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Monsanto Company (NYSE:MON)

F2Q 2014 Results Earnings Conference Call

April 02, 2014, 09:30 AM ET

Executives

Bryan Hurley - IR

Hugh Grant - Chairman and CEO

Brett D. Begemann - President and COO

Pierre Courduroux - SVP and CFO

Ashley Wissmann - IR

Manny Cruz - IR

Analysts

Vincent Andrews - Morgan Stanley

Don Carson - Susquehanna Financial

Chris S. Parkinson - Credit Suisse Group

Robert Koort - Goldman Sachs

Michael Piken - Cleveland Research

Michael Cox - Piper Jaffray

David Begleiter - Deutsche Bank

P.J. Juvekar - Citigroup

Mark Gulley - BGC Financial

Jeff Zekauskas - JPMorgan

Mark W. Connelly - CLSA

Kevin W. McCarthy - Bank of America Merrill Lynch

Frank Mitsch - Wells Fargo Securities, LLC

John Roberts – UBS

Tim Tiberio - Miller, Tabak + Co., LLC

Operator

Greetings and welcome to the Monsanto Company Second Quarter 2014 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.

I would now like to turn the conference over to your host, Bryan Hurley, Investor Relations lead for Monsanto. Thank you. Mr. Hurley, you may now begin.

Bryan Hurley

Thanks, Rob, and good morning to everyone. Thanks for joining our second quarter earnings update. I'm joined this morning by Hugh Grant, our Chairman and CEO; Brett Begemann, our President and Chief Operating Officer; as well as Pierre Courduroux, our CFO. Also joining we from the IR team are Ashley Wissmann and Tim Boeker.

Because it reflects the first view on the North American season, the second quarter provides an important proof point of growth from our core seed and trait business, so our emphasis today will be on the confidence that provides in our outlook and our continuing growth opportunity.

This call is being webcast and you can access the webcast, supporting slides, and replay at monsanto.com. We have provided you today with EPS measures on both a GAAP 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 on the website.

This call will include statements concerning future events and financial results. Because these statements are based on assumptions and factors that involve risk 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.

So, we'll move quickly to the discussion of our Q2 results and the outlook. The key highlights are on slide four. At an ongoing EPS level, we delivered 15% growth in the quarter. On the gross profit line, nearly 80% of the absolute growth comes from our Seeds and Genomics segment, and within that solid growth in both our soybean and corn portfolios. That was further highlighted by record second quarter gross profit in our soybean business, reflecting contributions from multiple elements of our soybean platform coming online.

The quarter also reflects strong progress on each of our full-year financial targets with improvement across our total company GP, Seeds and Genomics GP, our corn and soybean margins, and our ongoing EBITDA growth.

After delays in the early part of the quarter from extended winter storms on North American logistics, we were able to largely catch up on our overall shipments by the end of the quarter. And as a result, there's no change to our quarterly flow related to those early weather challenges.

With our strong seed and trait performance in Q2, we also anticipate a strong conclusion to the year with a significantly smaller loss in Q4 to punctuate the year and a Q3 that we expect to be somewhat lower than last year.

For the full year, we've reconfirmed our guidance for fiscal year 2014 ongoing EPS in the range of $5 to $5.20 and ongoing EBITDA growth in the mid to high teens. That outlook incorporates the reality that there are more headwinds across the ag industry this year, largely driven by currency effects which created an estimated $0.15 to $0.20 full-year EPS headwind relative to our projections and that are built into our guidance.

So, with that, let me hand it to Hugh for the strategic view at this second quarter.

Hugh Grant

Thanks, Bryan, and good morning to everybody on the line. With our largest quarter and the first proof points for the key northern hemisphere ag season in hand, I'd emphasize that our business is on track to deliver the growth we anticipated for fiscal year 2014.

This is a quarter where the outlook is as important as the financials. So, let me highlight three key points. Number one, despite the greater variability you see across the ag sector this year, today we've confirmed our full year guidance shown on slide five.

This is a year where everyone in agriculture recognizes the market realities of softer commodity prices, more volatile global currencies, and some decrease in corn acres in key markets like the Americas.

We're not immune to these trends and Pierre will quantify some of those macro headwinds in our outlook, but it's important that, even in a year with such prominent headwinds, Monsanto has the right portfolio to deliver expected strong growth for yet another year.

Next, the second quarter is actually the key proof point that in a softer commodity environment Monsanto is growing our core seeds and traits business. Almost 80% of our gross profit growth in the quarter comes directly from seeds and in particular, corn and soybeans. That's key as it means our seeds and traits business is delivering in the major areas and across the milestones that are critical to our success this year.

Third, that growth delivery is a direct function of the diversity that we have in a broader global portfolio. And within this balanced portfolio, we've a strong line of sight that reinforces our confidence in both a strong second half and the punctuation on this year's total growth.

This is a year where we wanted to see the seed business deliver as the prime growth engine and that's exactly what we see in this second quarter checkpoint.

That's important because the performance this year also unlocks a longer-term runway. There are two things that you look for in that opportunity; the demand-driven macro environment and the growth layers that are unique to us.

On the macro side, I think of 2014 as a transition year. With the effect of the severe drought in 2012 and the supply side pressures over the past few years, we've come through an abnormal period of some extreme conditions and inflated commodity prices.

But on slide six, expand the scope and look at demand in the context of the multi-year runway. As you do that, the macro environment normalizes and importantly, the long-term trends set the tone.

And those trends are strong, wide reaching, and compelling. The hallmark of the next 10 years is that demand cannot be met by increasing acres as we have over the past 10, so we see no real alternative other than boosting productivity. That's the concept of sustainable intensification.

We've built our business over the last decade to be ready for that generational opportunity. That opportunity starts this year and as we target that long-term demand-driven opportunity, Monsanto has more company-specific catalysts across more platforms than we have ever had. We show that in slide 7.

Brett will cover these in more detail, but the bottom-line is that the factors that play out in the longer term are more visible, more proven, and more transformational than they have ever been.

The first of those comes with record second quarter growth for our soybean business as we have the early validation on the decade of the soybean as one of our most transformational opportunities. That's highlighted by Intacta.

With our launch this year we have the data point to say that not only is Intacta out of the gate, but it started at a leapfrog pace at the beginning of 100 million acre market that we expect will rewrite our soybean growth opportunity.

The second factor comes as we layer on top of that the steady, expected growth as we use our breeding advantage to upgrade our seed portfolio every year, particularly in corn. It’s a powerful point of leverage when you think that what we're doing has seen a steady growth contribution from our biggest global business year in and year out.

And finally, this year, we're unlocking new platforms that have the potential to be some of the most significant business drivers in our portfolio within the decade. These range from the precision ag platform that we've assembled under The Climate Corporation to our new biologicals platform with Novozymes.

These aren’t significant financial growth factors this year, but we've clearly taken the first step to establish these as platforms that we believe can be completely new categories of opportunity.

Collectively, this is the broader global portfolio that we've consciously cultivated over the last several years. We've passed milestones in each this year, so the visibility that we have on these core company catalysts reinforces an important level of confidence that we have and why our continuing opportunity is so compelling.

And that brings me to my final point. There's no doubt that the ag environment has been more variable this year than it has been over the past several. And while there's still a lot to play out, I'm pleased that we've been able to demonstrate that our seeds and traits business can grow against that backdrop.

That speaks to the value of our technology and the strength of our portfolio. That in turn means that we're in a good position to deliver growth today while also building the platforms that access the important longer term opportunities in agriculture. So, we're on track, we see real opportunity in the demand trends, and we're focused on delivering.

So, with that, let me hand it to Brett to take a deeper dive into the operational milestones that are embedded in our results for this quarter.

Brett D. Begemann

Thanks, Hugh, and good morning to everyone on the line. Coming into the year, we said that our seeds and traits business would return as the biggest driver of our growth. Within that I said our focus would be on margins, and specifically that we anticipated seeing significant margin expansion.

As we show on slide eight, that's on track. The proof point now shows on the financial statements in the quarter as margins are moving up in the overall seed business.

Let me walk through these drivers and give you the proof points, both for fiscal year 2014 and for our growth from here. Given the prominence of the North America season in Q2, I'll start with how the season is shaping up now that the order book is translating to the early shipments ahead of planting on slide nine.

With the market variability coming out of a very atypical 2013, there has been a heavier than usual focus on commodity prices, acre projections, and discounting noise. I see 2014 clearly playing out as a normal year and the growth we saw in our order book has carried through the early shipments, putting us on track for the strong growth in our global portfolio that we see driving our full year margin increases.

With shipments underway, we're on track for the 5% to 10% mix lift in our global corn seed portfolio. This year, we'd expect to be towards the lower end of that range as we factor in the global headwinds like currency.

There's real power in this significant, steady engine across our business. That translates to an expected greater than $1 billion of net sales growth over the next five years just from this corn germplasm upgrade, that's why this is such a powerful business factor.

In the quarter, the proof point is the margin expansion I mentioned. Corn margins are up approximately two and a half points and a portion of that is the global mix benefit the comes from our portfolio upgrade.

The first increment of our improved cost position is also starting to flow through and this COGS benefit in corn continues throughout the North America season. This has us well-positioned for the three point margin growth we expect for the full year.

Among the key seasonal factors, the next step comes as planting gets underway and the focus will be on the obvious variables; the weather and farmers' planting decisions. The winter weather slowed some of the pace of logistics on early deliveries, but hasn't carried over now that we are a step closer to planting.

As we saw last year, weather is more of an influence during planting and the spring weather window will help determine if incremental acres go to corn, soybeans, cotton, or elsewhere. Given the balance in our portfolio, we're in a good position to serve our farmer customers however these decisions shakeout. So that may change the composition of what we sell, but I don't think it changes the bottom-line opportunity.

If I shift gears slightly to slide 10, one of the things that I think gets missed with all the focus on commodity prices and acres is that we're on track for a record volume in our global corn portfolio.

In the quarter, we have a couple of new data points. Not surprisingly, with the second season largely planted in Brazil, it's clear that the overall corn acres were down in Latin America this year.

Against that, we now have the visibility on volume in the northern hemisphere and we're on track for volume growth for the year. If we look at Latin America, it's an important area where we hit strategic milestones this year. In Argentina, we're on track with the upgrade to the triple stack. Likewise, in Brazil, we're making progress on our next-generation traits.

In that regard, the corn opportunity has parallels to the Intacta in soybeans as the tropical insect pressure means the value and opportunity is really in the insect control traits. So, products like our double stacked insect control traits are really leading that upgrade trend.

As we move to the northern hemisphere, despite the obvious turmoil in the Ukraine, one of the most significant opportunities this year comes from the broader Eastern European market. It's really one of the fastest growing regions in our portfolio today because there's a trifecta of opportunity in germplasm mix upgrade, significant share growth, and a growing overall market.

Today, this is more than a 30 million acre market and one where we have effectively doubled our footprint in the last several years.

Relative to the Ukraine, we see the same factors as others in the industry. There has been some disruption tied to the political unrest, but we've been working through that and feel good about the full year contribution to growth.

This global expansion is key in delivering our growth this year, but it's perhaps more important in the long-term opportunity. We've a leading global position that spans markets and crops, so however the macro acres trend in any given year, there's an increased geographic balance in our portfolio. So, while the U.S. will still be the cornerstone for us, our overall growth isn't tied to one market.

From there the next driver is soybeans on slide 11. With Intacta, Roundup Ready 2 Yield, and the Roundup Ready 2 Xtend platforms we have entered a new era of opportunity and acceleration that can drive overall growth for years to come.

That shows in the margin improvement for the quarter. The seven point expansion is particularly strong in the quarter, as we have all of the drivers showing up in the financials ranging from Intacta sales to the next increment of contribution from Roundup Ready 2 Yield from U.S. licensing.

As all of those factors continue to grow, we expect more than $1 billion in net sales growth across the soybean platform in the next five years. There is no bigger 2014 milestone than the Intacta launch in Latin America on slide 12.

With this quarter reporting is largely in for the season and we've delivered the 3 million acres, making the Latin America rollout of Intacta the largest launch of a soybean trait in our history.

Just as importantly, we've emphasized our focus on the first year experience and we reached more than 13,000 farmers with our commercial rollout, up from the 1,000 participants in our Ground Breakers program last year.

We had more than 35 varieties in the market this year, more than double the varieties we had with our U.S. launch of Roundup Ready 2 Yield. We're still harvesting our seed production for next year, but we'd expect to double the number of varieties for 2015, reaching an even broader geographic area. That focus on the experience has us on track with some of the best first year performance we've seen in any trait we've launched.

The first feedback came with the heavy insect pressure that swept Brazil this year. With the emergence of a new caterpillar pest, Intacta is actually providing a better performing alternative that's giving farmers a new tool.

And on slide 13, with good progress in overall harvest, the new information we have today is the initial yield data from the very first commercial experience. With almost 50% of the data in from our testing, we're matching the better than four bushel an acre advantage we saw in Ground Breakers in the commercial experience. That comes in trials comparing Intacta against soybeans typically using multiple insecticide treatments. So, we're seeing both yield benefits and better insect control.

With the productivity gains from less insecticide use, the visible differences in insect protection, and clear yield benefits, this first year experience was a clear success. And that's the critical pacesetter we wanted to see as we start in 2015 what we expect is one of the fastest historical ramp ups as we target more than 100 million acres across Latin America.

Across the larger current portfolio, I'd just mention briefly that our ag productivity business continues to be on track. Our strategy and market outlook have been consistent with what we anticipated.

We've seen some continued financial benefit as our mix and market pricing have been in the range we expected through Q2. That trend likely puts us more towards the stronger side of our full year outlook for a steady to stronger contribution in this segment.

On the roster of what we needed to deliver this year, the last is establishing the foundation for one of the most transformational, long-term opportunities, the precision agriculture platform on slide 14. Today, it's one of our most promising opportunities with 1 billion acre runway, so the foundation we set this year is important.

We've brought all of our precision agriculture technology under the banner of our Climate Corporation platform. We see this as a family of products and that's a big advance, as it takes precision ag from the piecemeal offerings in the market today to a real, unified platform.

We've always viewed our strategic retail partners as a significant advantage in the precision ag space. This platform now touches more decisions on a grower's farm and retailers play a key role in many of those key decisions, ranging from seed selection to fertility to pest and disease management. And we're making real progress.

We have business agreements in process with all of our major retail partners. Combined these partners account for roughly half of Monsanto's U.S. business today and represent more than $25 billion in total sales every year across seed and all the key ag inputs and services.

This year we're beginning to take our overall platform to the commercial stage. As you look at this portfolio of products, it starts to resemble the multi-stack approach you see with biotech traits. With hundreds of thousands of acres in early trial within the precision farming family and an expected 20 million acres with access to the gateway tools of Climate Basic, you can see that this can be a meaningful platform quickly.

Since we made The Climate Corporation acquisition, there has been a lot more talk about precision ag in the industry, but I think, with our differentiated technology and emphasis on industry collaboration, we are the best-positioned with a true platform.

Let me bring all these data points together. When you look through the lens of fiscal year 2014, the drivers are on track. We're seeing the growth engine in seeds and both of those things are allowing us to deliver the growth we anticipate.

And with what we accomplish in 2014, we set up an important runway that allows us to grow now while we simultaneously position ourselves for that important longer-term opportunity.

So, with that, let me hand it over to Pierre.

Pierre Courduroux

Thanks, Brett, and good morning to everyone. Having heard about the business milestones that back our confidence in our performance and opportunity, let me now highlight the corresponding financial proof points that reinforce this confidence.

As I do that, I'll focus on a couple of key points that tie our Q2 results to our full year financial outlook. First, despite the greater variability in the overall ag market this year that Hugh and Brett called out, we're on track with our plans and we have the visibility to confirm our growth and guidance today.

It certainly helps to put some financial context to some of the industry headwinds and the two biggest of those are currency and lower corn acres in some key markets. Related to our initial planning, I'd estimate the full year headwind is largely driven by currency and would be in the order of $0.15 to $0.20 in total. The ability to overcome those headwinds and deliver growth really speaks to the strengths of our underlying business and our core growth engine.

Second, the strength of those business drivers actually creates a very clear line-of-sight to a strong second half of the year. We have communicated earlier that we expect a historically strong fourth quarter to punctuate the year. So, we expect to build on the good growth we saw in the first half with an overall strong second half and one of the strongest fourth quarters we've seen in recent years.

And finally, if I move beyond the P&L, we continue to make progress in our initiative to be more aggressive in our cash deployment. A key point in that evolution is that after a couple of years of effectively returning our total free cash to our shareowners, we're on track for fiscal year 2014 to use our balance sheet and return more than our generated free cash for the first time in our recent history.

I'll cover this cash use aspect in further detail, but let me first tie the specific financials from the quarter to our full year growth metrics on slide 15.

As you work down those metrics on the financial statements, you'll see that we're on track on each and every measure, and you will also see strong incremental progress towards each in the quarterly results.

Start with our overall gross profit outlook. Within that the biggest two points we said out to deliver was strong growth in our core seeds and traits business. Now that we've got into the heart of our business, it's clear that the seeds and traits growth we are focused on is being delivered.

In the quarter nearly 80% of our total gross profit increase comes from Seeds and Genomics. And if you look at the full year view, we expect seeds and traits to continue to drive our underlying earnings growth.

If you take that down a level to Seeds and Genomics margins, you see very good progress in the quarter and the first half toward our target of an increase of three to four margin points for the full year.

The biggest driver of that is clearly the soybean business where Q2 margins were up by more than seven points as we see the pronounced benefits from Intacta launch in Latin America, the strong soybean opportunity in our U.S. business and the first increment of the DuPont soybean royalty.

We'd expect this to ease a little with the seasonal business flow in Q3 before providing a significant list again in Q4, keeping us on target for our full year expectation for a margin increase of six to eight points across our soybean business.

The progress on corn margins is equally strong. In the second quarter we've seen margin improved by about 2.5 points. This improvement largely reflects our mix lift and the start of the expected cost benefits.

Going into the second half, we would anticipate an additional margin benefit from our cost of goods as we expect the cost improvements to be even more prominent in Q3 and to carry into Q4 as we stay on track for our full year target of three point margin lift.

From an operating expense perspective, we are running at a relatively higher year-over-year rate. That reflects both the dilution effect of the Climate Corp. acquisition and the additional investments we are making to support our record number of product launches along with our new growth platforms.

So while operating expenses will grow at a higher rate this year, these are disciplined increases and we continue to expect to see operating expense leverage from gross profit for the full year.

Taking all of those in consideration, we have already delivered a double-digit increase in ongoing EBITDA for this quarter, and we expect to reach our mid to high-teens EBITDA by the end of Q4.

Translating those metrics to our outlook for the rest of the year on slide 16, what you see is that we expect continued strength in our second half punctuated by a strong conclusion in Q4. That second half strength is mostly driven by three core structural factors, none are particularly variable and we have a good read on the specific timing of each.

Number one, we'll book the second installment of the DuPont soybean royalty in Q4. In combination with some of the incremental sales for the Latin America Intacta season that's a big driver of the significant growth we'd forecast for soybeans in our last quarter.

Number two, last year the combination of the anticipation of a jump in corn acres and the subsequent late season effects on the whether -- on U.S. planning caused an abnormal amount of returns that were reflecting in our corn numbers.

Practically, that increased our Q3 corn performance last year, but created a significant negative in Q4. As this unusual pattern normalizes, you'd logically expect the resulting shift this year could have the inverse effect reducing the Q3 comparator, while the absence of that drag creates a significant uptick in Q4 corn.

And number three, last year we took an inventory write-off related to our vegetable business that was focused in our fourth quarter. We have a less pronounced effect this year. We'd expect a more typical contribution from vegetables in one of its biggest seasonal quarters.

If you bring those factors together, we expect Q4 to be a significantly small or large than it was last year, near breakeven or at the small loss. And as many of you remember, for the past couple of years our Q4 has been a loss of more than $0.40, so these three factors aggregate to a significant benefit.

With a shift into Q4 I just described and some unique factors affecting the comparison, we'd expect Q3 to be lower than last year. The biggest factor comes with a significant tax benefit that increased our Q3 last year and doesn't repeat this year.

That is combined with the Q3 effect of the corn comparison to last year that I just described, and with the expected continuation of the trend on operating expenses that we had seen in the first half of fiscal '14.

In addition, the practical reality is that we don't expect any incremental growth from our productivity following last year's significant step up in the quarter.

So, as a result, the combination of the significantly stronger Q4 and the factors in Q3 translate to strong second half that punctuates many of the positive trends on factors like margin and growth drivers we've seen begin in Q2.

From there I want to focus on our cash priorities on slide 17. During the second quarter we officially entered the Novozymes Alliance. So in the first half of the year we invested approximately $1.3 billion into our business growth, primarily through Climate Corporation and Novozymes.

Our $290 million first half free cash flow reflects that investment and keeps us on-track for our full year free cash guidance of $600 million to $800 million including acquisitions.

Whether it's M&A, collaboration agreements in new platforms or CapEx investments into our core business, direct investment in growth opportunities is one of our priorities and where we can use our cash to unlock further growth.

At the same time, we're combining this direct investment in the business with a more aggressive approach in returning value to our owners. As I mentioned, we are on-track this year for the first time in our recent history to return to owners significantly more than the free cash we generate in the form of dividends and share buybacks.

Coming off a record for buyback spending in Q1 we've continued to build on that with an additional $200 million in buybacks in Q2 even with a $300 million outlay in the quarter for the Novozymes deal.

In the last four quarters, we've used more than $1.5 billion for share buybacks, moving us from an annual repurchase of less than 1% of our market cap to nearly 3% in that short time. As we look at our cash deployment strategy, we're focused on continued aggressive program that reduces our share count, the continued emphasis on dividend and looking to identify high return means to invest in our business.

So let me emphasize again our confidence in our earnings growth this year. Our strong underlying business continues to deliver the growth we expected. And even in the phase of the variability in acres, commodity prices and currency, we today affirm our full year guidance with confidence.

That puts us in a good position for long-term growth with strong cash generating capability that in turn allows us to continue that growth, while being aggressive in delivering value to our owners.

Thanks. And I'll turn the time back to Bryan for the Q&A.

Bryan Hurley

Thanks, Pierre. So with that we'd now like to open the call for questions. As we typically do, I'll ask that you please hold your questions to one per person, so that we can take as many questions from as many people as possible. You’re always welcome to rejoin that queue for a follow-up.

So with that, Rob, I think we’re ready to take questions from the line.

Question-and-Answer Session

Operator

Thank you. We'll now be conducting the question-and-answer session. (Operator Instructions) Thank you. Our first question is coming from the line of Vincent Andrews of Morgan Stanley. Please proceed with your question.

Vincent Andrews - Morgan Stanley

Thank you and good morning, everyone. I just wanted to see if we could drill little bit more into the third quarter guidance. I just did -- the way I had been looking at it, last year you had revenue pulled out of 3Q into 2Q.

You had sort of a cost step up as your seed production cost seemed higher as you move through the year. So I would have thought that would have been a big tailwind in the quarter. I calculate the tax is $0.12, so it just seems like you're calling for the SG&A and R&D expense to be up substantially in the quarter. Is that right? Is that exactly what's going to happen?

Hugh Grant

Yeah. Vincent thanks for the question. I think the way I'd encourage you look at it is more or less story of our really strong second half, but the third does look a bit softer and the fourth looks really strong. But Pierre, maybe you can just do a little bit of dissection on how the comp looks versus last year.

Pierre Courduroux

Yeah. And so, there are a lot of variables playing when you do a year-to-year comparison. I mean especially when you look at corn, and as Hugh mentioned, I mean I would focus on an overall strong second half with very strong seeds and traits growth. You should get specifically to Q3, I mean you pointed it out, I mean the tax, the $0.15 tax benefit we enjoyed in fiscal year would be the biggest driver of the comp.

And then what we mentioned in our prepared remark as well, the corn impact of the late planning, I mean the conditions that didn’t allow planning at the end of Q3 last year and impacted us fairly significantly in Q4 is also a fairly significant driver that maybe, Vincent, you didn’t point out. And on top of that as you just mentioned, I mean obviously the increasing OpEx is going to play a role there.

Vincent Andrews - Morgan Stanley

I see. So you expect corn and soy seeds and traits gross profit to increase in Q3 or to be flat or down?

Pierre Courduroux

So we'll see exactly how it plays out, but I would expect a flattish type of number.

Vincent Andrews - Morgan Stanley

Okay. Thank you very much.

Bryan Hurley

Okay.

Operator

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

Don Carson - Susquehanna Financial

Hugh, this is one of the few times you've actually reported the quarter after the planting intention surveys come out. And I know obviously whether and price moments will drive planting. But just wondering how you see the overall outlook because while corn is down and you cite that as a reason for some of your cost in Q3, got a big increase in soy in the U.S., increase in cotton. So how do you see the overall demand outlook playing out in the U.S. planting season versus last year?

Hugh Grant

Yeah. I mean, so the -- I think the number that was published yesterday was 91, and third quarter was 92. I think that would be in line with our expectations, Don. It's interesting you look at year ago, and the question was why can't it be 100? So I think 92 this year is I think is within the boundaries of realism.

Yesterday cotton finished the day north to $5, so $5 environment and 92-ish million acres of corn I think is a reasonable plan and assumptions going into the year. Beans looks strong and we've seen great performance in our bean franchise, not just in North America, but as Brett mentioned, in Brazil as well. But I think to answer your question; I think this within the expected norms.

Don Carson - Susquehanna Financial

Let me rephrase the question then. With overall acreage of your three core crops up 2 million year-over-year, presumably some market share gains with your strong performance in corn and soy last year, would you expect your domestic volumes to be up this planting season versus last year?

Brett D. Begemann

Don, this is Brett. If you look at the -- excuse me -- the total acreage in the core crops, corn kind of where we expected. Soybeans may be a tad higher that what we were anticipating.

Don Carson - Susquehanna Financial

Right.

Brett D. Begemann

And the cotton acres pretty close to what we have been anticipating for the cotton acres. So there's still room for that to happen across the mix of all those crops. But recognize that while we're extremely well-positioned in all three crops and the tradeoffs don't bother us near as much as they do others that participate in this space, the value creation per acre is slightly different across those three different crops.

So I feel really good about our second quarter playing out really strong regardless of how those acreages end up getting planted across the crops. But it's the extra acres that we're seeing are coming -- if they come, are going to come from the soybeans as it's projected today, which would be the lower value of the those three crops. But I feel like we're in a really good position going into second half.

Keep in mind that when you look at our corn business, we're looking at it globally, and the clear global corn acres are down for the first half and anticipated also in the second half. So I think the mix were still in a good place.

Don Carson - Susquehanna Financial

Thank you.

Hugh Grant

But Don, just to your rephrased question, I think on volume it's early days, but based on our performance and our order books, we would anticipate volume will be up.

Don Carson - Susquehanna Financial

Okay. Thank you.

Hugh Grant

Thanks.

Operator

Our next question is from the line of Chris Parkinson with Credit Suisse Group. Please proceed with your question.

Chris S. Parkinson - Credit Suisse Group

Perfect. Thank you. You flagged $0.15 to $0.20 of agricultural headwinds concerning some FX and lower corn acreage. Can you parse out some of this for us little bit further, and just flag the largest headwinds, potentially on your FX assumptions for the concerned geographies? And then also, what your expectations will be for these currencies for the balance of the year? What's inherently embedded in your guidance? Thank you.

Pierre Courduroux

So, definitely those headwinds are embedded in the guidance. I mean that’s one of the points we wanted to make. And when you're looking at the $0.15 to $0.20 we've been quoting, this is for the full year.

So just to make things clear there, most of that is related to headwinds -- to currencies, sorry. And as far as currency, the biggest factors there will be South America. I mean we've seen that in the first half of the year, South America, I mean specially Argentina, but also Brazil have been the key points in the currency headwinds we've been looking at.

Chris S. Parkinson - Credit Suisse Group

Can you give any color on this, specifically what you're looking at for both Brazil and Argentina? And also are you embedding anything for Eastern Europe as well?

Pierre Courduroux

So, Brazil and Argentina, as I said, are the major drivers. And out of the two, Argentina will be the largest one. I mean the currency depreciated by almost 25% during Q2, so that's been a major event.

So Brazil and Argentina will be the biggest drivers. But we've also some headwinds around the world, because actually what we've seen in the second quarter, as you know, is that the dollar has been actually really strong against emerging market currencies and some emerging market currencies also in Eastern Europe has been affected. This is how we come to that $0.15 to $0.20 downsize for the year versus our original thinking.

Chris S. Parkinson - Credit Suisse Group

Perfect. Thank you.

Operator

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

Robert Koort - Goldman Sachs

Thank you. Good morning.

Hugh Grant

Good morning.

Robert Koort - Goldman Sachs

Was wondering if I could ask Hugh about the U.S. corn market and how the mix of your product has shifted? Specifically I'm curious on what kind of penetration or percentage rights you're getting in SmartStax and then across your products in a Refuge-in-a-Bag format?

Hugh Grant

Bob thanks for the question. We continue to see -- based on the order books we continue to see really nice growth on SmartStax and the RIB product, so they really become flagship products. And as you look at some of the talk across resistance and you see growers reaching more and more for the SmartStax products, and its from the early days we've really build out the varieties, so we got our best germplasm and best varieties represented in SmartStax.

Robert Koort - Goldman Sachs

And if I might ask, you've provided a nice historic trend on the Roundup Ready 2 in the launch year in a few years out, is there any reason we shouldn't expect you could quadruple or better your Intacta year two sales. I know you'd spoke to many more varieties being available.

Hugh Grant

Yeah. We've never quantified in that way, but what I will say, Bob, is that the ramp on Intacta will be faster than any of our previous ramps in soybeans. And that's for two or three reasons; one, really big growers in Brazil; two, pent-up demand; and three, the extraordinary performance versus insects. So I think it's going to go really fast. There's every chance we'll sell out seeds again in the next year.

Robert Koort - Goldman Sachs

Great. Thank you.

Hugh Grant

Thank you.

Operator

Our next question is from Michael Piken of Cleveland Research. Please proceed with your question.

Michael Piken - Cleveland Research

Yeah. Good morning. I just wanted to delve a little bit deeper into your precision Ag platform, and I know it's not really going to be a near-term growth driver, but if you could give us some sort of color in terms of how you plan to grow that business and any maybe sort of updates in terms of how you're thinking about pricing it specifically if you bundle, let's say, some of the FieldScripts products with some of the Climate Corp. products. Thanks.

Hugh Grant

Yeah. I'll maybe -- I'll ask Brett to say a little bit on pricing. And I would think -- I'd think of this going forward as this is an integrating platform that brings a range of trade partners together and brings a range of technologies and applications together.

This year we've really focused on good grower experiences. This is a little bit like a groundbreaker year for us, and Brett said that we are on 20 million plus acres with Climate Basic, and we are on hundreds of thousands of acres with Climate Pro, which is the paying version of this technology. But Brett maybe -- so we're really pleased with the starting year, I think it's going really well, but maybe a little help -- word, Brett, on how you see it playing out.

Brett D. Begemann

Yeah, thanks. I look at it as the 20 million plus acres of Climate Basic as a really strong indicator that farmers are really, really interested in this space, and looking for someone to help them improve decision making with better science. Granted there's no charge for Climate Basic, but to get on the system you have to go online and enter your information to be a part of that. So interest is high.

Second piece of that is as we've stated that the early days of the purchase of Climate; we're seeing the power of being able to bring together their competencies around weather and hyper Doppler radar, etcetera, with the power we have of our own genomics engines and breeding systems here to create better recommendations going into the marketplace.

And I think that's what you start to see that come together in the FieldScripts products that we put into the marketplace that are paid acres, and then as well the Climate Pro acres that are also paid acres. And there is synergistic effect.

I mean if I was to suggest to a grower the optimum process is to be utilizing the FieldScripts engine to make a choice on genetics, based on field history, etcetera, as well as Climate Pro to help the farmer make the very best decisions on how to grow that crop throughout the year. So they definitely play off of each other, and that's why we talk about them as a family of products. And for the farmer that wants to optimize as far as he can go, it's using that suite of products all the way across the portfolio.

That being said, each one of the individual products will be able to be bought separately. They won't have to be integrated. So the farmer will have significant choice. But as we see it, there will be -- there always be the basic products out there just to help the farmer collect information and knowledge, but then the paid acres is where we'll be focused. And this year we'll have a really good testing in the field with the Climate Pro as well as the IFS acres to take a look at.

Bryan Hurley

Rob, I think we can go onto the next question.

Operator

The next question is from the line of Michael Cox of Piper Jaffray. Please proceed with your question.

Michael Cox - Piper Jaffray

Good morning, guys. Thanks for taking my question. On Intacta I was wondering if you could comment whether you plan to renew or re-up the rebate or the discounts that you offered this past season. And then secondarily on Intacta, any potential risk or issue to getting farmers in Brazil to pay for the technology?

Hugh Grant

So thanks for the two questions. I'll let Brett talk about rebates and discounts. My experience -- my experience this year that the grower feedback has been phenomenal, yields have been very, very strong from what we've -- we're halfway through capturing yield.

The first half looks really strong and I think given our performance and grower feedback, I'm optimistic in our ability to capture that premium performance and growers so far have been very encouraging and have stepped up in terms of paying for that premium. So I don't have any worries there. Then the other piece Brett on discounting.

Brett Begemann

Yeah. On the discounting, let's to be really clear on that, the discounting was associated with giving up on the Roundup Ready 1 lawsuits etcetera. So farmers that haven’t done that yet, will still have the opportunity to sign up for that and receive that discount on Intacta to make that happen and we'll continue that next year.

But that's where the discounting was -- but on the getting paid, nothing better than having a great product performance year to show the farmer the value is really there and it changes that conversation quickly.

Michael Cox - Piper Jaffray

Yeah. Okay. And if I could ask one quick question on IFS, you've offered some money back guarantee offering to spur adoption. I was wondering if you could just comment on the success of those types of offerings and how they contributed to the receptivity.

Brett D. Begemann

Yeah. The money-back guarantee is on Climate Pro. So the farmer can buy Climate Pro this year with a money back guarantee in the fall. And it's exactly what you said. We want to encourage as many farmers as possible to sign up for Climate Pro and try the tools.

This is something really different. It's really new. And the best way to show a farmer the value is have them use the product, not unlike some of our early trait products that were new and different, same kind of thing.

Michael Cox - Piper Jaffray

Thanks a lot.

Operator

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

David Begleiter - Deutsche Bank

All right. Thank you. You -- just on U.S. market share looks like in corn given lower acres and your forecasted higher volumes, you can grow share maybe by 1%. But in soybeans given the higher acreage, can you still grow share in soybeans you think this year?

Hugh Grant

So I -- call me traditional, but I would kind of like to get a crop planted before we start talking about -- we always start talking about shares. So we're feeling good with the product performance both in our corn business and in beans.

And as Brett made the point earlier, the bean story is north and southern hemisphere. And I think there's opportunities for share growth in both, but before getting too granular, I'd like to get the spring down and get some crop in the ground.

David Begleiter - Deutsche Bank

And can you just remind us of the trade-off between corn and bean acres. It used to be about $0.02 to $0.03 for every million acres. Is that still the good rule of thumb?

Hugh Grant

Yes. A good rule of thumb; that would be about right.

David Begleiter - Deutsche Bank

Thank you.

Hugh Grant

Thanks very much.

Operator

Our next question is from the line of P.J. Juvekar with Citigroup. Please proceed with your question.

P.J. Juvekar - Citigroup

Yes, hi. Good morning. In Seeds and Genomics, your gross margins were up 230 basis points, roughly. How much of the benefit gained from lower seed costs, which I know was going to be a benefit in 2014? And then we know the DuPont royalties was also a benefit. But can you specifically talk about lower seed costs?

Pierre Courduroux

So the lower seed cost P.J. mostly impacts our corn business. And at this point in time, I mean would be a slightly lower than the two points we are shooting for the full season. We will see the second part of that benefit from COGS in Q3 and Q4 as we mentioned. So we are still shooting for the three points total of which two coming from COGS when you looking at the corn business.

P.J. Juvekar - Citigroup

Thank you. And Brett, did you say you expect glyphosate gross profit to be flat in 2014 versus 2013? I think that was your previous prediction. Are you sticking to that?

Brett D. Begemann

Yeah. I think P.J. what we've been saying is we expected glyphosate gross profit to be steady to stronger and today I pointed to the stronger end of that. And that's kind of how we see it finishing for the year.

P.J. Juvekar - Citigroup

And do you sort of care to quantify that. Thank you.

Brett D. Begemann

Quatify what's stronger?

P.J. Juvekar - Citigroup

Yeah.

Bryan Hurley

If you -- this is Bryan Hurley. If you kind of look at quantifying that from a relative perspective, you obviously saw a big step up in glyphosate last year -- in the Ag productivity segment last year. You'd expect some degree of step-up, but nothing on the magnitude of what you saw last year.

P.J. Juvekar - Citigroup

Thank you.

Bryan Hurley

With that, I think we're probably ready for our next question.

Operator

Yes. The next question is from the line of Mark Gulley of BGC Financial. Please proceed with your question.

Mark Gulley - BGC Financial

Hey. good morning.

Hugh Grant

Good morning.

Mark Gulley - BGC Financial

I wanted to ask you guys to elaborate a little bit on insect pressure in South America. Of course you alluded to the soy insect pressure, but then you talked a little bit about corn. Can you elaborate on how that might affect adoption of insect traits in both Argentina and Brazil?

Hugh Grant

Yeah. I think what you see in south America is already to this point in corn insect traits have been adopted at a very fast rate. And you see that with the transition we're going through now to Triple Pro in Argentina and to the second generation in Brazil.

You have a longer growing season. You have more above ground pest. So you have a lot more insect pressure across South America than we experienced in North America. And that drives the desire from the farmer standpoint to have more insect control in the field for the longer season.

Mark Gulley - BGC Financial

And I think this year and certainly beans, it was particularly high.

Hugh Grant

It was high in beans this year and a new pest showing up in Brazil, another caterpillar pest that hasn’t been that prevalent before and it's showing up lot stronger.

Mark Gulley - BGC Financial

And secondly is my follow-up financial question. Congratulations on the 2% share count shrinkage on the diluted line year over year in the second quarter. Can you give us an idea, or update us perhaps, on your share repurchase goals in the second half of this year and perhaps even looking ahead to next year?

Pierre Courduroux

So we've not been specific about the magnitude and the details of our plans but what we said is that this year we will be returning more to our share owners than our free cash. And we indicated when we made the Climate Corporate acquisition that I mean we were taking the opportunity of borrowing about $1 billion to finance this acquisition to free up some money available for share buyback.

So we are very active. I think, we've been very active over the last couple of quarters. And as you mentioned, we've been able to reduce our share counts. And that's a goal. I mean we'll try to be very thoughtful about how we do that, but that's definitely a goal of ours.

Mark Gulley - BGC Financial

Thank you.

Pierre Courduroux

Thanks very much.

Operator

Our next question is from the line of Jeff Zekauskas with JPMorgan. Please proceed with your question.

Jeff Zekauskas - JPMorgan

Hi. good morning.

Hugh Grant

Good morning.

Jeff Zekauskas - JPMorgan

A quarter ago, you were conservative about glyphosate prices. You thought that Chinese prices had come down and maybe that would affect the North America market. Has that proven to be the case? That is, have your glyphosate prices changed at all sequentially? And do you expect it to change at all for this fiscal year?

Hugh Grant

Yeah. I'll ask Brett say a few words on that. I think Jeff, the way I'd characterize it is it's within the bounds of what we forecasted and anticipated this year. And I think if you (indiscernible) in the glyphosate piece, then you run the4 risk of losing the -- losing sight of the seeds and trait growth.

And the thing I'm particularly pleased on this year, first half behind us looking at the second half is we demonstrated margin less than we demonstrate nice growth in our seeds and traits. But Brett, maybe a word on how the season is shaping out and the visibility around that.

Brett D. Begemann

Yeah. If you go back to last quarter, Chinese prices were fluctuating downward. And that's why we pointed a little bit to the caution. I mentioned that we really don't focus on Chinese prices. We focus on generic prices in the marketplace, and which never did materialize at a lower level based on the Chinese price state.

They held we held therefore, as I look at it today, you can see four, five months out in advance of where we are I expect flattish prices for the rest of the year, which to Hugh's point is right in the range of what we were expecting. And that's what puts us to the stronger end of flat to stronger GP from glyphosate.

Jeff Zekauskas - JPMorgan

Have you sold about 60% of all the glyphosate you intend to sell this year in the first two quarters?

Brett D. Begemann

We don't break out the specific volume by quarter, but the…

Jeff Zekauskas - JPMorgan

How about by half?

Brett D. Begemann

I would tell you at this point that I see no material change in the shipping or buying pattern of Roundup across the year. So we're -- there's nothing different than what we have historically experienced.

Jeff Zekauskas - JPMorgan

Okay. Thank you very much.

Brett D. Begemann

No. Thank you.

Operator

Our next question is from the line of Mark Connelly with CLSA. Please proceed with your question.

Mark W. Connelly - CLSA

Thank you. Hugh, I wonder if we could talk a little bit about farmers' attitudes. In New York, the view seems to be that farmers are all incredibly bearish about the outlook, that they think corn prices are headed to zero and they are not willing to pay anything in the U.S. for corn and seed.

On the other hand, you mentioned that corn futures have hit $5. So I'm wondering how do you think farmers are actually looking at this -- at the outlook here? Are they really as bearish as people make them out to be?

Hugh Grant

Yeah. Thanks for the question. You know the old story is never as bad as it seems, it's never as good as they tell you. I think we never took $8 corn very, very seriously. And I think this doom and gloom you have to be cautious, you have to predicate that with caution, but I think there is still a tremendous opportunity out there.

I think farmers are being more careful and rightfully. So they are taking a little bit longer this year. The season is probably going to run a little bit late. Our attitude here is we are trying to look through any given season, take the longer view, we've been careful and our pricing, we've rebuild our reputation in that grower community. And I think as we mentioned this morning, we feel good about the season at hand and we're getting good encouragement from our grower customers.

So I'm – maybe I'm the optimistic scores man, but I think there's more opportunity there and I think we are seeing the reward and the order book and how farmers are looking. But I think it's -- we mentioned at the start, acres are a little bit softer and $5 corn is still pretty good, but it's something to watch. So Mark, I would say, we are cautiously optimistic.

Mark W. Connelly - CLSA

And what about Brazil then? Certainly the real is not helping. And as I look at your slide 13, I wonder whether weaker yields in Brazil are making this 4 bushel an acre as good a test as you would have wanted. Is next year going to be a better comparison for Intacta if the weather is more normal?

Hugh Grant

No. I think this was a great test this year. So A, it was across a wide user-ship. B, we had intense insect pressure. And C, bean prices are pretty strong. So I would say that this was a really, really great test for the technology this year.

Mark W. Connelly - CLSA

Super. Thank you.

Operator

Our next question is from Kevin McCarthy with Bank of America. Please proceed with your question.

Kevin W. McCarthy - Bank of America Merrill Lynch

Yes, good morning. Two-part question on Intacta. First, would you expect to launch in Argentina and other South American countries outside of Brazil next year?

And then second part, I believe you have second-generation insect protected beans in Phase IV. What are the chances that could come to market next year or might it require more patience?

Hugh Grant

Yes. So, Brett, launch next year in Argentina?

Brett D. Begemann

So, we have -- as we have mentioned before, there's a few trial acres in the northern part of Argentina this year. And we've said that they are about a year behind Brazil, so we would intend to be commercial in parts of Argentina next year.

There will also be some varieties that we will be marketing in Paraguay and Uruguay. So, next year really puts us fully into the South American market. As we look at the second-generation of Intacta, it's not quite that close to the marketplace.

We'd be looking to the latter end of the decade before we would have the second-generation out there. We're super excited about it. It's fantastic that we already got it in the portfolio as we're launching the first product, but it will be towards the latter part of the decade.

Kevin W. McCarthy - Bank of America Merrill Lynch

As a brief follow-up on Ukraine, Brett, I think you mentioned some degree of disruption there. It didn't sound terribly significant. But in your scenario analysis and planning, can you speak to direct effects and possibly indirect benefits if tensions were to intensify in that country?

Brett D. Begemann

Yeah. It's difficult to speculate on what could happen over there, because it can change overnight. But I would tell you that there is -- the two breakouts I'd make for you is. There is the larger farming operations that are over there that are well capitalized and feel good about their business.

Then you have the smaller farmers in the country that rely more on credit from retailers, et cetera. The smaller ones are impacted more than the large ones. If the disruption was to intensify, I would expect the disruption to intensify more for the smaller ones than the large ones, which gives us the cautious optimism that we can work our way through this for the year. I'd never suggest there's no impact. It's just a manageable impact as we go through the year.

Kevin W. McCarthy - Bank of America Merrill Lynch

Fair enough. Thanks a lot.

Operator

Our next question is from the line of Frank Mitsch of Wells Fargo Advisors. Please go with your question.

Frank Mitsch - Wells Fargo Securities, LLC

Good morning, gentlemen.

Hugh Grant

Good morning.

Frank Mitsch - Wells Fargo Securities, LLC

Hey, on your soybean business, obviously you had record profits, year over year up $140 million plus on the gross profit line. And I think you attributed it to three major categories; Intacta launch, the royalties, and general gains in the U.S. How would you apportion roughly that year-over-year increase among those three major buckets?

Pierre Courduroux

So, we've not quantified it in detail. I mean we've given some indication. I think the key points are -- I mean we're online with -- we were on track with what we said we would be doing. So, Intacta we have been able to launch on the 3 million acres we've been talking about. The DuPont royalty I think you can get pretty easily to the number there.

And maybe the part that most people have been missing is actually really the very strong performance of our U.S. business, our Roundup Ready 2 Yield business in the U.S., which would be very consistent actually with some of the acreage shift we've been talking about.

So, it wouldn't be exactly a third, a third, a third, but the three are significant impacts into the performance of our soybeans business. And what you can see is definitely plays out a big role in the GP, but also the margin expansion.

Hugh Grant

And Frank if you look how -- if you look at the next two or three years, what we're just on the very front end of very significant, very fast growth in Intacta. So, you're right it's a three-legged stool this year, but as you go out over the next 24 to 36 months, then Intacta becomes a major driver in the soybean franchise.

Frank Mitsch - Wells Fargo Securities, LLC

All right, terrific. And then you'd anticipate, with the gains in RR2Y in the U.S., that Q3 is shaping up nicely there as well in soybeans?

Pierre Courduroux

So, once again, it will all depend on the planning and the shift in the final acres, but -- I mean we think we're extremely well-positioned in terms of sellouts regarding our soybeans business, absolutely.

Brett Begemann

Yeah. You will see really the second big increment of all of those factors that you mentioned show in the fourth quarter for soybeans. You'll have that second DuPont royalty and you'll actually start seeing Intacta sales for the next season showing up in the fourth quarter as well.

With that, we probably have recognized that we're running just a bit long on time. Why don't we take two more questions and then Mr. Grant will wrap things up?

Operator

And our next question is from the line of John Roberts of UBS. Please go ahead with your question.

John Roberts - UBS

Can you hear me?

Hugh Grant

Yeah, we can hear you John.

John Roberts - UBS

Hugh, of the 9 billion in additional corn required over the next cycle here, how much would you say is going to be international? How much would be U.S.? And would you hazard a guess of the split from Monsanto?

Hugh Grant

I missed the start of your question, John. The nine --?

John Roberts - UBS

9 billion bushels of additional corn demand.

Hugh Grant

I'm sorry, I got you. The split, it's nearer about 6 billion. I'm looking around the table here.

John Roberts - UBS

Slide six with the 9 billion bushels of growth in demand for corn.

Hugh Grant

I think we would say somewhere between 6 billion to 9 billion. Is that right?

Pierre Courduroux

Yeah.

John Roberts - UBS

And then how much would be -- would you guess is going to be North American yield growth and how much would be international growth, both yield and acres I guess?

Brett Begemann

I think the way you look at it is the vast majority of the growth coming out of North America to meet that 9 billion bushel demand is going to have to be intensification on the acres that are already there. As we have the acre discussion every year, is it 95 million, is it 91 million, who knows? It's mostly intensification.

We have the opportunity to expand a little bit more in Eastern Europe and possibly Brazil with acres, but the vast majority, as we look at the next 10 years, is going to have to come from intensification because we're also getting demand pressure on soybeans and other crops. So, we can't keep trading off the acres and still meet it.

And a lot of what has happened in the previous 10 years is wheat acres becoming corn acres because a farmer can be more profitable and you run out of that at some point. There's still some in Canada. There's still some in northern Eastern Europe, but we're running out of those.

So, we're going to have to see the intensification, sustainable intensification on the acres that were already growing corn. So, most of it will come around the world, every acre is going to have to contribute.

Hugh Grant

So, John the consensus here is 30% to 40% of that growth comes from North America.

John Roberts - UBS

Okay.

Hugh Grant

But to Brett's point, the last 10 years we've seen a huge piece of that growth come from brand new acres. The next 10 years our guess is the lion's share of this comes through intensification and that was my point on sustainable intensification is how you make those acres work harder.

John Roberts - UBS

And 60% to 70% would come from ex-U.S.?

Hugh Grant

That's correct.

John Roberts - UBS

Would it be a higher increment from Monsanto?

Hugh Grant

Well, the yields -- they've got further to go because the yields drag behind the U.S. today. So, there's a greater opportunity in total production there because if you look at Brazil, India, Eastern Europe today those acres are less productive than North American acres.

John Roberts - UBS

I'll take it offline. Thank you.

Operator

Our next question is from Tim Tiberio of Miller Tabak. Please proceed with your question.

Tim Tiberio - Miller, Tabak + Co., LLC

Good morning, thanks for taking my time. I guess just following up the last question. We've seen some reports out of India that indicates they may be softening their stance towards GMO seeds for food crops.

Are you becoming more confident in that market than where we were over the last two years? Or do you think it's still too premature to really start thinking about this as part of the component of the incremental volumes or yield gains that we will need to see?

Hugh Grant

Yeah, I think it's maybe a little premature. I mean they made an early move and a very significant move in cotton, but they haven't done a lot since then. There's a real opportunity there. And if you look at India and protein consumption in India, rice acres are decreasing, water is becoming scarce, and corn -- particularly corn growth for poultry feed has increased significantly. So, I think there's a real opportunity there going forward, but I think probably premature to guess on it today.

Tim Tiberio - Miller, Tabak + Co., LLC

Okay. So you don't put a lot of weight that the BGP, if they get into power, may soften that stance? It seemed like some of the recent court rulings are at least green-lighting some of the initial field drills.

Hugh Grant

Some of the signs are encouraging, but I think it's a dangerous game when you start trying to second guess regulatory bodies. I think there's a need -- there's a lot of grower experience and there's a real opportunity, but the encouraging piece is the continued rise in protein demand. And it kind of ties to John Roberts' question, this is going to come through intensification of producing more bushels on an acre, but when that occurs I wouldn't like to speculate.

I'm just very conscious of your time, so I'll maybe transition. Thank you for your patience. I apologize for the 10 minutes we're over. And I'd just wrap up the call this morning by thanking you for joining us at this juncture.

Q2, as I mentioned at the beginning, we still have the North American and European seasons, West and East to play out. There's a couple of critical proof points that I think are punctuated by our performance that we discussed this morning.

I'm very encouraged because we've been able to demonstrate solid growth in our seeds and traits against a backdrop of a tougher ag environment than we've seen probably over the past few years.

With that we're on track to deliver the growth that we anticipated for the full year, even given a more variable external atmosphere. And with what we accomplish in 2014, I think we set up an important runway that allows us to grow now while we simultaneously position ourselves for an important longer-term environment as well. So, nice growth in our core and in our new platforms.

So, we're focused on delivering that opportunity and we look forward to continuing to share that with you and update you on our progress. So thanks, again, for joining us this morning.

Operator

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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