John DeereCommitted to Those Linked to the Land
Market Fundamentals
Deere & CompanyNovember 2013
| Deere & Company | November 2013
Safe Harbor Statement & Disclosures
This presentation includes forward-looking comments subject to important risks and uncertainties. It may also contain financial measures that are not in conformance with accounting principles generally accepted in the United States of America (GAAP).
Refer to Deere’s reports filed on Forms 8-K (current), 10-Q (quarterly), and 10-K (annual) for information on factors that could cause actual results to differ materially from information in this presentation and for information reconciling financial measures to GAAP.
Guidance noted in the following slides was effective as of the company’s most recent earnings release and conference call (20 November 2013). Nothing in this presentation should be construed as reaffirming or disaffirming such guidance.
This presentation is not an offer to sell or a solicitation of offers to buy any of Deere’s securities.
2
|
Table of Contents
Slide #Ag Fundamentals – U.S. 4
Construction & Forestry Fundamentals – U.S. 12
Other Regions 15
Deere & Company | November 20133
Ag FundamentalsUnited States
| Deere & Company | November 20135
U.S. Farm Cash Receipts
Source: 1998 – 2012: USDA 27 August 20132013F – 2014F: Deere & Company Forecast as of 20 November 2013
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F 2014F
$ Bill
ions
Government Payments Total Cash Receipts
Projected total cash receipts remain at historically high levels
| Deere & Company | November 2013
U.S. Farm Balance Sheet Strong
10%
12%
14%
16%
18%
20%
22%
24%
26%
28%
30%
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,00019
7119
7219
7319
7419
7519
7619
7719
7819
7919
8019
8119
8219
8319
8419
8519
8619
8719
8819
8919
9019
9119
9219
9319
9419
9519
9619
9719
9819
9920
0020
0120
0220
0320
0420
0520
0620
0720
0820
0920
1020
1120
12F
2013
F20
14F
$ Bill
ions
Farm Debt Farm Equity Debt to Equity Ratio (%) Debt to Asset Ratio (%)
Source: 1970 – 2012: USDA 27 August 20132013F – 2014F: Deere & Company Forecast as of 20 November 2013
6
| Deere & Company | November 2013
Corn, Soybeans, Wheat and Cotton PricesNearby Futures: 25 November 2008 – 25 November 2013
Source: Chicago Board of Trade – Corn, Soybeans & Wheat; Intercontinental Exchange – Cotton
1.002.003.004.005.006.007.008.009.00
11/25/08 11/25/09 11/25/10 11/25/11 11/25/12 11/25/13
Do
llars
Per
Bu
shel
Corn
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
11/25/08 11/25/09 11/25/10 11/25/11 11/25/12 11/25/13
Dol
lars
per
Bu
shel
Soybeans
2.00
4.00
6.00
8.00
10.00
12.00
14.00
11/25/08 11/25/09 11/25/10 11/25/11 11/25/12 11/25/13
Do
llars
per
Bu
shel
Wheat
0.25
0.50
0.75
1.00
1.25
1.50
1.75
2.00
2.25
11/25/08 11/25/09 11/25/10 11/25/11 11/25/12 11/25/13
Dol
lars
per
Pou
nd
Cotton
7
| Deere & Company | November 2013
Uses of U.S. Corn Crop 2011-2022Bus
hels
(m
illio
ns)
Source: USDA Agricultural Projections to 2022, February 2013
8
20.0%
23.0%
26.0%
29.0%
32.0%
35.0%
38.0%
41.0%
0
5,000
10,000
15,000
20,000
25,000
Exports Food, Seed, & Industrial (Less Ethanol) Ethanol & By-Products for fuel Feed & residual Ethanol & By-Products for Fuel as % of Total Corn Usage
| Deere & Company | November 20139
World Farm FundamentalsGlobal Stocks-to-Use Ratios
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013P
Source: USDA – 11 October 2013
Cotton
Wheat
Corn
Soybeans
| Deere & Company | November 2013
Agricultural Growth – EnergyU.S. Ethanol
U.S. Corn Used In Ethanol
Source: Informa – November 2013
10
0
1,000
2,000
3,000
4,000
5,000
6,000
99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/14F 15/16F
Bus
hels
(m
illio
ns)
| Deere & Company | November 2013
Daily Ethanol Margin Per Bushel Corn GrindBased on Nearby Futures Prices (Excl ITDA*)
*Interest, Tax, Depreciation and Amortization (ITDA) totals ~$0.50 and is often disregarded in margin calculations because it does not influence short term production decisionsSource: Informa – November 2013
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
11/2
5/09
2/25
/10
5/25
/10
8/25
/10
11/2
5/10
2/25
/11
5/25
/11
8/25
/11
11/2
5/11
2/25
/12
5/25
/12
8/25
/12
11/2
5/12
2/25
/13
5/25
/13
8/25
/13
11/2
5/13
11
Construction & Forestry FundamentalsUnited States
| Deere & Company | November 2013
U.S. Housing Starts
13
Source: 1960 – 2012: U.S. Census Bureau September 20132013F – 2014F: Deere & Company Forecast as of 20 November 2013
0.000
0.250
0.500
0.750
1.000
1.250
1.500
1.750
2.000
2.250
2.500
1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014F
Housing Starts (Millions of Units)
Multi-Family Housing Starts
Single-Family Housing Starts
| Deere & Company | November 2013
U.S. Construction Spending
14
-160%-150%-140%-130%-120%-110%-100%-90%-80%-70%-60%-50%-40%-30%-20%-10%0%10%20%30%40%50%60%70%
0100200300400500600700800900
1,0001,1001,2001,3001,4001,5001,6001,7001,8001,9002,0002,1002,2002,300
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F
% Total C
onstruction Spend
Bill
ions
, 200
5 Cha
ined
$’s
U.S. Construction Spending (Billions, 2005 Chained $’s)
Residential Investment in StructuresNonresidential Investment in StructuresGovernment Investment in StructuresGovernment Infrastructure Investment
Source: 1995 – 2012: U.S. Bureau of Economic Analysis September 20132013F – 2014F: Deere & Company Forecast as of 20 November 2013
Other Regions
|
EU 28Macroeconomic Data
Deere & Company | November 201316
2012 2013 2014FGDP Growth (%) -0.4% 0.0% 1.2%
Inflation (%) 2.5% 1.5% 1.7%
Unemployment (%) 10.7% 11.3% 11.2%
Source: IHS Global Insight October 2013
5%
23%
72%
Labor Composition
Agriculture Industry ServicesSource: The World Factbook, 2011 est.
2%
25%
73%
GDP Composition
Agriculture Industry Services
Source: The World Factbook, 2012 est.
-3.0-2.0-1.00.01.02.03.04.0
Germany UK France Italy Spain
Major Economies – GDP Growth (%)
2012
2013
2014F
|
EU 28Ag Economic Data
Deere & Company | November 201317
• Utilized agricultural area ~ 187 million hectares
• Arable land ~ 107 million hectares
• Growth potential for Ag equipment industry in Central & Eastern Europe
• Ongoing farm & Ag land consolidation and yield improvements
• Average farm size ~ 14 hectares
• Number of farms ~ 12 million
Source: FAO, Eurostat Agricultural Census 2010Deere & Company Forecast as of 20 November 2013
Production Net Exports
Total Grains 15% 5%Wheat 20% 10%Barley 41% 21%Pork Meat 22% 30%Cow Milk 30% 19%
Source: USDA, September 2013; average 2011-2013(Total Grains excl. Rice)
Share of the World Market
$0
$20
$40
$60
$80
$100
$120
2004 2006 2008 2010 2012 2014F
$ Bill
ions
Crop Value of Production
Crops included: Wheat, Barley, Corn, Rapeseed,Sunflower Seed, Soybeans, Sugar Beet, Cotton and RiceSource: IHS Global Insight as of September 2013
| Deere & Company | November 201318
Deere & Company Forecast as of 20 November 2013
Economic UpdateEU 28 – Fiscal 2014
Short-term economic stress has diminished, but risks remain • Only modest GDP growth expected
Grain prices and farm income lower but to remain near long-term average
Solid livestock margins• Beef prices at historic highs• Pork prices above long-term average• Improved milk prices will support dairy farmers
| Deere & Company | November 2013
EU 28Government Support of Agriculture
Source: EU Commission, Agra Europe
19
0
10
20
30
40
50
60
70
1990 1995 2000 2005 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
EUR
bn (n
omin
al p
rices
)
Pillar I (Direct Payments + Market Expenditures) Pillar II (Rural Development)
2007-2013 2014-2020
• Common Agricultural Policy proposed budget 2014-2020 frozen at 2007-2013 nominal levels (-14% in real terms)
• Portion of direct payments tied to environmentally-friendly farming practices• Limited effects of direct payments redistribution in favor of new member states• In nominal terms & over the full time period, Pillar I ~ constant – but bigger cuts in Pillar II
|
BrazilMacroeconomic Data
Deere & Company | November 201320
17%
23%
60%
Labor Composition
Agriculture Industry ServicesSource: Brazilian Institute of Geography and Statistics (IBGE), 2012
Source: IHS Global Insight 2013
2012 2013F 2014FInterest rate (%) 8.5% 8.1% 8.9%
CPI Inflation (%) 5.4% 6.2% 5.4%
Unemployment (%) 5.5% 5.6% 5.6%
-2.00.02.04.06.08.0
2009 2010 2011 2012 2013F 2014F
GDP Growth (%)
5%
26%
68%
GDP Composition
Agriculture Industry ServicesSource: Brazilian Institute of Geography and Statistics (IBGE), 2012 est.
|
BrazilAg Economic Data
Deere & Company | November 201321
Production Net Exports
Soybean 8% 19%Corn 28% 38%Sugar 21% 44%Beef 16% 17%Chicken 16% 36%
• Agricultural area ~ 275 million hectares1
• Planted area ~ 72 million hectares2
• ~ 17 million hectares brought into production from 2002-2012 (~ half from pasture)
• ~ 24 million hectares will be brought into production in next decade3
• ~ 4.5% CAGR in industry equipment sales through the end of the decade3
• Average farm size ~ 64 hectares
• Number of farms ~ 5 million
Source: USDA, 2013; average 2011-2012
1 Includes pasture, excludes double crop2 Includes double crop3 Deere & Company Forecast as of 20 November 2013Source: FAO, Conab, Brazilian Institute of Geography and Statistics (IBGE)
Share of the World Market
Crops included: Soybean, Corn, Rice, Wheat, Sorghum, Cotton, SugarcaneSource: Actual: MAPA (Brazilian Ministry of Agriculture), Oct 20132013 & 2014 : Deere & Company Forecast as of 20 November 2013
Gross Value of Agricultural Production
Bill
ions
of
Bra
zilia
n Rea
l
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F2014F
| Deere & Company | November 2013
• R$156 billion approved for 2013/2014 Agriculture and Livestock Plan *• R$135 billion targeted towards Agribusiness mid/large-scale operations (17.4% higher than 2012/2013)• R$21 billion targeted towards family agriculture (16.7% higher than 2012/2013).
• Special credit line for warehouse investments with 3.5% interest rate by year, 15 years of term and total budget of R$ 25 billion in 5 years.
BrazilGovernment Support for Agriculture
22
Tractor Programs 1
Enginehp Where
InterestRate
GracePeriod (Max) Term Maturity
Mais AlimentosPró-TratorTrator Solidário
50-7850-12055-75
BrazilSPPR
2.0%0.0%
~ 2.0%
3 Years32
10610
PerennialNot Defined
Dec14
Finame PSI-BKModerfrota
AllAll
BrazilBrazil
3.0%-3.5%2
5.5%23
1.5104
Dec13Jun13
CombinePrograms 1 Class Where
InterestRate
GracePeriod (Max) Term Maturity
Mais Alimentos IV Brazil 2.0% 3 Years 10 Perennial
Finame PSI-BKModerfrota
AllAll
BrazilBrazil
3.0%-3.5%2
5.5%23
1.5104
Dec13Jun13
1 Exclusively Finame qualified products. Minimum of 60% local content (weight and value)2 3% until 30 June 2013 then 3.5% until 13 December 2013. 3 3 years if amount financed > R$100 million
Government programs to support equipment purchases
* Includes budget for financing input costs, investments and production trade.
|
CISMacroeconomic Data
Deere & Company | November 201323
Source: IHS Global Insight October 2013
4%
36%
60%
GDP Composition
Agriculture Industry Services
Source: The World Factbook, 2012 est.
8%
27%
65%
Labor Composition
Agriculture Industry ServicesSource: The World Factbook, 2011 est.
(Russia)
(Russia)
2012 2013 2014FGDP Growth (%) 3.6% 2.5% 3.6%
Inflation (%) 5.8% 6.5% 5.9%
Unemployment (%) 5.4% 5.3% 5.2%
-2.0-1.00.01.02.03.04.05.06.07.08.09.0
Russia Ukraine Kazakhstan Belarus
Major Economies – GDP Growth (%)
201220132014F
|
Production Net Exports
Total Grains 10% 18%Wheat 15% 18%Barley 22% 26%Rapeseed 4% 17%Sunflower 50% 34%
CISAg Economic Data
Deere & Company | November 201324
Source: USDA, September 2013; average 2011-2013(Total Grains excl. Rice)
Source: FAO, CIS farm statistics 2006-2007 (Russia, Ukraine and Kazakhstan)Deere & Company Forecast as of 20 November 2013
• Utilized agricultural area ~ 560 million hectares
• Arable land ~ 196 million hectares
• Significant opportunities exist to improve yield rates in all major crops
• Land under cultivation (sown crops) expected to remain flat over the next decade
• Deere estimates “Western-style” equipment used on <25% of farm land
• Average farm size ~ 995 hectares
• Number of farms ~ 0.5 million
Share of the World Market
$0
$10
$20
$30
$40
$50
$60
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F
$ Bill
ions
Crop Value of Production
Crops included: Wheat, Barley, Corn, Sunflower Seed, Rapeseed, Soybeans, Sugar BeetSource: IHS Global Insight as of September 2013, Russia and Ukraine only
| Deere & Company | November 2013
CISGovernment Support of Agriculture
• Import policies affecting combine sales in Russia, Kazakhstan and Belarus
• Restructured Russian National Ag Program 2013 - 2020 expected to increase Ag support by over 60% by 2020 in nominal terms
• 2013 annual Ag federal budget increased 17-20%, includes additional regional subsidies• Interest rate subsidies for Ag equipment largely eliminated, replaced with direct area payments
to Ag operations and direct subsidies to domestic Ag equipment industry• Ag equipment localization requirements re-considered/strenghtened
25
|
ChinaMacroeconomic Data
Deere & Company | November 201326
2012 2013F 2014FInterest rate (%) 6.3% 6.0% 5.9%
Inflation (%) 2.7% 2.4% 2.8%
Unemployment (%) 4.1% 4.1% 4.1%
9.210.5
9.37.7 7.8 8.0
0.02.04.06.08.0
10.012.0
2009 2010 2011 2012 2013F 2014F
GDP Growth (%)
Source: IHS Global Insight 2013
10%
45%
45%
GDP Composition
Agriculture Industry ServicesSource: IHS Global Insight, 2012 est.
35%
29%
36%
Labor Composition
Agriculture Industry ServicesSource: The World Factbook, 2011 est.
|
ChinaAg Economic Data
Deere & Company | November 201327
$0
$50
$100
$150
$200
$250
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F
$ Bill
ions
Crop Value of Production
Crops Included: Corn, Wheat, Rice, Oilseeds, and CottonSource: IHS Global Insight 2013
Source: USDA, 2013; average 2011-2012
Source: FAO, IHS Global Insight, China National Bureau of Statistics
• Utilized agricultural area ~ 520 million hectares
• Arable land & permanent crops ~ 126 million hectares
• 121 million hectares cultivated in 2011
• Rural population % of total declined 9% 2003-2012
• Average farm size ~ 0.5 hectares
• Number of farms ~ 252 millionShare of the World Market
Production Net Exports
Total Grains 21% 0.5%Wheat 18% 0.7%Corn 24% 0.1%Rice 31% 0.8%Cotton 29% 0.2%
| Deere & Company | November 2013
Source: China Ministry of Agriculture
ChinaGovernment Support of Agriculture
12
28
72
75
72
86
108
133
12
13
14
15
15
19
15
15
15
15
3
4
4
7
12
20
20
22
22
22
1
2
4
13
16
18
21
22
0 25 50 75 100 125 150 175 200
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013E
RMB (in billions)
Material Subsidy (basic subsidy for purchase of inputs)Grain Direct Subsidy (for growing encouraged crops)Seed Subsidy (for purchasing high-performing seed)Equipment Subsidy (for purchasing encouraged equipment)
141
15
17
31
52
103
127
123
28
166
192
|
IndiaMacroeconomic Data
Deere & Company | November 201329
2012 2013F 2014FInterest rate (%) 10.2% 9.9% 9.5%
Inflation - WPI (%) 7.5% 6.1% 6.5%
Unemployment (%) 8.1% 8.2% 7.8%
0.02.04.06.08.0
10.0
2009 2010 2011 2012 2013F 2014F
GDP Growth (%)
Source: IHS Global Insight 2013
18%
18%64%
GDP Composition
Agriculture Industry ServicesSource: IHS Global Insight, 2010 est.
53%
19%
28%
Labor Composition
Agriculture Industry ServicesSource: The World Factbook, 2011 est.
|
IndiaAg Economic Data
Deere & Company | November 201330
$0
$30
$60
$90
$120
$150
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013F
$ Bill
ions
Crop Value of Production
Crops included: Corn, Wheat, Rice, Oilseeds, CottonSource: IHS Global Insight 2013
Source: USDA, 2013; average 2011-2012
Source: FAO, Tractor Manufacturers Association of India, Indian Ministry of Agriculture
• Utilized agricultural area ~ 180 million hectares
• Arable land ~ 157 million hectares
• 140 million hectares net area sown (2007/08)
• Annual industry tractor sales > 500,000 units
• Average farm size ~ 1.2 hectares
• Number of farms ~ 129 millionShare of the World Market
Production Net Exports
Total Grains 10% 6%Wheat 14% 6%Corn 2% 3%Rice 22% 20%Cotton 21% 13%
| Deere & Company | November 2013
IndiaGovernment Support of Agriculture
185
262
325
766
530
623
672
660
231
240
313
438
560
638
728
850
35
40
54
143
170
195
237
194
197
207
275
56
48
151
332
0 500 1,000 1,500 2,000 2,500
2005
2006
2007
2008
2009
2010
2011
2012
Rupees (in billions)
Fertilizer Subsidy
Food Subsidy (for households)
Interest Rate Subsidy (for farmers)
Irrigation Subsidy
Electricity Subsidy
Other Subsidies (mainly for seeds)
Source: India Ministry of Agriculture (2004-2009), India Ministry of Finance (2010-2012)
809
917
1,191
2,048
1,090
1,296
1,440
31
1,564
|