Thank you for standing by. My name is Kayla, and I will be your conference operator today. At this time, I would like to welcome everyone to the Corteva Agriscience 2Q 2024 Earnings. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] I will now turn the call over to Kim Booth, Vice President of Investor Relations. You may begin.

Good morning. And welcome to Corteva’s second quarter and first half 2024 earnings conference call. Our prepared remarks today will be led by Chuck Magro, Chief Executive Officer; and Dave Anderson, Executive Vice President and Chief Financial Officer. Additionally, Tim Glenn, Executive Vice President, Seed Business Unit; and Robert King, Executive Vice President, Crop Protection Business Unit, will join the Q&A session. We have prepared presentation slides to supplement our remarks during this call, which are posted on the Investor Relations section of the Corteva website and through the link to our webcast. During this call, we will make forward-looking statements, which are our expectations about the future. These statements are based on current expectations and assumptions that are subject to various risks and uncertainties. Our actual results could materially differ from these statements due to these risks and uncertainties, including but not limited to those discussed on this call and in the risk factors section of our reports filed with the SEC. We do not undertake any duty to update any forward-looking statements. Please note in today’s presentation, we’ll be making references to certain non-GAAP financial measures. Reconciliations of non-GAAP measures can be found in our earnings press release and related schedules, along with our Supplemental Financial Summary slide deck, available on our Investor Relations website. It’s now my pleasure to turn the call over to Chuck.

Thanks, Kim. Good morning, everyone, and thanks for joining us. We plan to update you today on our second quarter and first half performance, share our latest expectations for the second half of this year. In the second quarter, Corteva delivered both top and bottomline growth and nearly 250 basis points of operating EBITDA margin expansion. This was driven by strong demand for our proprietary technology, which was also particularly evident in our Seed business results. We also saw Crop Protection volumes grow, a sign that the industry is starting to stabilize after almost two years of decline. Seed continued its impressive trajectory in the first half of the year, with 420 basis points of operating EBITDA margin expansion and broad-based pricing gains across all regions. While North America corn acres are down year-over-year, the team has managed to hold volumes relatively flat and gain share in the first half, a testament to both strong demand for our latest corn hybrids, as well as the strength of the Pioneer business model. Performance in Seed remains strong across products and technologies, and we are proud to be number one in the North America seed market for both corn and soybeans. We are particularly pleased to see Enlist E3 continue to be valued by farmers and we believe E3 technology is the future. It is on at least 65% of U.S. soybean acres in 2024. Earlier this year, we announced the commercial availability of Pioneer brand Z-series soybeans in the U.S. and Canada, which is the next generation of industry-leading genetics with the Enlist traits. This new class of soybeans offers farmers a strong defensive package, with a generational leap in yield potential and agronomic performance over any soybean lineup Pioneer has ever introduced. In extensive 2023 IMPACT trials, Z-series soybeans showed…

Thanks, Chuck, and welcome everyone to the call. Let’s start on Slide 6, which provides the financial results for the quarter and the half. You can see from the numbers here, sales and operating EBITDA for the first half were down slightly from prior year, although a little better than our latest estimates, driven by a strong finish in North America’s seeds season. Briefly touching on the quarter, organic sales were up 2% compared to prior year, with gains in both Seed and Crop Protection. Pricing for the quarter was up 2%, with gains in Seed partially offset by continued competitive pressure in Crop Protection. Second quarter volumes were flat with volume gains in Crop Protection, led by Latin America and North America, offset by Seed volume declines in North America due to first quarter and second quarter timing. Topline growth and continued productivity and cost actions translated to earnings growth of 10% in the quarter in nearly 250 basis points of margin expansion compared to prior year. Now focusing on the half, as a result of the tough first quarter, organic sales were down 2%, with Seed growth offset by Crop Protection. Seed pricing gains were mid-single-digit compared to prior year and offset by Seed volume declines, which were driven by lower planted area in EMEA and in Asia. Crop Protection price and volume were both down in the half on competitive market dynamics in the really tough comp of the first quarter of 2023. The topline performance translated into operating EBITDA of approximately $2.95 billion for the half, down slightly compared to prior year. Seed pricing, the benefits from improved net royalty expense and productivity savings drove nearly 60 basis points of margin expansion. Let’s now go to Slide 7 and review sales by segment. Seed net sales…

Thanks, Dave. Now, before we get into the Q&A, Chuck, I believe you’d like to make a few closing remarks.

Thanks, Kim. I’d like to say a few words about the announcement we made after market yesterday that we will have a new Chief Financial Officer starting September 16th. David Johnson will join Corteva from Atkore, a publicly traded company and leader in electrical safety and infrastructure solutions, where he also served as CFO. David is an accomplished CFO with a proven track record of delivering strong results, operational efficiency, and financial discipline to large global organizations like ours. He has nearly three decades of experience, and as I’ve gotten to know David throughout this process, I believe he is the perfect choice for Corteva. David will, of course, succeed Dave Anderson. To ensure a smooth transition, Dave will continue to serve on the executive leadership team as a strategic advisor to me until his retirement in the first quarter of 2025. Dave joined Corteva over three years ago, which was, as many of you will remember, both a pivotal and critical time in our history. With his wealth of experience and his considerable expertise across industries, Dave gave this company, its Board, and its leadership assurance that this company’s financial strategy was in the best of hands, and I think the results speak for themselves. So before I turn it over to Dave, I’d like to thank him for his service and his dedication to Corteva, to our investors and shareholders, and to our customers and employees. Dave, thank you. It’s been an absolute privilege to serve alongside of you, and with that, over to you.

Thanks, Chuck. I really appreciate the kind words. It’s obviously just been a terrific opportunity to work with Corteva, to work with you and the organization over the last several years, and I’m proud of what we’ve been able to accomplish, and I’m really pleased with the strengthening of finance team and the alignment of the finance organization to support our Crop Protection and Seed business unit. And I’m looking forward to supporting David in this transition. I know it’s going to be a successful one. I know he’s going to be a terrific CFO for Corteva. So thanks very much.

Thanks, Dave. Now let’s move on to your questions. I would like to remind you that our cautions on forward-looking statements and non-GAAP measures apply to both our prepared remarks and the following Q&A. Operator, please provide the Q&A instructions.

[Operator Instructions] Our first question comes from the line of Vincent Andrews with Morgan Stanley. Your line is open.

Thank you. And first of all, Dave, congratulations on your retirement and thank you very much for all the help over the past three years. Chuck, if I could ask you on your sort of initial comments on 2025, and please correct me where I’m wrong, but it sounded to me like you were sort of softening your stance on 2025 and sort of not saying, hey, I took 2024 down by $100 million, so just take that existing $3.9 billion to $4.4 billion range down by $100 million. So I want to check in on those bridge items and see what’s still intact versus what your incremental concerns might be. So you had $100 million of royalty improvement for 2025, another $200 million of productivity and cost actions for 2025, and I know we had been talking about but hadn’t quantified some seed cost deflation for 2025, and then at least I expected some more crop chemical deflation for 2025. So if you could update us on those items, if there’s any change, and then also indicate, is it the Crop Protection pricing that you’re concerned about maybe deteriorating further or are you worried about being able to get seed price mix in 2025 if the futures curves stay where they are? Thank you.

Yeah. Good morning, Vincent. So great question. I guess let me start by just saying we still have a lot of conviction over 2025. We feel very good about the things that are obviously in our control, and if you’ve looked at sort of how we describe the controllable levers, whether it’s Seed out-licensing, the productivity and cost improvement that we’re working through, biologicals growth, all these things, we said $350 million to $450 million in both 2024 and 2025. We’re thinking that that number now is certainly north of $400 million for each of the years. So very good around the controllables. When you think about Seed, we remain very comfortable with our base assumptions for 2024 and moving into 2025 and I would even go beyond 2025. The technology pipeline that we’ve built, we think is second to none in the industry, and our out-licensing now is ramping up very nicely as we made comments in our prepared remarks. And then as you rightly called out, we can see deflation now that’s in the P&L in both Seed and CP. You’re right, we have not given you full quantities yet. We’ll do that at the right time. But we think that that could be a significant tailwind as we think through 2025 and even beyond that. So when you put all that together, we’re very comfortable with, if you look at the forward guide now for 2024 and then you look at some of the ranges we’ve provided for 2025 and what we call the value framework, we’re very comfortable we’re on a path to that range. The biggest question though, and we can’t ignore it, right, is not when we think about CP pricing. So we needed to see a few things in this quarter, and so we’re feeling pretty good that we saw volume growth in Q2 when it comes to CP, but it’s been a pretty competitive environment when it comes to pricing. And so that’s the thing that we’re watching. We’re not overly concerned, but it’s something we’re keeping an eye on. And the 2025 framework then needs to connect to that.\ And what we’re hoping to see now is further stabilization in the CP industry. And then eventually this market will return to growth because we’ve got two years now where we’ve seen declining organic growth, and to see three years, it would be quite unprecedented. It’s happened before, but it’s been quite rare. And so we’re still feeling that our base assumption of some growth in 2025 makes sense. And when you put all that together, I think the value framework would still be very comfortable for Corteva.

And our next question comes from the line of Joel Jackson with BMO. Your line is open.

Hi. Good morning. Just following up on that. So the last hour, one of your competitors was talking about seeing kind of 6% revenue growth next year in crop chems. Speaking to what you’re talking about, a volume recovery but competitive prices price decline. So I know it’s following up on the prior question here, but is that in the ballpark of what you’re seeing more higher or lower, and why would you be higher or lower than say that benchmark?

Yeah. Let me give you a perspective, Joel, and then I’ll have Dave just talk about how we built the forward guide and Dave can give you some specifics. So, when we look at CP for the second quarter, our price was down approximately 5%, but our volumes were up 6%, and we really needed to see the volume growth. I think from a Corteva perspective, and I’m only going to speak about Corteva today. I think what we wanted to do is make sure that we manage the inventories going into the channel. Because look, we need to learn from what’s happened, right? And we want our recovery when we look at Corteva to be sustainable as we work through the quarters. And so we’re very comfortable. We like the path that we’re on. I think when we think about how we guided the market, it’s important to say that the midpoint came down about $100 million. Really, that was sort of first half impact, right? But we had some pretty significant weather that impacted the CP business, we lost some sprays, both in Europe and the U.S., and then there was the pricing dynamic, which we’ve already called out. So now when you think about how to think about the rest of 2024, Dave, I’ll let you kind of comment on that.

Sure, Chuck. And I think too, just related to 2025, I think, Chuck, we would get into any details and any specifics regarding that at a later time. It’s really too early to comment on that. But importantly, Joel, as you know, for the first half, let me talk about our pricing assumptions just a little bit and then we can talk about overall market, and Robert, you may want to comment a little bit just on what we’re seeing at the farm gate in terms of just the continued demand there and the steadiness of that demand. But on the -- for the first half, as you saw, round numbers, we were around 4% pricing headwind in the business, Crop Protection business, 3.5%, specifically for the first half. And our expectation is for the full year, that’s going to be a little greater, probably in the, I’m going to call it the low- to mid-single digits, really driven by the mix -- the geographic mix. We’ve got a much larger, as you know, an increase in Latin America’s percent of total for the second half. So that’s what’s really influencing that number. When we look at volumes and volume expectations for the industry, and I’ll let Robert comment on this more. I mean, all of what we’re seeing, signs of what we’re seeing, as Chuck said, are pointing to some return to normalcy, stabilization, if you will. And we’re seeing that in terms of the demand, in terms of usage of product, including the differentiated products that are, in terms of technology -- possessed technology and efficacy that the farmer needs. Robert, you may want to just comment a little bit about that, because I think that bears on the health of the overall business and the outlook.

Thanks, Dave. Joel, we finished up about as we expected in the first half. And so as you begin, as we move into the second half, you’re going to see growth from really three areas in Crop Protection, new products, spinosad and biologicals. These will account for about 65% of our total growth for the business in the second half. And these are product areas that -- product lines that are performing better than the market and definitely better than the rest of our portfolio and historically have done so as well. And further to that confidence of what we’re seeing and our expectations, Brazil order book is very healthy and much more so than it was last year. We’re about 20% ahead of where we were last year. So, again, that gives us confidence that things are moving. And then we think when you look at our biologicals, we have 70% of our full year orders already in hand. And so once again, it gives us lots of optimism for the second half that we’ll be able to do what we’re saying we can do and that’ll roll into 2025.

And your next question comes from the line of Chris Parkinson with Wolfe Research. Your line is open.

Good afternoon. So one of your competitors put out its preliminary U.S. Seed price card fairly early. I think 10 years ago it would have been on our hard-hit to go in August and now we have somebody putting out an early July. What are your presumptions in the marketplace of why that was done in terms of your current share gains in certain row crops, presumably soy, as well as your ongoing field performance? It’s probably a little bit early to comment on the latter, but just any commentary and insight on why you think that was done would be particularly helpful. Thank you.

Hey, Chris. This is Tim. I’ll take a shot at this. So, it’s hard to comment on what the motivations were for putting a price card out early. When you put a price card out early, there’s -- I’d say a gap in details in terms of what you understand. You don’t necessarily know what the mixed products that they’re going to sell. You don’t necessarily know what their growth net’s going to be. And my best guess right now is there’s not a farmer who’s made a buy decision yet based off of that. So we’re in the process of developing our 2025 plans. And I’d say we’re weeks away from North America. We’re generally pretty consistent in terms of timing and we’ll stick to that timing as well. A little bit later in Europe, but more like a month or two out from most of Europe. As we think about going into this market, obviously every year is a little bit different, and it’s different in terms of the environment you’re selling into, as well as what you’re bringing to the market. What I’d say is in 2025, as we put together our pricing plans, especially in North America, it’s really driven by innovation and new technology. And the value approach that we take in terms of delivering value to our customer doesn’t change here. So on corn, we have a very favorable mix enhancement as we think about introducing new hybrids with Vorceed and PowerCore, two very exciting and important technologies on corn that we’ll be ramping up this year. And as was mentioned earlier in the prepared remarks, we’re also going to have a significant ramp up of our Z-series soybeans, which will be within Enlist and really take our value prop to the next level with farmers. So, overall, our philosophy never changes. It is value driven, it’s technology driven and it’s focused on innovation and making sure that our customers have access to that new technology. And we have that long -- I’d say longstanding trust and understanding from our customers as we bring them something new and better that we’re going to share in that value. So certainly a different market environment, can’t really speculate on our competition and what their motivations are, but our focus and our approach really doesn’t change in this environment.

And the next question comes from the line of Kevin McCarthy with Vertical. Your line is open.

Thank you and good morning. Chuck, in adjusting the guidance, you called out a number of different factors, including corn stunt and the impact on acreage in Argentina, some flooding in Southern Brazil, and the Crop Protection chemical pricing environment, and perhaps, there are other factors. And so my question would be, how would you sort of rank order the relative importance of those? And then with regard to the pricing dynamic in particular, I was wondering if you could expand on the question of whether or not you had any one-time incentives embedded in the 5% price erosion as one of your competitors seemed to highlight earlier this morning.

Good morning, Kevin. So let me, I’ll start and then Dave should certainly comment. So, as we’ve mentioned already, the lowering of the guide was really a lot driven by where we are after the first half, right? So weather, missed applications and then the CP pricing dynamic. The second half of the year, when we start thinking about it, what we’re looking for is CP volume growth and a similar pricing dynamic that Dave just called out. And really the determining factor for the confidence in the second half will be on two things. It’ll be on controlling the cost and the productivity controllables that we have and we feel very good about that. And then Brazil, and really it’s Brazil volume that we’re focused on. When you start thinking about the range though, the upside and the downside and the guide range, we kept it this time a little bit wider than we normally do at this time of the year, and that’s really to reflect some of the uncertainty we’re seeing in Argentina when it comes to corn stunt. And Argentine farmers right now are not looking to buy the Seed. So it is an uncertainty and there’s a lot of different estimates out there. So we feel we’re pretty nicely captured between, if you think about the guide range between $3.4 billion to $3.6 billion, we would fall into that range, I think, with what we know today, and this is evolving -- the story’s evolving, from the planted acres in Argentina. And then the assumption for the midpoint certainly captured when we’ve said this before in Brazil, to capture some of the planted acres that we lost last season. And that was really driven by weather. So we think things are looking better in Brazil, but time will tell and it’s still a little early to call victory on that as well. And then if you think about the upside of the guide range, and Dave, you should weigh in on this, that would have the global CP market starting to stabilize and more of a return to growth, which isn’t out of the question in this market environment, but we did put that as the upside for the guide range. Dave, did I miss anything?

I think you captured very well, just to maybe state the perspective just in a slightly differently, just to reiterate to some degree what Chuck said. Kevin, in that base $3.5 billion, we’ve obviously got, as Chuck said, when talking about prepared remarks, the Brazil area of recovery, as well as the CP volume growth, you spoke to that, Robert spoke to that, in terms of particularly driven by Latin America, but also to some degree, APAC and North America increase in the second half, but really significantly driven by Brazil. Pricing, we’ve given you the assumptions there. We feel that’s good in terms of what we’re seeing and our expectations. And then the other key point is what we’ve got dialed in, in terms of cost deflation for the Crop Protection raw materials. So those are the kind of the base, and then Chuck did a good job of just outlining on sort of the plus minus of that, and obviously, one of the things we’re monitoring, Tim, you’re monitoring, and we’ll know more later, is the overall Argentine corn planted area, just that phenomenon.

Okay.

So I would say that’s the way we would see it, Kevin.

And your next question comes from the line of David Begleiter with Deutsche Bank. Your line is open.

Thank you and good morning. Chuck, just again, back on CP, I think you said, you’re not overly concerned on the pricing pressure here. Why is that? And specifically, is the threat from generic producers in China, in your view, more or less than it was a year or two ago? Thank you.

Yeah. So, look, we think that there’s a lot going on in the CP industry, David, and a lot of this that we’ll reference now, we think will run its course, and it’s on a pathway of having an improved and what I would consider to be a healthier CP market overall. So when you start thinking about all of the moving parts here, what we’re finding is that a lot of the industry players now are moving through their high-priced inventory, which is natural and it’s part of the healing process that we would consider as part of the overall industry dynamic. But what I would say is that, the fundamentals, what you have to keep sort of first and foremost, and the reason we’re not overly concerned, and we’ve said this in the prepared remarks, but it’s important to state again, on-farm demand is healthy. And in the first time in two years, I’d say what’s going into the channel is now coming out of the channel. And so this is just a much healthier overall structure that we haven’t seen in a couple of years. So you’ve got this dynamic where what’s generally going into the channel is going out of the channel, on-farm applications are healthy. Of course, farmers are being smart about their investments and their applications, they always are. But what we’re seeing is that that channel is a lot healthier. So that gives us some confidence. And then what we needed to see was the volume growth into the channel in the second quarter. That was the first sign of what I would consider to be a stable market. And so the pricing dynamic is the way we’ve described it. But as we work through this journey a little bit more and we need now to finalize this with Brazil, because we would say that from a destocking perspective, the U.S. and now I’d say Europe, they’re more or less destocked. And if you notice, we haven’t used that language too much today, because we’re feeling that the industry is finally behind that. We have to go through now the Brazil environment. But like Robert said, certainly our order book is healthier than it was this time last year and farmers are planning to apply the product in the fourth quarter. So when you put it all together, I think we are on a journey of stabilization. We feel like this is where we needed to be at this time of the year. But we do need to see how the second half actually unfolds. But that’s why we have, I think, guarded optimism is the way I would describe it.

And your next question comes from the line of Josh Spector with UBS. Your line is open.

Yeah. Hi. Good morning. Two things, if I can quickly here. First, I apologies if I missed this. But can you talk about your volume expectations in CP for the second half as you go through 3Q and 4Q? One of your peers just talked about a healthier 4Q versus 3Q. I wonder if you’re seeing that the same way. And then secondly, thinking more longer term, I guess, Chuck, particularly given your experience in the industry, I think, you guys have talked about confidence on Seed pricing. But what typically have you seen -- you talked about you’re not concerned about trade down, but what have you seen in prior cycles, particularly year one of a more pinched farmer?

Yeah. Good morning, Josh. So do you want to talk about volumes, Robert, and then I’ll come back and we should hear from Tim as well on Seed.

Yeah. Thanks. Well, on the volume stem for second half in Crop Protection, I’ll let Dave talk specifically about some of the splits, but relatively balanced. Dave can reference some more numbers if needed there. But when you think of us on Q3 and Q4, we don’t have a large swing. It’s about normal is the way I would think about it. Things are moving, as Chuck talked about, more stabilized. Brazil inventories are approaching normal ranges. And a large part of our business is Latin America in the second half. Specific to volume, we’re going to be in mid-teens up on a second half basis. And again, that gives us optimism on how we see things shaping up for second half. Dave, something to add?

No. That covered it well, Robert. Let me just say that when we talk about normalization, it’s interesting, because -- and we’ve mentioned this previously, but when you look at, for example, the Latin American numbers, you’re really comparing to the weak second half of 2023 and particularly the fourth quarter of 2023. So some of the V percent that you’re looking at, go back and look at cumulative, or if you look at cumulative volumes, 2022 and 2023 compared to 2020, or 2023 and 2024 compared to 2022, that’s when you get into more of a, just a really normal, if you will, sort of expectation in terms of pattern. And there’s nothing, Robert, to your point, I think that stands out between 3Q and 4Q. Tim, do you want to comment on Seed?

Yeah. On the Seed side, we get the question a lot about the trading down and maybe I’ll think about it in a couple ways. One is, in terms of technology ladder, it is very difficult for a farmer, once they’ve had certain Seed technologies, to be able to move down the ladder, if you want to think of that. So if they’re used to planting, above ground insect control with certain herbicide-resistant traits, they kind of built their operation around that. If they’re used to being triples above and below ground with multiple modes of herbicide resistance, they kind of are built that, equipment, labor, the whole bit is around that and we’ve not seen any meaningful trade down over time. And certainly, as recently as six years or seven years ago, we were in a very difficult environment and didn’t see the trade down at that point in time. On the -- if you think about from a genetic side or trading down on brand, I think that what you have to understand is, you can say Seed is interchangeable, you can get different trade packages or comparable trade packages from different companies, but one thing about Seed is it is a very emotional decision. And for that farmer, it’s not just confidence that the genetics are going to perform and deliver a certain level of yield that’s consistent with their expectations, but it’s also the ability to be able to handle adversity, consistency over time, and plus the support and service they get from their point of sale. And so, in a situation like this, our value proposition has to make sense and we’re quite confident, that what we’re delivering to those customers will be, make sense to them, will be additive to their operation. And then the other point is, at times like this, especially when margins are compressed at the farm operation level, that last bushel is maybe all the profit that they make, if you want to think of it that way or put them in a positive cash flow situation. And so, they see Seed differently than other decisions that they make over the course of their Seed operation. So, never take it for granted, always stay close to the customer and help them understand our value proposition. But history has shown that Seed holds in well.

Yeah. Josh, just I’ll echo what Tim said very quickly. So, in all my years, whether it was being a retailer or now on the Seed side, we just don’t see it. And the reason we don’t see it is because it’s akin to gambling. That germplasm, especially if you think about our germplasm, it’s approaching 100 years now and we’ve got more than decades of experience in breeding. And if you just think about the Z series that we just rolled out, that three bushels per acre against our best stuff, because that’s a comparative Corteva versus Corteva, that could be the difference between profit and not. I -- we are not -- like Tim said, we never take it for granted. Our obligation to our farmer customers is to ensure that next year’s hybrids are better than this year’s. And we invest a lot of money in R&D and plant breeding to ensure that happens. But with that comes some credibility in the marketplace, I think.

And your next question comes from the line of Frank Mitsch with Fermium Research. Your line is open.

Hey. Good morning, and congrats, Dave, on your pending retirement. It has been a pleasure working with you. There’s been a lot of discussion, obviously, on CPC volumes and price. The common theme is higher volumes, but lower price. When do you think we might get back to an environment where pricing is flat or perhaps even positive on CPC?

Yeah, Frank. So I think we’re approaching, I don’t want to give you a quarter because, look, this whole dynamic that we’ve all faced with the destocking is almost unprecedented. And if I provide a quarter, I’m definitely sure I’ll be wrong. But we’re looking at the trend lines and we’re very encouraged at where we’re at. First and foremost, like we said a couple times already today, we did need to see the volume grow and we saw that. And we needed to see the volumes entering the channel and leaving the channel at about the same rate. And thank goodness, on-farm demand has been healthy. I think many of us are now moving the high-priced inventory through the P&L and into the marketplace, which is another important step. And our inventories, Dave, they’re still a little higher than we’d like, but they are a lot better than they have been over the last couple of years. So, when you put all this together, I think we’re on a path of recovery or what we call stabilization. And I probably need to leave the conversation there, because it’s probably not healthy for me to forecast what will happen, except to say that, again, two years of organic decline has happened in the industry, but it is unusual. Three years is even more unusual.

And our next question comes from the line of Steve Byrne with Bank of America. Your line is open. And Steve, your line is open.

Sorry about that. There’s a fair amount of uncertainty out there about whether dicamba will be available in 2025 or at least by early 2025. And I’d like to hear your view on, like, how would you rank the benefits to your business profitability-wise from that risk driving more independent Seed companies to license your Enlist germplasm and corn and soy, which you mentioned is gaining some momentum, Chuck. Is that a bigger benefit to you from such an uncertain outlook for dicamba versus increased shift to your own proprietary brand, your own Pioneer brand in Enlist corn and soy? How would you rank those?

Hey, Steve. This is Tim. Maybe I’ll take a first shot and let Chuck wrap up there. So, obviously, you know, we’re like everyone else, just kind of eyes open, waiting to see how this is going to turn out. And we did have -- we continue to have very strong adoption on the Enlist E3 side and soybeans. And as we said earlier today, we believe it was greater than 65% of the market, which is a tremendous amount of growth when you think about already being above 55% last year. So do I believe that there’s still room to grow? I really do believe there’s room to grow. It’s hard to size that up based off of the uncertainty around what that label is going to look like. And particularly, the ability to use the product in season, that’s really the, I think the outstanding question there. So in terms of how it shapes up from 2025, I would expect market adoption to expand in 2025. Are there new companies that are going to be in there? Probably not a lot because there’s well over 100 companies that are currently licensed and selling Enlist E3 soybeans today. So I’d say adoption’s pretty wide across the market. It’s just about how much more can the trade continue to penetrate? Depending upon the outcome, certainly our brands will benefit at some level, certainly licensees and others who are distributing products will benefit. And so, to be able to size it up today just with that level of uncertainty probably doesn’t make a lot of sense. What I can say is there’s more than likely adequate Seed to support substantial growth on a year-over-year basis between all the 100 plus companies that are producing and currently in the marketplace with Enlist E3 varieties.

Yeah. I won’t say much more than that on the dicamba. I think Tim covered it well, but if you just look at the strategy that we’ve implemented just a few years ago to be a technology seller instead of a technology buyer, we’re very pleased with that. And you can start to see some of that path to royalty neutrality that hit our bottomline, right? Like over 400 basis points of margin expansion in Seed. This doesn’t happen overnight. This has been a long investment cycle. But if you think about how our soybeans and our corn is performing and we do have the latest in the next-gen technology in the pipeline, as Tim already called out, with Vorceed and PowerCore, and then Enlist E-Series now adding to the mix and becoming more important. And this year we’re over 200 new hybrids and varieties in the marketplace. Next year we’ll be at a similar number. We think that the strength of our Seed business will continue to gain momentum. And then when you think about some of the lower costs and the deflation, as we called it, flowing through the P&L, we just like the path that Seed is on. I think the first half this year was a record, but I think that this business is just getting started. So we’re extremely pleased with the performance of our Seed business right now.

And the next question comes from the line of Jeff Zekauskas with JPMorgan. Your line is open.

Thanks very much. In your corn product line in the U.S., did doubles grow faster than triples? And you said that your corn royalties were up 40%. Is that a $20 million benefit or $10 million or $30 million? Can you size that?

So in terms -- maybe I’ll start off and let Dave size up from a financial standpoint. But in terms of our mix, our mix is pretty stable between years. And so we’ve been -- we have had a really strong offer in the past. So, yeah, we’re transitioning to PowerCore, we’re transitioning to Vorceed, but we’ve had a really strong competitive offer up till now. And this is just building off of that. So when you think about it from a between-year standpoint, that mix doesn’t really change a whole lot, sometimes on the margin. But generally, I would say stable. And as we introduce the next level of technology, it’s really more about replacing and upgrading rather than all of a sudden altering that mix. And on the corn licensing side, specifically at the PowerCore and Enlist is where we’re growing. And we’ve been in the marketplace and licensing our genetics with that trade for the last couple of years and we’re starting to see that build. And so Dave, I’ll let you talk about it from a financial standpoint.

Yeah. So the total -- Jeff, good morning. So the total royalty income referencing the 40%. So that’s not just corn. That’s our total, as Tim said. And what that equates to for us is that about $35 million increase. Hope that helps.

And our next question comes from the line of Kristen Owen with Oppenheimer. Your line is open.

Great. Thank you so much. I wanted to ask about the moving pieces on the free cash flow guidance, since that was held stable, but you did lower the net income outlook. So, if you could just update us with your thoughts on working capital. And while I understand it’s probably too early to say on 2025, just given that the operations puts and takes that you’ve defined already, just help us understand how much of the working capital benefit is being captured 2024 versus 2025? Thank you.

Sure. So, just quickly, thanks for the question. As you probably saw, we had benefits from both inventory and accounts payable with some offset in receivables in terms of our cash provided by working capital relative to the prior year. So if you will, the change on the change. So inventory was just under $500 billion of benefit, $165 million and accounts payable about $659 million. And then again, we got some offset in accounts receivable and deferred revenue. I think those trends are going to continue. We’re going to see continued benefit in terms of inventory as we sell through, in terms of cost of goods sold and the volume that we forecast for the second half of the year. And the same way with payables is procurement tends to now start to normalize. So we’ll get that benefit. Receivables are going to continue to be a bit of a headwind, particularly with the increase that we’ve got now in volume and revenues in the second half and particularly in the fourth quarter of the year. And when you look at the geographic mix of those revenues. It’s a little early to talk about 2025 with any degree of precision. We’re obviously encouraged by what looks like a 50% free cash flow to EBITDA conversion for this year. We want to sustain that and improve that if possible going into 2025. So, again, that’s something that’s a little early, but we’ll update you on. We’re quite encouraged right now with the way in which cash is shaping up.

And the next question comes from the line of Edlain Rodriguez of Mizuho. Your line is open.

Thank you. Good morning, everyone. I mean, Chuck, just wanted to get your insight into Crop Protection, the relationship or if there’s any relationship between volume we’re covering and the pricing pressure that we’re seeing. Like, is there a relationship or will farmers apply the products regardless of pricing so pricing doesn’t dictate what’s going on with volume at all?

Yeah. Good morning, Edlain. So, look, I think that the dynamic that we’re seeing right now on the farm, you can see the macro agricultural economy margins are tighter than they have been the last couple of years. But farmers are still at least the ones that I’ve spent some time this summer traveling through the Midwest and talking to lots of farmers. Tim and I were talking to a host of Pioneer reps as well this week. What we’re finding is we’ve already talked about the dynamic with Seed. I think with CP, we’re not seeing on any broad basis farmers making decisions based purely on economics. So if a crop needs to be protected in some fashion, they are protecting the crop. But look, given the margins that we have now on the farm, they’re going to make sure that every dollar they spend has the right return on investment. And let’s be clear, right, when they’re investing in Seed or CP, that is a return on investment. What we’re finding though is that, there is a -- if sometimes a farmer will use more of a commodity type product, they have to use that product oftentimes more often because it doesn’t have the same efficacy as some of the newer technologies. So they might buy it for a lower price, but they’re going to use more volume and I think that that is certainly what we’ve seen in some parts of the marketplace. But generally speaking, I think farmers are doing what we would expect them to do in this market. They are prioritizing their investments. They’re ensuring that they’re going to maximize yield because the yield is going to be what they’re going to take and sell into the marketplace and make their returns. So I think that we’re in a market where technology is still going to be important, but we definitely need to ensure that we’re providing farmers with a proper return on investment. And when we look at our CP portfolio, we think that certainly there is a lot that we can do to support farmers in those decisions.

And I will now turn the call back over to Kim Booth.

Okay. So that concludes today’s call. We thank you for joining and for your interest in Corteva. We hope you have a safe and wonderful day.

And this concludes today’s conference call. You may now disconnect.