Presentation on theme: "The Future of the Seed Business"— Presentation transcript:
1The Future of the Seed Business Matthew MouwSr. Marketing ManagerPioneer Hi-Bred, International Inc.DuPont Agriculture & NutritionThank you. It’s a pleasure to be here today.I’m going to talk to you today about the great news in agriculture. This is an exciting time… Demand is growing, technology is better than ever, the adoption of biotechnology is incredible, the future is bright. Agriculture is a great business to be in.I’ll also talk about our Ag and Nutrition growth platform and how Crop Protection and biotechnology are complimentary tools that will help meet the demands of a growing world population in a very attractive and growing food and ag industry.
2Key Economic Factors Shaping Agriculture Population growthRising incomes in developing countriesIncreased demand for higher value foodsYield growthTighter supply and demand relationshipsNorth America is more dependent on changes in the global ag sectorBrazil and China are major sources of uncertainty in world markets for many commoditiesBiotechnologyPopulation continues to grow globally.Rising incomes in developing countries will fuel increases in the demand for more higher value foods.Yield growth is the key to improve farmers’ incomes while satisfying the increasing global demand.Because of the tighter supply and demand relationships, weather events or other crop declines will ripple through the sector with higher prices, possible rationing and more volatility.North America is more dependent on changes in the global ag sector.Brazil & China are major sources of uncertainty in world markets for many commodities.
3Population and Income Growth ßTotal (Million People)Percent Annual ChangeàReal GDPPer CapitaTotal (Thousand 1990 US$)Total (Trillion 1990 US$)Fast income growth is taking place in countries that have high population & lower total income. These economic factors lead to more demand for agricultural products.Incomes are rapidly growing in countries like India, China, Brazil and Argentina that have high population and have had lower total income historically. These economic shifts are going to increase demand for higher protein diets.These numbers are current. The left column is the total and the right column is the change year over year. The last year that’s included is the change from 2004 to (It does not include projections of 2006 and the change from 2005 to 2006 projections.)This next slide shows…Source Information: Pioneer – Global Market Economics, PWAF
4Income and Meat Consumption Per Capita Income and Meat ConsumptionIn general, countrieswith higher levelsof per capita income,have higher levelsof per capita meat consumptionJapanWith FishThis shows per capita meat consumption of countries in relation to their per capita income. This chart does not take into account fish consumption. Otherwise, Japan would be up where their income level would indicate.Source Information: USDA & GlobalInsight
5Meat Consumption Increases with Income Growth Billion PoundsBrazilEU-25RussiaUkraineChina44226688110132154More meat is consumed in China than any other countryTotal meat consumption in the U.S. is expected to grow slightly faster than population, resulting in a small rise in per capita meat consumptionAs experienced in , animal disease outbreaks cause major disruptions in meat marketsBSE (“Mad Cow”)Avian InfluenzaMillion Metric TonsMore meat is consumed in China than in any other country. And their demand is growing at a faster rate than the U.S., Brazil or the countries that make up the E.U. It should be noted that there are some hiccups along the way. Anytime we have an animal disease outbreak, we see a temporary disruption in meat markets.This increased demand will utilize all, and more, of the increased global yields because of the amount of grain that will be needed to feed the livestock that will satisfy the growth in meat consumption.USSource: USDA-PS&D
6Biofuels: Putting the Market in Context US Liquid Transportation Fuels140 billion gallons of gasoline use on US roads37.1 billion gallons of diesel used on highways11.7 gallons of diesel used off-road (farmers use 3.2 billion gallons)Current Ethanol production: 4.0 billion gallons (7.5 Renewable Fuel Standard by 2012)Current estimated US biodiesel capacity: 100 million gallons per yearA bag of Pioneer Seed……Produces ~ 1,200 gals of fuel ethanolMakes 12,000 gals of E10 gasoline
7Ethanol: A major driver in new grain flow patterns # Bushels (mby) 1,797.78# Acres 11,985,185# Units 4,438,957Current MMGY 3962Potential MMGY 1019Current % of 05/06 corn production consumed:Iowa: 23%Nebraska: 21%Minnesota: 18%South Dakota: 40%26% of US corn use by 2015
8China and Brazil Changing the Global Soybean Market Global soybean production increased from 137 MMT to 217 MMT from 1994 to 2005The U.S., Brazil and Argentina have led the production increasesCommodity prices have not fallen due to the increase in production, as China has had to import more to meet their needsBrazilian surplus has been exported to the world market offsetting the increasing demand in ChinaThe U.S. (exporter) and the EU-25 (importer) have been relatively stable in the world soybean trade in the last decadeThere’s a lot of talk about the success and growth of Brazil’s soybean market at the expense of U.S. growers. I’d like to spend some time talking about why it isn’t a question of which country will be successful. And why there’s enough demand for both countries to grow their yield and export markets.China’s demand for soy continues to grow, but their domestic supply cannot keep pace. Demand is growing at a pace that will more than account for the stocks produced by Brazil – and then some. And this is just one country.U.S. Exports are relatively flat. In other words, Brazil’s export market is not growing at the expense of U.S. growers.Source Information: Pioneer – Global Market Economics, PWAF
9Crop Demand Growth in Last Decade +12%The growth rate of world population over the last ten years+25%The growth rate of pork consumption over the last ten years+29%The growth rate of chicken consumption over the last ten years+23%The growth rate of world corn consumption over the last decade+39%The growth rate of world soybean consumption over the last decade+4%The growth rate of world crop area harvestedThere has been a population increase and increased demand for pork, chicken, corn, and soybeans. We have achieved this growth with an increase of only 4 percent in crop area. This has been achieved through increased productivity.Productivity will be essential and drive decisions for farmers. The role of all input suppliers is to help customers increase productivity. At the same time, we all need to focus on productivity improvements in our own businesses.Source: Pioneer Global Marketing - MREADS
10Growth in Total Grain Production Crop yields need to continue to increase to keep pace with increasing incomes, population and demand for meatIf yields don’t keep pace, more area will be pulled into productionGlobal corn area increased 4.8% since 1980; production increased 45.0% in that same timeMore than 130 million “virtual acres” have been created since 1980World Grain Consumption:The world demand for corn is continuing to expand as incomes and population expand.With increasing incomes and population and the resulting increase in demand for meat, crop yields will need to continue to increase.If yields do not increase at the current forecasted rate, more area will be pulled into production.Corn area in the world was 324 million acres in 1980 and is now 340 million acres (4.8% increase). Production increased from 16 to 24 billion bushels over that time (45.0%).In other words, 130 million “virtual acres” acres were created since 1980.Source Information: USDA & GlobalInsight
11Biotechnology Acreage Increasing 4 Major CropsI believe we are witnessing one of the greatest technology changes in the history of agriculture and this milestone is verification that farmers around the world recognize the significant value of biotechnology and have adopted its use at an amazing pace. Few technologies, not even the introduction hybrid corn in 1926 by Henry Wallace, have had the rapid acceptance and growth rate that biotech crops have enjoyed.21 countries are growing biotech crops and developing countries are adopting at the same rate as developed countries.
12Ag Biotechnology is Delivering Across the Board Improved Food Quality and TasteImproved Feed QualityOffer Agronomic TraitsStress Reduction, Yield IncreaseImpactCommercial2nd Generation Pest and Weed ControlMultiple Pest/Weed Control Traits1st Generation Pest and Weed ControlCrop Protection199420042014After 10 years of 1st generation pest control we’ve really only scratched the surface of the capability of this technology. We are now poised to deliver 2nd generation products as well as food and feed quality products.Will are also making strides to develop products that may contain 5-6 individual stacked traits.FoodSalesInputProvidersGrainProcessorsFoodMfg.Growers
13Positioned to Capture Value : Solid top line and bottom line growth: Pipeline delivers expanded market, value and growthFoodFeedBio-fuelsBio-materialsValue CapturePioneer: $2.8B RevenueSolae: $1.1B RevenueCrop Protection: $2.3B RevenueInput ProvidersGrowersGrain ProcessorsEnd User Mfg.Market InsightConsumers
14IndustrySelect® – Linking Seed to Need More than 100 end-use account projectsand $100 million in Pioneer sales2006 IndustrySelect Products by CategoryStrong pipeline of transgenic trait solutions for all food, feed and fuel targetsImproved Animal FeedSpecific feed hybrids for faster weight gainTargets: increased nutrient density and availability, oil modification, balanced amino acids and improved digestion$2 billion opportunity per yearImproved FoodOptimizing taste and health benefits of soybeansHigh performance corn grain characteristics to meet/exceed processor specificationsIncreased Ethanol ProductionProcessors realize 2-4% ethanol yield gainIndustry Select is our Pioneer downstream value added corn seeds business.These hybrids have demonstrated end use performance advantage in target end uses, specifically – ethanol, animal feed, food and starchWe started this business focus 2 yrs ago and this year sales broke $100mm and our share at target end users is >50% so we’re making progress.Very important here is the base we are building that we will drive biotech output traits through in coming years.Matching seed with needs across value chainIndustry-leading products for starch, ethanol, livestock feed, cereals and snack foodMore than 100 end-use account projects and programsMore than $100 million in Pioneer sales tracked through these end-use programsStrong foundation for products in the pipeline
15Bio-Based Economy Value Chain FuelsChemicalsMaterialsBiomassFeedstockGrowth marketsNew productsOilChemistryMetabolicEngineering
16Aggressive R&D Strategy Elite GeneticsMost extensive elite genetics pedigreesBiotechnologyProprietary traits and Genomic toolsChemistryComplimentary and high value solutions++Rich, Balanced PipelineProviding game changing solutions for the entire food and energy value chainDuPont is uniquely position to take advantage of this combination of leading technologiesSo we are using this data – 75 years of genetics, and the latest biotech genomics tools that have really become available in the last 3 years to understand the native gene drivers of performance. The real key for us has been the addition of mathematicians, bioinformatics experts and computational biologists to develop the best algorithm technology to revolutionize breeding.So nobody could do this 3 years ago, and only we can do this today because of our 75 years of seed and performance data.This is a key value driver and differentiator for our platform going forward.Technology Foundation for Growth
172005 Rich Crop Genetics Pipeline Anthracnose Stalk Rot ResistanceFungal Disease ResistanceDrought Tolerance IGlyphosate ResistanceCorn Rootworm Resistance IIHerculex RWHerculex RW + RR2Herculex XTRAHerculex XTRA + RR2YGCB + YGRW + RRYGCB + YGRW + RR2Nitrogen Use EfficiencyIncreased Yield IIncreased Yield IIIncreased Ethanol Production IIncreased Ethanol Production IIImproved Feed IImproved Feed IISeed Production TechnologyAsian Soybean Rust ResistanceGlyphosate + SU Resistance IGlyphosate + SU Resistance IICyst Nematode ResistanceHigh Oleic Acid OilOmega-3 OilDrought Tolerance IIGlyphosate + SU ResistanceDrought Tolerance IIICorn Borer Resistance IIHerculex® IIncreased Ethanol Production IIIImproved Feed IIIImproved ProcessingNutrium Low Linolenic OilCornSoybeansHigh Oleic + High Stearic Acid OilPhase 1 Proof of ConceptPhase 2 Early DevelopmentPhase 3 Advanced DevelopmentPhase 4 Pre-LaunchDiscovery Gene/Trait IdentificationLaunchFarmerProcessorConsumerEnabling TechnologyTarget Markets
182006 Rich Crop Genetics Pipeline Phase 1 Proof of ConceptPhase 2 Early DevelopmentPhase 3 Advanced DevelopmentPhase 4 Pre-LaunchDiscovery Gene/Trait IdentificationLaunchFarmerProcessorConsumerEnabling TechnologyTarget MarketsCornSoybeansAnthracnose Stalk Rot ResistanceFungal Disease ResistanceDrought ToleranceCorn Rootworm Resistance IINitrogen Use EfficiencyIncreased Yield IIncreased Yield IIIncreased Ethanol Production IIImproved Feed IISeed Production TechnologyAsian Soybean Rust ResistanceGlyphosate + SU Resistance IGlyphosate + SU Resistance IICyst Nematode ResistanceImproved Feed IHigh Oleic Acid OilOmega-3 OilGlyphosate + SU ResistanceCorn Borer Resistance IIIncreased Ethanol Production IIIImproved Feed IIICorn Rootworm Resistance IIICorn Borer Resistance IIIInsect ResistanceGlyphosate + SU Resistant CottonInsect Resistant RiceNematode Resistant CottonGlyphosate Resistant CottonInsect Resistant CottonGlyphosate Resistant CanolaOther CropsHigh Oleic + High Stearic Acid Oil