms that the strategic elements are aligned in our business. And second, it reinforces our confidence in growth for 2014. Fiscal 2014 is a continuation of the success of our current strategy with an even stronger global portfolio.

Thanks for your time. And with that, let me now turn it back to Bryan for the Q&A period.

Bryan Hurley

Thanks Pierre. We have Hugh, Pierre and Brett here as we open the call to your questions. As we typically do, I’ll ask you, please hold your questions to one per person so we can take questions from as many people as possible. You are always welcome to rejoin the queue for the follow-up question. So Christine, I think we’re ready to take questions from the line.

Question-and-Answer Session

Operator

Thank you. We will now be now be conducting a question-and-answer session. (Operator Instructions) Thank you. Our first question comes from the line of Michael Cox with Piper Jaffray. Please proceed with your question.

Michael Cox – Piper Jaffray

Thanks a lot, congrats guys on a great year.

Brett D. Begemann

Thank you.

Michael Cox – Piper Jaffray

It is somewhat early to be speaking to volume growth in corn for 2014 considering the speculation that we’ll plant fewer corn acres here in North America next season. I was just wondering if you could comment on what gives you the confidence to make this statement, and perhaps is this a reflection of what you’re seeing from fall orders or indications from North America?

Hugh Grant

Yeah, Mike, thanks for the question. We had a record year this year, very strong volume and a nice mix of Ag. And as I made the comment on my opening remarks, we’re very encouraged by what we’re seeing and the international business as well, maybe Brett you can give a little bit more confidence going into 2014.

Brett D. Begemann

Yeah, I think as we look at 2014, it’s important to step back and recognize that the global demand for corn continues to grow by a significant amount. And as we project forwards it’s going to continue to take some new acres, which we look to and I mentioned in Eastern Europe. But just as importantly the strength of our portfolio as we continue to perform well and look for share opportunities around the world in our global footprint. So, between – I looked at total acres globally not country-by-country and we look at it as share contribution. We feel good about projecting 2014 growth.

Michael Cox – Piper Jaffray

Okay. And if I could ask one quick follow-up on Intacta, given the value capture formula that you’ve described historically and what seems that you are steering us towards for pricing as that rolls out. It seems that that would effectively double seed cost for growers in South American on soybeans and I would just be curious as to what your thoughts are around, any sort of pushback of that sort of magnitude of price escalation?

Pierre Courduroux

Mike, the two years, the Ground Breakers down there and this last year, we had 1000 plus farmers that used the technology. We are now very confident on our four plus sort of strong four bushel advantage of us, the older technologies wield. Brett said, we are shooting from about 3 million acres or so, we’ll sell out, so the demand is high and we will place against farmer level and we’re working through that farmer price level. We will price against that four bushels. But Brett, anything you'd add in terms of how growers are looking up early pricing?

Brett D. Begemann

I think the important part as you mentioned as the two years the farmers have had the opportunity to participate in Ground Breakers and when you have a 1000 growers looking at these opportunities and seeing the product performing at field, that gives us confidence that they are seeing the value and talking to their friends and neighbors about the value that they are seeing and we are in the process of pricing today and right now and we are working through that conversation with farmers, but I anticipate a very good uptick of the product.

Michael Cox – Piper Jaffray

Thanks a lot guys.

Brett D. Begemann

Thanks for your questions.

Operator

Our next question comes from the line of Don Carson with Susquehanna Financial. Please proceed with your questions.

Don D. Carson – Susquehanna Financial Group

Thank you. Question on corn margins, Pierre, you guided that were going to be down or you’d expect it to be down a couple of hundred basis points for the year as a whole. Just wondering what was the overall impact of eating that cost because clearly you had positive mix benefits upgrading in both North and South America? Is it this quarter sort of 5.6 percentage point decline that’s indicative of the full impact of cost year-over-year and you expect to gain all that back and more as we go into fiscal 2014?

Hugh Grant

Don, thanks for the question. I’ll maybe ask Pierre to give you a little bit color on this. I’d say, the headlines in corn despite a really tough planting season for customers, record volumes, good growth, I’m delighted with the mid-teens growth that we’ve seen in corn. And for us a conscious decision around consistency and maintaining consistency between years. So we saw, we ate cost this year and frankly see as an investment around customer base. So we consciously absorbed that cost with the expectation that we’ll see some of that coming back as an advantage both in customer side, I mean and margin next year. Pierre, maybe you can go a little bit deep in that.

Pierre Courduroux

Yeah, maybe to be a little more specifically, we entered the year with a number of goals regarding corn and one was to grow volume, and as Brett mentioned, during the prepared notes, we are very comfortable that we’re going to be eating a record volume in corn. The second goal was to be able to price and see some price list and we’ve always been talking about a 5% to 10% price sweep from a year-to-date perspective and we are squarely within that range. So we feel very good.

So the strategy is definitely working and it’s translated into the numbers where we see sales growing, by mid-teens 14% on a year-to-date basis. So feeling very good about the strategic driver and where the business is going. However, as you mentioned, Don, I mean we’re seeing the impact of non-structural cost that are definitely related to last year’s droughts and the impact it has on our production cost, the need for us to bring back product from South America and grow more products from South America.

But as I mentioned, those cost are non-structural. They have a disproportionate impact into Q3, as you noted. I mean we are talking about a couple of points for the full-year and you noted that you’re 5% to 6% in the quarter. So this is disproportionate in Q3. This is non-structural and based on normal growing condition and looking into 2014, I’d expect ample supply, I’d expect the normalization of cost, and from a margin perspective, I’d certainly expect a couple of points lift from where we are right now. Having said so, I mean, this is based on seed production and seed has only been in the ground for a month but we feel as I mentioned non-structural and we see the margin lift next year.

Don D. Carson – Susquehanna Financial Group

And just a quick follow-up, you’ve talked about your certainty on volume growth. So, what kind of share gain are you anticipating in U.S. corn in the 2013 season.

Hugh Grant

We’re really pleased with the volume Don and we will wait and see where the total planting acres come out. The smaller the denominator, the bigger the numerator, the better the share growth will be. But based on the number of bags that went out of the door and the performance of the crop the previous year, I’m feeling pretty good about our performance, but that’s still ahead of us, I think.

Don D. Carson – Susquehanna Financial Group

Okay, thank you.

Hugh Grant

Thank you very much.

Operator

Our next question comes from the line of Frank Mitsch with Wells Fargo. Please proceed with your questions.

Hugh Grant

Hello, Frank, good morning.

Frank Mitsch – Wells Fargo Securities, LLC

Hey, good morning Hugh, hey, couple of quick questions here. Given the factor that other companies have been talking about the weather impact on their Ag chemicals business and you guys posted some pretty good results in Ag Productivity. What would you explain the delta between what you’re doing and what the rest of the industry is doing there?

Pierre Courduroux

In Ag Productivity?

Frank Mitsch – Wells Fargo Securities, LLC

Yes, on the cross section chemical side?

Hugh Grant

Yeah, I think a piece that we saw really nice uptick in some of the international businesses especially in Latin America. And in the northern hemisphere, terrible spring conditions are very rare. So that lead to the ability, you have a lot of growers getting into the field, but when they go in their control of bigger weeds, so you see an increase in those rates as well.

So I think, it’s a combination of the growth that Brett talked about in southern hemisphere and I would anticipate those rate increase was bigger, have better control weeds in the northern hemisphere with the wet spring. So we’re pleased with the performance of the business both in volume and in price.

Frank Mitsch – Wells Fargo Securities, LLC

Is there any spillover effect that we can look for in terms of Ag Productivity into Q4 as well fiscal Q4?

Pierre Courduroux

So we expect Ag Productivity to remain strong in Q4. I mean that’s certainly part of our anticipation right now.

Frank Mitsch – Wells Fargo Securities, LLC

Okay. Thank you.

Hugh Grant

Thanks very much.

Operator

Our next question comes from the line of Kevin McCarthy with Bank of America Merrill Lynch. Please proceed with your question.

Kevin W. McCarthy – Bank of America Merrill Lynch

Yes. Good morning.

Hugh Grant

Good morning.

Kevin W. McCarthy – Bank of America Merrill Lynch

Two financial questions for Pierre, if I may. First on, free cash flow, looked like you maintained your range of $1.8 billion to $2 billion. But it looked to us as though cash flow from operations was suggested lower and cash flow from investments like wise, ratcheted down somewhat. So I was wondering if you could speak to the variances in those two buckets?

And then second, if you could provide an update on your commodity hedging strategy with regard to level in duration of hedges and whether not there’s been any change there?

Pierre Courduroux

So as far as the cash flow question is concerned, I mean once we are getting closer to year-end and I mean every quarter we get smarter about how we see our detailed breakdown of free cash moving forward and we’ve done some corrections in the way we’re looking at that. But fundamentally as we said from the beginning of the year, this year we still feel very good about our cash generation and we are also I mean based on what we’ve seen in recent year, investing or forecasting to invest in working capital to rebuild some of our inventories when looking at year-end. So we’ve been correcting some, that the breakdown on our free cash and we got a range which allows us to mange within this range.

We still feel very good about the cash generation coming from our business, so it’s just adjustments we’ve made. And as far as the cash from investment, I mean the same holds true with just we know we’ve got a multi-year plan as far as our CapEx is concerned and now that we’re coming closer to year-end, we are multi-sized on how it’s going to play out by the end of this year. So this is why we’ve been adjusting some of the variables in our free cash. So that was your first question.

Regarding hedges, we’ve not changed our approach to hedges. And as far as the commodity is concerned, what we are trying to do is get to predictable levels of commodity prices when we are thinking about our cost and we’re planning our hedges on a 18 months window and on a rolling window that’s something we’ve done for years and there is no change there in the way we’re thinking about it.

Kevin W. McCarthy – Bank of America Merrill Lynch

Okay, great. And then a quick clarification if I may on tax, I think you indicated something like a more normal rate for fiscal 2014. Just to clarify, is that meant to signal approximately 30%, in other words, an increase in your tax rate year-over-year looking to 2014?

Pierre Courduroux

So, what we’ve seen in this first quarter is we’ve been for the resolution of a series of discrete tax items. And we’re very pleased because we probably rate some of the positions we’ve been taking. So, looking into next year and the fourth quarter, we are expecting a more normalized tax rate. And as you were saying Kevin, I mean, when you look at those historicals, we’ve always given a range of 30% to 32%.

We are not looking at the lower end of these range based on the confirmation we got from both discrete tax items. And what’s really important to mention I think that’s where your question is coming from, is when we are talking about growth next year and we are affirming our mid-teens aspiration to grow, we are not including any further benefits from tax rate getting back to normalized tax rate in our thinking right now.

Kevin W. McCarthy – Bank of America Merrill Lynch

Yes, it’s exactly what I was, what I was after, it sounds like it will be a headwind for you, so that maybe you’re anticipating underlying operating growth it’s stronger, thanks for that.

Bryan Hurley

Thank you.

Operator

Our next question comes from the line of Vincent Andrews with Morgan Stanley. Please proceed with your question.

Vincent Andrews – Morgan Stanley & Co. LLC

Thank you. Maybe a week or so ago, I saw a presentation that was given down in Brazil to a bunch of growers and somebody there said, that you had about 6 billion acres of Intacta that you can potentially sell next year. So, I am guessing that’s a gross number and you’re whittling it down to the three by selecting through varieties. But could you talk a bit about that process and how it compares relative to what you did with Roundup 2 back in that launch year. And just give us a sense of, I know you have that slide in the deck. But if you’re working on the three year, off of six how does that and you’re going to be sold out this year at three, how should we be thinking about the next two years of the volume you might have and what you might be able to sell after, after this year of 3?

Hugh Grant

Vincent thanks a lot. I think you kind of answered your question with your comment on variety, so we are really pleased with the three, so I was tricky the whole bag is big, but in Brazil a piece of this production is done by multipliers, so it’s less transparent than it’s up here when you get through variety of selection and that sort of stuff. If you think about three, if you think of the three new contracts that run already two launched, the first few years of that when year one was 1.5 million acres, year two was 7 million acres and year three was 17 million acres. So really steep trajectory, so starting with the three or number of runs, it’s a nice launch pad, but Brett maybe a few more words on production and transparency.

Brett D. Begemann

Yeah, as I think about the Intacta launch, I step back and remind that we are looking at this as a 100 million acre opportunity, not just a Brazil opportunity and it’s absolutely critical that we have the best and most successful launch that we can in Brazil, and that’s where our focus is on, whether it’s 3 million acres or 6 million acres really financially it will be somewhat immaterial, it’s all about a smooth introduction of Intacta in South America and as Hugh already mentioned, we are anticipating this to be the fastest ramp up of a biotech traits that we have ever seen and at the same time, even at three, it’s 2x the largest launch we have ever had. So I am excited that we will have around three and if it ends up being more, so be it. I am more focused on a smooth launch with a trajectory to that 100 million acre opportunity.

Vincent Andrews – Morgan Stanley & Co. LLC

And if I could just ask a quick follow-up to Pierre and this relates to the share repurchase. Obviously you have almost completed a program, you have announced another program, but shares have basically been flat for three years now and I guess the question I'm asking is and I know this information cannot be done with the math in the 10-K, but can you give us a sense of what you think the share creep is going to be over the next year or two, assuming the stock price roughly where it is or maybe a little higher. How much incremental share authorization do we have to offset before we’re actually can see the share count go down.

Pierre Courduroux

So Vincent, as we said and I think we have to position that as part of our mid-term strategy. Our goal is to reduce share count and when you look at the first half of the year, to a certain extent we’ve almost been a victim of our own success, the share price appreciation, which has accelerated some of the dilution, but when you look at the time window we're looking at which is a couple of years, our goal is definitely to reduce some of the share counts. And we don’t expect dilution to accelerate actually based on where we are today and with the programs we're putting in place we are actually targeting a share count reduction.

Vincent Andrews – Morgan Stanley & Co. LLC

But no sense of what the headwind is what it would be over the next couple of years just as things rest?

Pierre Courduroux

Well we've always been talking in a normal year of dilution in the range of $300 million to $400 million and that’s still what we are thinking about. Now as I said, depending obviously as you know on the stock price, this may accelerate some or slowdown, but the $300 million to $400 million is the number we're working with.

Vincent Andrews – Morgan Stanley & Co. LLC

Okay thanks very much.

Bryan Hurley

Thank you.

Operator

Our next question comes from the line of Robert Koort with Goldman Sachs. Please proceed with your question.

Robert A. Koort – Goldman Sachs & Co.

Thank you, good morning.

Hugh Grant

Good morning.

Robert A. Koort – Goldman Sachs & Co.

I was hoping you could help a little bit with the cadence of the bean business in 2014 specifically since you're going to be introducing new seed into that market, will that change the timing of payment and when you recognize revenue for seed as you bring in the Intacta. And then secondly, on the Pioneer royalty payment, how will that move across the quarters and does it show up on revenue or just as an increase stream. Thanks.

Hugh Grant

Well, thanks for the two questions. I’ll ask Pierre to give a little bit more detail. I think the way, I would think about Intacta in this first and Brett is exactly right. The focus in the first year and it’s the lamenting of Ground Breakers, happy farmers is a good thing, smooth launches make for faster growth. So in terms of change in quarters, I don’t think there is a material difference and not foresee it really at Intacta, the focus is getting the product into the right farmers hands in a timely basis, but Pierre quarterly shifts on Intacta and then the DuPont bookings.

Pierre Courduroux

So we’re not anticipating major changes regarding to Intacta in terms of the calendarization. I mean we’re expecting, it will follow mostly the patterns we’ve seen in Brazil knowing that this year, we’re going to sell seed and there's not going to be revenue coming from POD. So it maybe a little more upfront loaded compared to what you traditionally have, but I am not expecting huge shifts from that perspective.

And as far as the DuPont’s revenue is concerned, it will be booked twice a year, if my memory is correct, but that’s something we may have to come back to you on in details. So it’s going to be booked as royalty, I think twice a year, but I’ll come back to you on this one.

Robert A. Koort – Goldman Sachs & Co.

Thank you.

Hugh Grant

Clearly, the good news is less of timing, it’s more about thud of the soybean market that opens up for Roundup Ready 2, it’s not the real headline.

Operator

Our next question comes from the line of Mark Gulley with BGC Financials. Please proceed with your questions.

Mark R. Gulley – BGC Financial LP

Good morning. Given the emphasis on international growth, I have two questions in Brazil. One is on corn and obviously you have some ambitions there, but given the very high transportation cost and the fact that it looks like, or trying to assume well those logistics cost be addressed, farmers are just almost breaking even on corn when you factor in those rate cost? And then secondly, and kind of a follow-up, you’ve had a lot of political unrest in Brazil recently, demographics there are a lot different, farmers are much more wealthy I think than in the U.S. So do you think the political unrest will change in all Ag policy as it affects your sales and your earnings in Brazil given what’s happened in the last several weeks?

Hugh Grant

Mark, two good questions, thinking that you’re right, transportation is and beans can be 45 plus percent of total cost of production, but it was more and more a focus on a yield and optimizing yield on an acre and if you look at what happened in corn in Brazil in five short years, production has gone through the roof on fairly fixed acres. So it doesn’t compensate for gas or distance traveled, but their leverage in the assets that they have, Brett you’ve been there recently, would you add then a little?

Brett D. Begemann

Yeah, I’d just add that, keep in mind that the disproportion of volume of corn in Brazil is produced for domestic consumption and the livestock feeding industry down there and only recently have they started participating in the export market and that’s not necessarily expected to grow exponentially. It’s really more of the animal feeding industry growing and supplying that. At the same time, I’d just reinforce the point Hugh made, that’s been one of our success stories in Brazil and it’s why you see the ramp of biotech trade so fast, as it helps the farmer increase yield and productivity and that puts them in a better position even with inflated cost structure to be able to compete.

Hugh Grant

And then your second question, it’s an interesting one, so there is unrest, there has been demonstrations in Brazil. I don’t know if Brazilian growers are richer though, they are bigger. They are highly technified. They are really focused on production leverage. We watch the reign, we watch the relationships, though we don’t see any change on Ag policy any time on any time soon. Mark, I think the advantage we have is, we have an insider in Brazil and that we are producing and selling inside the country and agriculture is a huge piece of the economy.

So I don’t have any vision or anything there that would answer your question directly, but I like our position with the footprint that we have in Brazil and the presence that we have in the country. I think that that gives us a little bit of foresight.

Operator

Our next question comes from the line of David Begleiter with Deutsche Bank. Please proceed with your question.

David I. Begleiter – Deutsche Bank Securities, Inc.

Thank you. You I think Brett, you touched on in multi-trait, the multi-stack opportunity in soybean beyond just South America. Can you expand on the timing and the potential of that going forward?

Hugh Grant

Yeah, so Brett talked about the decade of the beans. We see a long runway in this, but Brett, maybe just a quick word on the pipeline and how this plays out.

Brett D. Begemann

Yeah, I think, so first of all we are fully focused on successfully launching Intacta into a 100 million acre opportunity in South America, as well as continuing the expansion of Roundup Ready 2 Yield in the U.S., so it’s another significant part of that market opens up to us, but just as exiting as that near-term products that we have. I mentioned we have Roundup Ready Xtend coming which is the Roundup by dicamba trait that will be doing Ground Breakers in the U.S. working thorough the regulatory process here, and I will tell you, there is a lot of excitement at the farmer level for a new whole new weed control system that really maintains the efficiency of the Roundup Ready system and makes it simple to control, but difficult to control weeds.

And as we look at South America, that product also has a fit, particularly in Argentina where dicamba is already registered and a little bit later in Brazil where we have to go through the chemistry, but the product fit for South America is just as strong as it is for North America.

So it becomes a 200 million acre opportunity for that product. And also in that mix we’re also looking already at the second-generation of Intacta for insect control that will be part of that portfolio in South Americas. We have a really nice runway of innovation for that 200 million acre opportunity in soybeans that I’m really excited about.

David I. Begleiter – Deutsche Bank Securities, Inc.

And Brett just quickly, do you think you gained share in soybeans in the U.S. in this year?

Brett D. Begemann

It’s a little bit like the corn situation. The farmers are just, what a tough year. Then as we sit back and look at it today, I feel really good about the success we’re having with Roundup Ready 2 Yield in the U.S., but I have no certainty yet where acres are going to land and the trade-offs that farmers have had to make between prevent plant and switching corn to soybeans and cotton.

What I would tell you, that I focus on is, we are kind of in a unique position that when a farmer changes his mind on corn, we have an opportunity with cotton and soybeans that not every everyone else enjoys and we’re making sure that we’re getting the right hybrids there for the farmer to plant corn if he chooses corn. We’ll get cotton there in the south if he wants cotton and we’ll get beans there if he wants beans and at the end of the day, I feel really good about how our soybean business looks in the U.S. But we will wait and see how the acres all sort out at the end of the day to know exactly where we’re at.

Bryan Hurley

Christine, this is Bryan. I realized we’re running kind of short on time. Maybe we’ll extend it a bit and try to squeeze in maybe three more questions here.

Operator

Okay. And our next question comes from the line of Jeff Zekauskas with JPMorgan. Please proceed with your question.

Jeffrey Zekauskas – JPMorgan Securities LLC

Hi, thanks very much. Did your U.S. corn volume grow this year versus last year? And are you bearing any exceptional costs for farmers now wanting shorter maturities instead of longer maturities or wanting soy instead of corn?

Hugh Grant

Jeff, thanks for the question. So, our volumes are up this year. Every year we see those traders, and as to Brett’s point, we’re fortunate that we can satisfy those traders. The cost impact on that is fairly small. The advantage is you get something out in the shelf that the grower needs, and at this point, I mean there are still beans, incredibly there are still beans being planted. Being able to satisfy his second pick or his sub-choices is a really big deal and one that he doesn’t forget. So, it’s more an advantage than a penalty.

Jeffrey Zekauskas – JPMorgan Securities LLC

Okay. And then lastly, the cash flow guidance that I think Kevin asked, was cut by $150 million sequentially, and it looks like your corn profits were sort of about $100 million lower than they might have been judging by last year’s margin. So, did something happen between the last time you reported earnings and now such that these two elements are meaningfully lower than one might have expected them to be?

Hugh Grant

Yes, I think Pierre covered this. So I’ll ask him to share a few points on how a headwind becomes a tailwind. But we produced in a drought and sold in a flood. And we consciously this year said we weren’t going to jerk around on our pricing and stock through our – stop our consistency with the growers. But Pierre, maybe to Jeff’s point, maybe a little bit more color?

Pierre Courduroux

Yeah, I mean looking at the corn margin, which I think is what you’re looking into right now, as I mentioned, definitely a headwind coming from the cost that we’ve been, I mean, and non-structural costs that have a disproportional impact on Q3 because that’s when we moved the product from South America. So, this is an investment we’ve made in our customers, as I mentioned, non-structural and we are expecting this will play a positive role when looking into 2014.

And as you mentioned, I mean, the relative costs on our margins, you’re talking a couple of percent and that’s something that’s been developing over the last quarter basically when we got closer and closer to looking at the final cost associated with this production, which once again is related to last year, very unusual conditions regarding the drought. So this is from the P&L perspective and looking into 2014, I mean, we are definitely looking into recapturing those couple of margin points we’ve lost on our corn business related to that cost.

As far as free cash flow is concerned, it’s more a rebalancing as I mentioned, once again in between how fast we are investing in our CapEx and also the need we have to rebuild some of our inventories looking into the end of year. So, I wouldn’t read more into the free cash because free cash has not changed. It’s just the balancing in between our cash from investment and cash from operation. I wouldn’t read more into it than that.

Jeffrey Zekauskas – JPMorgan Securities LLC

Okay, great. Thank you very much. Thanks for taking my questions.

Hugh Grant

Thank you.

Bryan Hurley

Thank you. Christine, we can probably handle those two additional questions now.

Operator

Our next question comes from the line of P.J. Juvekar with Citi. Please proceed with your question.

P.J. Juvekar – Citigroup Global Markets Inc.

Yes, thank you, good morning. I got two quick questions; one long-term, one short-term. In the long-term, there was a recent Supreme Court ruling that basically says, you cannot patent human genes, so when you take a step back and look at your business, when you are discovering genes, you’re isolating them, you’re inserting them and there are a lot of technical steps in between. So, what parts of this process you think are patentable and what could be potentially at risk.

Hugh Grant

P.J. thanks for the question. So, we’ve examined the ruling, we are watching this with interest and as we look our business and we look at the mid to long-term, we don’t see any impact to Monsanto. So, we feel we just finish those reviews we feel very good.

P.J. Juvekar – Citigroup Global Markets Inc.

Okay, I will follow-up on that later separately, and then, secondly just quick question on the POD royalty collection system, is it ready to handle Intacta and then the split between you and the grain elevator, is that going to remain the same, because the absolute dollar level is going to go up. Thank you.

Hugh Grant

Yes, I believe that the POD system is very capable of handling the launch of Intacta. We’ve been in discussions with all of those participants as we worked our way towards the launching and in detail now. And as we finalize pricing and the launch of the product, we’ll work through those specifics on how we are going to share within the POD system and that will be something we can talk more about when it’s finalized.

Bryan Hurley

I think Christine that puts us in good shape for our last question here.

Operator

Our final question comes from the line of John Roberts with UBS. Please proceed with your question.

John E. Roberts – UBS Securities LLC

Thank you, looking at slide 12 on the Eastern Europe opportunity, are you number one in Eastern Europe, there was an earlier reference that you were number two overall in Europe and maybe you could talk about the transition from wheat to corn, whether that's a broader phenomenon across Europe and I don’t know whether even your plans on GMO wheat in your pipeline changed in light of some of the recent wheat events, maybe just some commentary around the wheat trend in general and your share in Europe in the corn market?

Hugh Grant

Thanks, John. Brett, maybe a quick look?

Brett D. Begemann

Yes, John as you look at Eastern Europe, we’re actually number two in Eastern Europe as we look at it today and as I mentioned it’s growing really fast and both in acres as well as our share as we extrapolate from our U.S. corn base into that area as they match up very nicely. And to your point of wheat acres, yes that’s where some of this growth is coming from. As we accelerate the yield gains in corn for an Eastern European grower, corn becomes a more profitable crop for him to grow versus wheat. And I remind you that a significant part of wheat goes into animal feed, corn becomes an easy substitute for animal feed and when you can increase the profitability of the farmer, it makes a big difference. And I don't think this is a new phenomenon. If you look at North and South Dakota in the United States, 10 years, 15 years ago is mostly wheat, and today you look across those fields, it’s mostly corn and soybeans. And as I talked to our Canadian customers in Canada, they're looking at the opportunity to grow corn as well. So I think this is just a real phenomenon that is playing out.

John E. Roberts – UBS Securities LLC

Thank you.

Hugh Grant

To your question John, just I’m conscious of the time, we ran a little bit longer. Thanks for your questions and your support as always. As I think about the third quarter, this is a call where the quarterly numbers traditionally take a little bit of a backseat to the trends and the outlook, we very quickly look towards 2014. So let me wrap up today by summarizing just a couple of key points that are takeaway from our performance this year and how it informs our future opportunity as we look at the next two years.

So, first point, three back to back years of greater than 20% ongoing earnings growth. I think it’s a clean endorsement of our strategy and the continued focus on our customers and the strength of our global portfolio and I think it fit into to finish the call, talking about Eastern Europe. Secondly, we carry these elements on to 2014, which reinforces our confidence in future growth. And thirdly, the fundamentals in our business and the fundamentals in agriculture in general take a long runway, and that means that the growth that we’re talking about isn’t just isolated in 2014, but we see a horizon of growth for the long-term and we look forward to sharing that progress with you in future calls. Thanks very much for today.

Operator

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

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