market fundamentals€¦ · 2. safe harbor statement & disclosures. this presentation includes...

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Market FundamentalsAugust – October 2017

2

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. Past performance may not be representative of future results.

Guidance noted in the following slides was effective as of the company’s most recent earnings release and earnings call (18 August 2017). 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.

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Table of ContentsSlide

Agriculture Fundamentals 4

Construction & Forestry Fundamentals 21

4

Agriculture Fundamentals

5

Global Stocks-to-Use Ratios

Source: USDA, 10 August 2017

0%

20%

40%

60%

80%

100%

120%

0%

10%

20%

30%

40%

50%

60%

1996 1999 2002 2005 2008 2011 2014 2017P

Cotton R

atios

CottonWheat

Corn

Soybeans

6

Source: USDA, 10 August 2017

Global Grain Supply and Demand

0

500

1,000

1,500

2,000

2,500

3,000

93/94 95/96 97/98 99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/14 15/16 17/18

Mill

ion

Met

ric

Tons

Consumption Production

7

Global Grain DemandWith and Without Biofuel Use

0

1,000

2,000

3,000

2005 2007 2009 2011 2013 2015 2017F

Mill

ion

Met

ric

Tons

Consumption with biofuel use

0

1,000

2,000

3,000

2005 2007 2009 2011 2013 2015 2017F

Mill

ion

Met

ric

Tons

Consumption without biofuel use

* Compound Annual Growth RateSource: OECD-FAO Agricultural Outlook 2016-2025, July 2016

8

U.S. Farm Cash Receipts

$0

$100

$200

$300

$400

$500

2001 2003 2005 2007 2009 2011 2013 2015 2017F

$ Bill

ions

Crops Livestock Government Payments

Source: 2001–2015: USDA, 7 February 20172016F–2017F: Deere & Company forecast as of 18 August 2017

9

U.S. Farm Balance Sheet

10%

15%

20%

25%

30%

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013 2017F

$ Bill

ions

Farm Debt Farm Equity Debt to Equity Ratio (%) Debt to Asset Ratio (%)

Source: 1973–2015: USDA, 7 February 20172016F–2017F: Deere & Company forecast as of 18 August 2017

10

Agricultural Growth – EnergyU.S. Corn Used in Ethanol

0

1,000

2,000

3,000

4,000

5,000

6,000

00/01 02/03 04/05 06/07 08/09 10/11 12/13 14/15 16/17F

Mill

ions

of Bus

hels

Source: Informa, August 2017

11

Source: IHS Global Insight, July 2017

-12%

-8%

-4%

0%

4%

8%

12%

16%

InterestRate

Inflation Unemployment GDPGrowth

Germany UK France

2015 2016 2017F

GDP Growth – Major Economies

74%

24%

2%GDP Composition

Services Industry Agriculture

Source: The World Factbook, 2015 est.

EU 28Macroeconomic Data

12

− Utilized agricultural area ~ 190 million hectares

− Arable land ~ 110 million hectares

− Growth potential for Western Ag equipment industry in Central & Eastern Europe− Ongoing farm & Ag land consolidation and yield

improvements

− Average farm size ~ 16 hectares− Number of farms ~ 11 million

Source: USDA, July 2017; average 2014-2016(Total Grains: excludes rice; Cow Milk: net exports of cheese)

Share of the World Market

$0

$30

$60

$90

$120

$150

2008 2011 2014 2017F

US$

Bill

ions

Crop Value of Production

Includes wheat, barley, corn, sunflower seed, rapeseed, soybean, sugar beet, cotton, riceSource: IHS Global Insight, May 2017

Source: FAO, Eurostat Agricultural Census 2013

Production Net ExportsTotal Grains 15% 12%Wheat 21% 19%Barley 42% 29%Pork Meat 21% 34%Cow Milk 30% 44%

EU 28Ag Economic Data

13


-12%

-8%

-4%

0%

4%

8%

12%

16%

InterestRate

CPIInflation

Unemployment GDPGrowth

2015 2016 2017F

72%

23%

5%

GDP Composition


Source: Brazilian Institute of Geography and Statistics (IBGE), 2015

BrazilMacroeconomic Data

14

− Agricultural area ~ 279 million hectares*

− Arable land & permanent crop ~ 83 million hectares− ~ 17 million hectares brought into production

from 2002-2012 (~ half from pasture)− ~ 25 million hectares will be brought into

production from 2013-2025

− ~ 12% CAGR in industry equipment sales through the end of the decade**

− Average farm size ~ 64 hectares− Number of farms ~ 5 million

Source: IHS Global Insight, May 2017; average 14/15-15/16


$0

$30

$60

$90

$120

$150

2008 2011 2014 2017F

US$

Bill

ions


Includes key grains, ethanol, sugarSource: IHS Global Insight, May 2017

Production Net ExportsSoybean 31% 41%Corn 8% 18%Sugar 20% 44%Beef 16% 18%Chicken 14% 36%* Includes pasture, excludes double crop

** Deere & Company forecast as of 18 August 2017 (volume only, compared with 2016 actual volume)Source: FAO, Conab, Brazilian Institute of Geography and Statistics (IBGE)

BrazilAg Economic Data

15


-12%

-8%

-4%

0%

4%

8%

12%

16%

InterestRate


Russia Ukraine Kazakhstan

2015 2016 2017F

GDP Growth – Major Economies

60%

36%

4%

GDP Composition (Russia)



CISMacroeconomic Data

16



− Significant opportunities to improve yield rates in all major crops*− Land under cultivation (sown crops) expected to

remain nearly flat over the next decade− “Western-style” equipment used on <25% of

farm land

− Average farm size ~ 995 hectares− Number of farms ~ 0.5 million

Source: USDA, July 2017; average 2014-2016(Total Grains: excludes rice)


$0

$30

$60

$90

$120

$150

2008 2011 2014 2017F

US$

Bill

ions


Includes wheat, barley, corn, sunflower seed, rapeseed, soybean, sugar beetSource: IHS Global Insight, May 2017

Production Net ExportsTotal Grains 10% 23%Wheat 16% 28%Barley 24% 35%Corn 4% 17%Sunflower 54% 39%

* Deere & Company forecast as of 18 August 2017Source: FAO, CIS farm statistics 2006-2007 (Russia, Ukraine and Kazakhstan)

CISAg Economic Data

17


-12%

-8%

-4%

0%

4%

8%

12%

16%

InterestRate


2015 2016 2017F

48%

43%

9%

GDP Composition



ChinaMacroeconomic Data

18


− Arable land & permanent crops ~ 122 million hectares

− Annual industry tractor sales ~ 300,000 units

− Rural population % of total declined 15% from 2003-2014

− Average farm size ~ 0.47 hectares− Number of farms ~ 257.7 million in 2012

Source: IHS Global Insight, July 2017; average 2014-2016


$0

$75

$150

$225

$300

2008 2011 2014 2017F

US$

Bill

ions


Includes corn, wheat, rice, barley, sorghum, oilseeds, peanut, sugar, cottonSource: IHS Global Insight, May 2017

Production ExportsTotal Grains 17% 0.3%Wheat 17% 0.5%Corn 22% 0.0%Rice 30% 0.8%Cotton 23% 0.2%

Source: FAO, IHS Global Insight, China National Bureau of Statistics

ChinaAg Economic Data

19


-12%

-8%

-4%

0%

4%

8%

12%

16%

InterestRate


2015 2016 2017F

54%30%

16%

GDP Composition



IndiaMacroeconomic Data

20



− Annual industry tractor sales ~ 550,000 units

− Average farm size ~ 1.2 hectares− Number of farms ~ 129 million

Source: IHS Global Insight, July 2017; average 2014-2016


$0

$75

$150

$225

$300

2008 2011 2014 2017F

US$

Bill

ions


Includes corn, wheat, rice, barley, sorghum, oilseeds, peanut, sugar, cottonSource: IHS Global Insight, May 2017

Production ExportsTotal Grains 6% 3%Wheat 12% 1%Corn 2% 1%Rice 26% 26%Cotton 26% 13%

Source: FAO, Tractor Manufacturers Association of India, Indian Ministry of Agriculture

IndiaAg Economic Data

21

Construction & Forestry Fundamentals

22

U.S. Housing Starts

0.0

0.5

1.0

1.5

2.0

2.5

1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 2017F

Multi-Family Housing Starts Single-Family Housing Starts

Source: 1967–2015: U.S. Census Bureau, July 20172016F–2017F: Deere & Company forecast as of 18 August 2017

Mill

ions

of U

nits

23

-160%

-140%

-120%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

$0

$400

$800

$1,200

$1,600

$2,000

$2,400

1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017F

% Total C

onstruction Spend

$ Bill

ions

*

Government Infrastructure Investment Government Investment in StructuresNonresidential Investment in Structures Residential Investment in Structures

U.S. Construction Spending

* 2009$ baseSource: 1997–2015: U.S. Bureau of Economic Analysis, July 2017

2016F–2017F: Deere & Company forecast as of 18 August 2017

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