Greetings and welcome to the First Quarter 2012 Monsanto Company Earnings Conference Call and R&D Pipeline Update. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Bryan Hurley, Investor Relations lead for Monsanto Company. Thank you, sir. You may begin.
Thank you, Dan, and good morning to everyone on the line. Thanks for joining Monsanto's First Quarter Earnings Call. I'm joined this morning by Hugh Grant, our Chairman and CEO; Pierre Courduroux; our CFO; as well as Robb Fraley, our Chief Technology Officer. Also joining me are Manny Cruz and Bryan Corkal, my colleagues in Investor Relations.
This call is being webcast and you can access the webcast and supporting slides at monsanto.com. The replay will also be available at that address. We're providing you today with EPS measures, both on a GAAP basis 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 posted to our website.
This call will include statements concerning future events and financial risks. 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 statement. 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.
Today's an extended conference call that features the annual review of our R&D pipeline results with Robb. Before we cover that, Pierre will walk you through the quarterly financial results and our guidance outlook. Then, Hugh will cover the strategic checkpoint, including the U.S. order outlook.
So with that, let me hand the time over to Pierre to start us with the financial review.
Thanks, Bryan, and good morning to everybody on the line. The first quarter results we reported today reflect better-than-expected performance from our Latin American business. They also reflect some timing benefits from our Australian cotton business and some early positives from the U.S. These results were even better than our revised quarterly guidance of a month ago. With these strong results in hand and an additional month of data on our business outlook, it gives me the confidence to point to the upper end of our original EPS range for the full year, even at this early point in the season.
Before we go into the details of the financial results, let me place the first quarter in a more precise perspective. First, we are, of course, very pleased with our first quarter results, as they confirm our emerging opportunity from Latin America, especially in corn. Compared with last year, we grew ongoing EPS by $0.20 this quarter. This is strong growth at this early point, and it is consistent with our plan that considers delivering 60% of our full year gross profit growth from our international business.
But with less than 10% of our expected total full year earnings, the first quarter is still a small quarter. I personally believe in a proven approach to updating guidance, making sure the projections we communicate are backed by solid data points in the business. Today, with the strong results we've seen through December and the positive outlook coming out of our U.S. order book, we have greater clarity that gives us the confidence to take our full year EPS guidance to the upper half of the previous range. But with the U.S. season still ahead of us, and the reality that there's volatility in the broader economic environment, we will not get ahead of the business. Against that backdrop, I feel good about translating the early strengths in our business to full year performance.
Let me now move from that overview to the specifics of our financial results on Slide 4. Ongoing earnings per share was $0.23, which was ahead of our quarterly guidance, but in line with our expectation for a more significant first quarter. That compares with ongoing EPS of $0.03 in the first quarter of last year. As expected, the most important driver is the growth in the Seeds and Genomics. Sales and gross profit both increased more than 30%. And there's really 2 key factors driving that change. One is the core business driver and the other as an element of timing.
The first and biggest business driver is Latin America. The Seed business delivered at the high end of our expectations and you can see this in our Corn Seed and Traits numbers where quarterly gross profit was up almost 60% relative to last year. This growth was driven by the mixed benefit that came from significant trade expansion and by volume growth in both Brazil and Argentina. And that year-over-year gain flows very nicely through to the margins, where the Corn Seeds and Traits gross profit as a percent of sales came in at almost 60% compared with 55% in the prior year.
The second factor of growth revolves around cotton, where we saw a quarterly uptick in gross profit from our Australian business. As last year, the total planted acreage in the high-value cotton market in Australia stands at historical highs as the acres have rebounded following several years of drought. And in addition to the business performance, roughly $0.04 in cotton EPS reflect a pure timing shift in this business.
In Australia, growers have the option of either buying the technology upfront or following harvest based on yield. This year, more farmers chose to buy upfront rather than after harvest, and this shifts those $0.04 from the fourth quarter of 2012 into this first quarter.
For the other crops, Q1 is a small quarter. In soybeans, we saw some gross profit contribution as the final royalties came through the point of delivery system in Brazil. But we also saw the vegetable gross profit decline in the quarter due to some softness in the higher value vegetable market in Europe, as well as some timing shift in the Americas.
On the Ag Productivity side of the business and albeit in a small quarter, gross profit is up about 24% compared with last year. This reflects continued solid performance across that segment and it keeps us right on pace to achieve the approximately $800 million target in total gross profit from Ag Productivity for the full year.
Below-the-line operating expenses for the quarter are also tracking with our full year guidance expectations. SG&A in the quarter was $500 million. This is higher than last year and reflects in part the Latin American business growth in the quarter as a portion of our SG&A expense comes from related commissions.
On the R&D line, our expenses were $351 million, which is somewhat higher than last year as we increased on spending for more projects. But this keeps us within our projection for our full year R&D spend.
The strength of the first quarter also shows up through our free cash results. Quarterly free cash flow was $856 million compared with $500 million last year. The increase reflects growth in net income, as well as an increase in the prepays in front of the U.S. season, which are ahead of last year's pace. Importantly, these prepays are a good early indicator of U.S. purchase patterns and are a positive indicator that supports the momentum in the order book that Hugh will cover. And you can actually see a reflection of those strong prepays in the year-over-year increase in deferred revenues on the cash flow statement.
Now on Slide 5, we roll out the complete guidance elements for the fiscal year. As we translate the strong Q1 performance into the full year, we move up the low end of our guidance and are on track to achieve the upper end of our original guidance or $3.39 to $3.44 of ongoing EPS, and it also tracks with our overall free cash target of $1.3 billion to $1.5 billion.
If you now go to Slide 6, here is how I see the earnings cycle for the remainder of the year. As I mentioned, roughly half of our expected EPS growth for the full year is reflected in this first quarter. Given the Latin American contribution, that's right in line with our expectation that roughly 60% of our GP growth in 2012 will come from our international business. We expect the remainder of the growth to be spread among the second and third quarters, as we expect growth in our U.S. business as well. We expect growth over last year in both of these quarters, but not on the same order of magnitude as we saw in the first quarter with the significant Latin American contributions.
In terms of drivers, we expect the momentum in the corn business will continue to drive our overall Seeds and Traits performance. Specifically, we expect continued strong growth in our corn platform in the U.S. for the second and third quarters. We anticipate less contribution to the overall growth from cotton and soybeans, as we are not planning for the same level of acres in favorable conditions as we saw in 2011. Reflecting the trend we saw in Q1, we also expect relatively limited growth from our vegetable business for the full year.
Finally, we expect the fourth quarter to still be a loss, but with the emergence of the Latin American business, we should see an increasing contribution from Seeds and Genomics over time. But for 2012, the shift of the fourth quarter cotton revenue from Australia into the first quarter means that a portion of that Seeds and Genomics opportunity has already been reflected. And with that shift, we don't see a significant change in the quarterly loss in 2012 relative to last year.
So as I wrap up, I will leave you with 2 key thoughts for how we carry the first quarter into our full year. It's still very early, but the first quarter is a strong start. We've seen growth come from the areas we expected and that positions us right where we need to be at this point in the year to realize the upper half of our full year EPS expectations. And within that, we have seen the contribution from a more balanced international business and that is important as it speaks to the flexibility in managing our business and the clarity we have in delivering on our mid-teens earnings growth objectives this year.
With that background of the quarter, let me hand the time over to Hugh.
Thanks very much, Pierre. And let me also wish everybody on the line the very best in the coming new year. The first quarter was a strong quarter. As the first checkpoint, the early strength validates both the business momentum behind our confidence in our 2012 growth and the drivers that create our opportunity beyond this year.
At this point, 3 things strike me. First, our pipeline progress continues to move ahead and be a competitive differentiator, and that's even more important as we put an even greater focus on delivering yields to our growers. Second, to add emphasis to a point that Pierre's already made, the growth in Latin America isn't just an important financial contributor. It's an increasingly important strategic growth driver. With the proof points in hand, we can confidently see the game-changing effect that the Latin American opportunity can have in driving growth over the midterm horizon. And third, our early orders in the U.S. underscore that the momentum that we started to rebuild in 2011 is carrying into 2012. At this time a year ago, the order book check was the early validation that we could successfully reset our U.S. product and pricing strategy. Today, I see the early orders as the indicator that our momentum is strong and our platform opportunities are real.
These all underscore the confidence that shows as we point to the upper half of our EPS guidance range today. They also reinforce the point that we made at our Investor Day in November that the key to our strategy is delivering yield to our farmer customers. We believe that we're the best positioned in that ability. And for when we are able to deliver yield, there's real value that shows up in our growth.
One of the biggest proof points of that is the emergence of the corn opportunity in Latin America. You see this most acutely in Brazil, which is highlighted in Slide 7. And just the fourth year since initial approval, the trait penetration this season stands at more than 75%. You see this rapid adoption occurring simultaneously with upgrades to higher value traits. We're seeing a significant step-up in acres from first- to second-generation singles this year with even further upgrade opportunity as we move our offerings for our Double PRO over time. With each of these upgrades, there's significant new value for the farmer, and the value of the acre increases for us, driving our mixed benefit.
The same effect is true for Argentina on Slide 8. In Argentina, we're in upgrade mode, as farmers are beginning to choose to upgrade from their established doubles to the new Genuity VT Triple PRO, which is in its first year of widespread availability.
If you shift to the U.S., 2012 is a bit different than the past couple of years, as we're coming out of a harvest where our products really distinguished themselves across the board. From a strategy perspective, our ability to deliver that total package of yield is a critical factor in defining how our customers see us. And that in turn sets up the first look at how our performance translates into the order book.
So let me give you that data. As of December 31, the order pace for our U.S. portfolio is ahead of the same point in time last year and tracking well against our 2012 targets. Last year was a strong year for our U.S. business and we're tracking ahead of that pace this year. We're in a growth mode, so our targets revolve around 3 key variables. Unit volume growth, the germplasm upgrade and our trait mix. Against that, our total volume is ahead of last year's pace and our portfolio mix is tracking squarely with our planning assumptions.
As a metric, prepays are also strong and coming in earlier this year. As Pierre indicated, a good portion of the cash flow that we've seen in the quarter reflects these strong prepays, which is a good indicator that there's solid commitments behind the order book.
Additionally, in a year where the perception of tighter corn supply likely drove some early orders in the industry, the key cancellation deadlines for corn are now behind us, so we've got good clarity that the order uptick that we've seen reflects real growth. That current order mix validates our confidence that we’ll expand the penetration of our key product platforms in both corn and soybeans, and that's reflected on Slide 9. We’ve a strong response to the rollout and the ramp-up of our RIB Complete products for Genuity SmartStax and VT Double PRO this year. That's translated to orders and it’s tracking very well to achieve the 22 million to 24 million acres that we've targeted for our Reduced Refuge Corn Family this season.
Likewise, the order book also reflects strong demand for our products with rootworm traits. For a number of years now, farmers have seen the value of rootworm control first hand. That proven performance shows up in the orders, as we're squarely on track with our expectations for our flagship Triples and the key products in our Reduced Refuge Family. Likewise, with widely recognized performance of Roundup Ready 2 Yield soybeans in the marketplace, we're tracking very well towards our targeted range of 27 million to 30 million acres. That speaks to the third year momentum as farmers experience the performance of Roundup Ready 2 Yield in a much broader lineup varieties.
So the bottom line in all of this, is the order book is strong. That speaks to the opportunity that we see in the U.S. for growth of our key platforms, for volume growth and for sales that flow through our financial statements. It's still too early to declare victory, but we're clearly where we need to be at this point in the year.
So from that operational look, I want to wrap up with a word on one of the most strategic checkpoints at this time of the year and that's our R&D pipeline. We're bringing to bear more tools than ever and we're making the conscious effort to make sure that we highlight the complete toolkit, ranging from the leverage created by breeding to our unmatched biotech pipeline. We're the only company to have that total package today, and that positions us best to deliver yield to our grower customers.
So with that, let me give the floor to Dr. Fraley for the tour of our pipeline this year.
Robert T. Fraley
Thanks, Hugh, and good morning to everybody on the line. When I outlined our R&D strategy at our November Investor Day, I focused on 2 points. First, that the competitive advantage created by our R&D engine is expanding; and second, that our R&D differentiation comes because we're uniquely positioned today to drive total yield, with the convergence of the industry's most advanced technology platforms. And remember, farmers buy yield, and that's where we're focused and that's what matters to the bottom line as we deliver yield to customers.
The proof of that converging yield opportunity is in this year's pipeline update. In 2011, we saw significant progress and formal advancement in every one of our platforms. So if I begin on Slide 3 of our R&D Slide, the progress is clear. Number one, this is a record year for progress within our pipeline, with 14 total advancements or additions across our R&D platforms and 8 advancements specifically in the biotech pipeline. You will see significant annual progress balanced among all of our research areas and an R&D pipeline that's expanding.
Number two, you see that the same concept of balance within the platforms. On Slide 4, you see only the biotech advancements. And if you do the 2-year look, including our recent product launches, almost 2/3 of our biotech projects have advanced. The symmetry tells the story. There are advances in every major crop at every development phase and from both the agronomic and yield-and-stress project.
Number three, if you expand the view to look at the platforms by crop, you see the power of the integrated approach to delivering yield on Slides 5 and 6. This is the convergence we've talked about and it reflects an expanded pipeline built around yield that we'll focus on going forward. We're known for our early investment in biotech, but we never rested on that. And today, we're driving even greater progress across more platforms.
And finally, there's no better proof point of the value in R&D convergence than in the results from our breeding platform in 2011. From the U.S. data I first showed in November to the breakthroughs we're making in next-generation tools, our breeding advantage increasingly contributes to our commercial advantage.
So with that, I want to dive into the update, and I'll begin with yield-and-stress pipeline on Slide 7. Yield and stress is the next frontier that flips biotech from a tool to preserve yield to a tool that creates yield. And like any new frontier, it's complex, it will be a significant learning curve for everyone and it won't be as straightforward as with the agronomic traits. Because of that, the value of our collaboration with BASF is more important than ever. The complexity of the work demands scale, scale and the discovery to generate leads and massive scale in testing. So the combined capabilities of 2 of the world's preeminent R&D engines at BASF and at Monsanto give us the capability no one else can bring to bear on yield and stress.
As the projects advance, we're building the line of sight on how to deploy them commercially. Yield-and-stress traits fit our convergence point beautifully. We see every product coming out as a part of a system of traits, germplasm and key agronomic practices. Understanding how specific traits and germplasm work in combination is critical, so you're seeing us do an increased amount of testing in the field in Phases 2 and 3 to develop reliable yield data for these systems.
Let me start with drought-tolerant corn, this is on Slide 8, and it's a project that illustrates these points clearly. This is our most advanced yield-and-stress project in Phase 4. As you know, this product initially targets the portion of the Western Corn Belt where dry conditions are expected in most years and where drought can limit yield during the stress period. It's a relatively small market to begin with, but it will be the first drought system in the industry to have the combined tools of breeding, biotech and agronomic practices packaged for farmers.
And importantly, we've just crossed the key milestone. At the end of last month, we received deregulation of the drought trait from the USDA. That's the final regulatory clearance we needed within the U.S. It allows us to move to on-farm testing this planting season and to complete the stacking strategy with Double PRO and Triple PRO traits. From here, the next regulatory milestone before commercial consideration is the import country approvals for the complete traits stack. Those submissions have all been made and we expect to have them in hand during the 2013, 2014 time frame. In the meantime, we're able to move forward with significant on-farm testing in our new Ground Breakers program. We have several hundred farmers who will test this integrated drought system that includes some of our best drought genetics, the biotech trait package and related agronomic practices. This program is designed to give farmers early exposure on a field scale while generating data that will help us prepare for commercial launch of the drought system. So this is a good step for our system, as well as for building an even better approach to bringing these new technologies to farmers.
If I stay within corn, our first generation higher-yielding corn advances to Phase 3 on Slide 9. Over the past several years, we've been in early phase testing. And with the second year of field testing in the lead germplasm, we've seen consistent yield benefits, as shown in the photo on the slide. And as we move into expanded testing, we're evaluating different germplasm backgrounds in more environments to develop a comprehensive set of yield data. That data helps us identify the right combinations of trait and germplasm and that will help build out the ultimate package that we would take to farmers.
If we shift over to cotton, we have also advanced our drought-tolerant cotton project on Slide 10. This is particularly relevant because it shows the leverage we get on our technology across crop platforms. As we're developing stress tolerance traits, we've been able to apply our experience to other crops, so there's a multiplier effect.
In our early-stage testing, we've seen good results under drought conditions. And as we expand into broader varieties, we expect to hone in on the potential commercial leads that we'll take into development. This is still a relatively early-stage project, but it's encouraging to see the proliferation of these yield-and-stress traits across more than one crop platform.
If we shift into our agronomic pipeline, I want to focus on one of our most advanced projects, dicamba-tolerant soybeans in Phase 4 and shown on Slides 11 and 12, the biotech traits advanced phase’s last year. But here's another prime example of converging technology, as the complementary chemistry that drives the ultimate dicamba weed control system just advanced on an overall path to Phase 3. This will represent the industry's first biotech herbicide-tolerant stack in soybeans.
On the trait front, we have this lined up for our Ground Breakers program in 2013, making it the second of our key new U.S. product systems that we’ll take through that program. This is another project where we've worked in conjunction with BASF as we're collaborating on new formulations of dicamba. On Slide 12, we highlight the advancement of that over-the-top new chemistry. In early studies, we've seen a reduction in volatility in our improved dicamba formulations with Roundup. In addition, these dicamba formulations make a nice addition to our system relative to other herbicide-tolerant trait systems, as our testing clearly shows dicamba has activity against a broader spectrum of weeds and our field trials are showing some residual activity compared with other chemistries, providing extended weed control.
Dicamba also has the fewest total resistant weeds globally, so it's a system we believe will provide unmatched weed control for farmers. And it's truly a platform system. Across the Americas, the dicamba system has fit on more than a hundred million soybean acres, with an opportunity to step up weed control and create incremental value.
Within soybeans, we also advanced our second-generation insect-protected soybean on Slide 13. Because of our experience with agronomic traits and with some accelerated multi-season test, we've been able to accelerate this project, advancing into Phase 3 this year after it was moved into Phase 2 last year. This comes on the heels of the first generation Intacta product that has been rolled out for on-farm Ground Breaker testing this year ahead of the initial commercial launch in fiscal year 2013. This second-generation approach speaks to the upgrade opportunity.
In tropical places like Brazil, the insect infestation in soybean is particularly heavy. So the additional Bt genes we add to Intacta with this second-generation product are valuable because they will provide multiple modes of action, increasing product durability and providing the potential for refuge reduction. In addition, with an expanded spectrum of control, this second-generation product would also add protection from armyworm, another important insect pest in Brazil.
If I shift over to corn, our Corn Rootworm III project on Slide 14 reflects that similar concerted strategy around multimode product. This is a project that's important for a couple of very key reasons. Number one, it's the first agricultural application of cutting-edge RNA interference technologies or RNAi for short. With RNAi, we're able to target and control rootworms with a novel mode of action that’s outside of the class of Bt proteins that had been used in all other insect control products. In fact, RNAi offers a mode of action different from the Bt protein mechanism in our yield guard products, as well as HERCULEX rootworm, Agrisure rootworm or the recently announced Agrisure Duracade traits.
RNAi technology leverages our genomics investments, because we identified key DNA in sequences in insects, and this technology allows us to tap into the naturally occurring machinery in the bugs to design new ways to target and control specific insects. We're the first to move the application of this technology for insect control into advanced development. And in addition to this first trait, we also have the next round of RNAi actives in the pipeline demonstrating insect control. Just as importantly, we are continuing to look at broader product applications for RNAi and we're building a broader intellectual property portfolio and further R&D capability to explore it.
Rootworm III is also accelerating with the advancement into Phase 3. Our extensive regulatory experience and advanced product development capability will allow us to move this product aggressively through the remaining development cycle. As you compare this with our current portfolio, the performance is unprecedented.
On the chart on the slide, you can see the 3 light green bars, which have even better control than our dual mode-of-action SmartStax products. Given the headlines that there's been on rootworm control over the last few months, we see this pipeline product as a gold standard in rootworm control and durability that will be a real game changer.
If we shift over to cotton, we advanced 2 agronomic traits, but the one to focus on is our Lygus Control project on Slide 15. The genes we're using for this project are one of the first to come out of our advanced protein engineering capability. We invested early and built up superior capability in protein structure, protein design and directed evolution. And that's paying off because it lets us design proteins that have as much as a 90-fold increased efficacy compared to the naturally occurring Bt proteins targeting these pests.
Most importantly, this allows us to do things that simply weren't possible 5 years ago. We've used this technology to target the category of insects we refer to as piercing and sucking bugs, like Lygus. Currently used Bt proteins do not effectively control these hemipteran insects, effectively missing a significant class of pest. Where these bugs are present, cotton growers can spend up to $30 an acre on chemical treatment, so it's clearly a valuable economic target if we can integrate it in the seed along with the current bollworm control.
So in the interest of time, I won't cover all the projects we've advanced this year. But I'll tell you that we're making impressive progress in our canola project, in some of the other chemistry areas and in the application of markers in our vegetable platform. Now we've highlighted these in the appendix that accompanies the deck I'm using today.
I'm going to complete our walk-through with an update on a cornerstone platform and that's breeding. I think as most of you know, we spend about half of our annual R&D budget on breeding, so we've made a conscious effort to highlight our capability here, not just because it's a significant part of the yield convergence we've discussed but because it's a critical advantage in the commercial market. Nowhere is that more evident than our yield data from the 2011 harvest highlighted on Slide 16. I covered this extensively at our Investor Day, but I want to emphasize the historic performance gains we saw this year across corn, soybeans and cotton with a couple of updates.
Now I also understand that there's a lot of yield data that floats around after harvest and everybody claims different things, but let me make 3 points. First, we do take yield seriously, as evidenced by the thousands of comparisons in our database. And second, since our initial data review, our core yield advantages have been further supported by independent first and university trial data. And finally, if your yields are better, they should be reflected in your pricing. We just completed a study of corn pricing for the 2012 season. You see DEKALB is consistently the premium priced seed in every major area and that premium tracks very well against the yield advantage we see relative to our competitors. And to me, that's the clearest validation that our yield advantage creates real commercial value.
One of our important updates revolves around soybeans on Slide 17. We've completed a direct comparison of Roundup Ready 2 Yield compared to the Pioneer Y Series soybeans, and Roundup Ready 2 Yield advantage of more than 4 bushels an acre was observed in greater than 5,000 comparisons across 14 states. And that tracks squarely with the yield advantage we saw against all competitors and underlines the buzz we're hearing in the countryside around Roundup Ready 2 Yield performance.
The other big update is from our cotton results on Slide 18. Like corn and soybeans, the new cotton varieties we've launched are consistently outyielding the competitors. You can see this by geography on the chart on the slide. And when you take a weighted average total, the Deltapine land advantage is more than 6%. That's about 70 pounds of cotton per acre or more than a $60 acre advantage for Deltapine land over competitors. And that really speaks to the rapid progress we've been able to make since acquiring Deltapine land and underscores the significant gains we made as we grew volume in 2011.
If I broaden the view in breeding, the leverage we're getting from our technology leadership is greater and there's 2 areas I want to focus on. The first is our Integrated Farming Systems on Slide 19, and this reflects the massive upgrade in the amount of data we're generating on our products. Now the idea of precision agriculture isn't new, but what we have that’s absolutely unique is the knowledge of seed genetic performance under different soil conditions, different planting densities and other environmental parameters. We're able to track and correlate that data to predict how a seed will perform on different farmers’ fields. It's possible to deliver prescriptions to farmers beyond the typical seed recommendations to significantly step up yield.
Today, we're piloting prescription programs with key farmers. From there, we have our first generation of commercial products in pre-commercial prep for the Phase 4 equivalent. This would be a commercial prescription that would tie the hybrid recommendations into variable-rate planning to maximize yield. From there, we plan to roll out successive waves that increasingly leverage our massive genetic databases to tailor what a farmer plant and drive the convergence of the advances in seed, soil testing and equipment to increase yield.
The second area where this breeding leverage is a case study is on how our marker or genome sequence capability is changing breeding on Slide 20. So historically, to target diseases, breeders had to screen through germplasm in the field or use laborious greenhouse test to identify key disease-resistance genes. We've completely revolutionized that. Today, we use high throughputs, screening and markers to identify, select and deploy disease-resistance genes.
On Slide 24, you see how this comes together commercially. We have active disease screens that boost our annual performance and we have targeted molecular breeding projects in ways that give our portfolio an unprecedented double shot of technology to create the industry's most advanced disease tolerance program.
The elegance of this approach can be best seen in our Goss's Wilt breeding program for corn on Slide 22. Through our traditional screening process, we have hybrids in our commercial portfolio with very good Goss's Wilt's tolerance targeting the key commercial needs today. But we also complement that using our molecular breeding technology to identify specific markers for Goss's Wilt that we can scale up significantly across all of our germplasm as a targeted trait, and that expands the reach of Goss's Wilt's tolerance in our corn portfolio and we expect it to step up the level of tolerance above anything available commercially today. And you see a similar opportunity for phytophthora in soybeans on Slide 23. We're literally stacking resistance traits that couldn't have been done just a few years ago and that's translating into almost 1.5 bushel yield advantage in soybean.
Fundamentally, it underscores that we've only scratched the surface of the capability and opportunity with breeding. In fact, I'd make the strong case that our technology lead is as important and maybe more pronounced in breeding as it is in biotechnology.
So if you move to Slide 24, I can summarize how I think about our overall pipeline and opportunity. First, our competitive differentiator is our ability to discover, develop and deliver products that matter to farmers. We established our lead with the early investment in Seeds and Traits R&D and with the first generation of biotech traits, and we've leveraged this across multiple platforms and no one has the scale, the capability and experience that we do.
Second, we don't take our leadership for granted. While others are playing catch-up, we're driving the next innovation in the next platforms like molecular disease breeding, RNAi and precision agriculture that take yield to the next level.
And finally, this all comes down to yield, and we're in the best position to deliver yield to our farmer customers. Just a few short years ago, the concept of truly integrated yield would have been inconceivable. Today, with our ability to generate data and form prescriptions for the grower, we see real opportunities in integrating the seed, chemicals and equipment management on one platform that drives yield more effectively.
So I appreciate your time. And with that, I'll turn it over to Bryan for the Q&A.
Thanks, Robb. With that, we'd now like to open the call for questions. With this R&D update, we'll extend this Q&A session a bit. But as we typically do, I'll ask that you please hold your questions to one per person so that we can take questions from as many people as possible during this time. You're always welcome to rejoin the queue for a follow-up question. So with that, Dan, I think we're ready to take questions from the line.
[Operator Instructions] Our first question comes from David Begleiter of Deutsche Bank.
David L. Begleiter - Deutsche Bank AG, Research Division
You talked about corn seed supply this growing season. Can you comment on your availability and whether there could be opportunities for you guys if other suppliers can't meet their customers’ demand?
David, we feel good about our supply this year. You're right, there's been a lot of noise in the marketplace and I think some of the smaller companies suffered with the very warm weather and production challenges given the lack of geographic diversity. We feel good about our own position and we are ready, willing and able to supply our farmer customers. So we're in pretty good shape and we're feeling confident as we get into the season.
Our next question comes from P.J. Juvekar of Citigroup.
P.J. Juvekar - Citigroup Inc, Research Division
So your corn sales were up 46% [indiscernible]
Our next question comes from Vincent Andrews of Morgan Stanley.
Vincent Andrews - Morgan Stanley, Research Division
My question is just how we should be thinking about the big bolt in your deferred revenue line which at the end of the quarter was close to $2 billion. It was $1.3 billion last year, and if I have the number right, it was $368 million a year ago. So maybe you could just talk to how much of this is just early ordering year-over-year, although I kind of member last year, it felt like orders were in a little early as well because of the attractive economics, but a $650 million build year-over-year seems like it's quite substantial relative to the move you made with your guidance.
Vincent, I'll ask Pierre maybe to give you a little bit of color. But the way I think about it, if you think -- you're right as you portray the history of this, I think it's really an indicator of strong farm income and it really speaks to the health of the business in general, the sector in general and how growers are feeling and I'm just pleased we've managed to compete for a slice of that. But Pierre, maybe you can say a few words on Vincent's question on the bulge.
Sure. And Vincent, you're right. I mean, it makes us feel good that the early prepays support our order book. By the same token as Hugh was saying, I mean, a big part of that is a reflection of farmer economics. And as you know, right now, I mean, there's a lot of cash at farmer level this year, so that's great and we can take advantage of that. And at the same time, from one year to the other, I mean, things are changing in the marketplace and some of those programs may be adjusted from one year to the other. So my read on that is, if anything, it’s definitely favorable, supports a strong order book in the U.S. I wouldn't over read it though. I would stay fairly conservative on the read. But definitely, we're very happy to have collected that money. And as Hugh was mentioning, I mean, definitely makes us feel very comfortable with our order book today.
Our next question comes from Michael Cox of Piper Jaffray and Company.
Michael E. Cox - Piper Jaffray Companies, Research Division
My first question is on Brazil. You mentioned that 3 quarters’ trait penetration. Could you perhaps comment more specifically on doubles penetration?
Yes. We are -- it's kind of interesting, Michael, because we're -- doubles was the first technology advance and now -- and it went very, very quickly. Those lines went faster than our historical trend lines in the U.S. and now we're seeing the -- before we reach peak acres, we're seeing the cannibalization of those acres in new traits.
This is Bryan. I might add to that. From a Brazil perspective, you have basically 3 packages of traits in the market today. One is the first-generation single; the second is the second-generation single, which is actually a stack; and then the third is what we would refer to as the double stack. As a percentage, that thing, that is the double stack, is very low today. So most of the upgrade has really been the first-generation single to the second-generation single. So the runway there to continue the upgrade is still present as well.
Michael E. Cox - Piper Jaffray Companies, Research Division
Okay. And then one on SmartStax. Any supply constraints you're facing for the 2012 season? In particular, any hybrid availability issues for some of your RIB complete offerings?
No, we feel good, Michael, of the availability. And a different story from a year ago. As you get into Central Illinois, we're still a bit hybrid, but we knew that going into the season, but a different game from our first year to launch.
Robert T. Fraley
I'll just add a quick comment that we just recognized that one of the Agri Marketing magazines made our SmartStax RIB Complete product of the year, so it is quite a difference from a year or so ago and the product has performed very well.
Our next question comes from Don Carson of Susquehanna Financial.
Donald Carson - Susquehanna Financial Group, LLLP, Research Division
Question for Robb. Robb, you talked about Ground Breakers, I think, 3 different times. This is kind of a new approach to launching products. Is the primary benefit here that it reduces the volatility around performance and pricing as you commercialize a new product? And I know you just went through the Ground Breakers with Intacta this past fall. Can you talk about how that process went?
Robert T. Fraley
Don, yes, So we've learned a lot. The origin of the Ground Breaker program actually started after we acquired Deltapine land and we're faced with the challenge of introducing new cotton technology in the marketplace to replace the fabulously famous Triple Nickel product. And so we required a lot of grower experience and interaction to select those new cotton varieties. And that turned out to be spectacularly successful as you kind of see in the cotton breeding results we show today. And then I think with the experiences we had with Roundup Ready 2 Yield and SmartStax, we really learned that getting that exposure to growers, getting them familiar with the technology, giving us an extra bit of time to match the traits to the germplasm is critical. So we're really making that for our large major trait offerings a routine part of the introduction cycle. So as you highlighted, the Intacta product in Brazil is already in the hands of nearly 500 growers and that's going to give us a lot of information on performance and opportunity for pricing and positioning and really understanding how a more complex product with multiple genes performs in the Brazilian environment. We're going to be doing that with drought. We have several hundred growers signed up to test the integrated package of the drought gene with different corn genetics, with the agronomic traits in Double PRO and Triple PRO. That's going to be really important because that product's going to fit across a broad geography. As you know, the last couple of years, we haven't seen a lot of drought, so it's also going to be a great opportunity for us to test how the trait performs in different germplasm, so we're excited about that. And I hinted in my comments that we'll take exactly that approach when we bring the double stack of Roundup Ready 2 Yield and dicamba tolerance into the marketplace in 2013. So yes, it's an important, I think, part of how we've dealt with both the interaction of traits and genetics and how we expect to manage the complexity of these new traits in the marketplace.
Our next question comes from P.J. Juvekar of Citigroup Inc.
P.J. Juvekar - Citigroup Inc, Research Division
Your corn sales were up 46%. Can you sort of break that down for us between price, volume and mix, and what kind of pricing do you expect in the upcoming U.S. season?
Yes, we've seen -- I mean it's still early days, P.J. But I would say, as we look at the season development, we've seen limited amounts of price discount in comparison to what we've seen in previous years. I'll maybe ask Pierre to just do a quick dissection between price, volume, mix.
So P.J., if you look at the first quarter numbers, as we mentioned, most of the first quarter numbers definitely are coming from South America. And at a very high level, the way I look at it personally, I mean, I would break down the growth in between what's volume-related, which would account for a little less than 50% and what's the trait expansion and the mix benefits we are seeing, plus the price benefits we are seeing with new germplasm in South America. So I would look at it as a 50-50 and obviously, when you look at the level of margins as I mentioned during the call, this is one of the reasons because of the trait expansion that we have seen our margin and percent increase from 55% to 60% in corn. So I mean, the great news is we've got headwinds both from the mix side and on the volume side in South America; the first quarter definitely is the South America quarter.
Our next question comes from Mark Connelly of CLSA.
Mark W. Connelly - Credit Agricole Securities (USA) Inc., Research Division
So just one question. If RNAi is successful with rootworm, would that mean that SmartStax ends up changing, meaning that you'd pick the HERCULEX worm out of SmartStax and related, should we expect you to start applying RNAi up to aboveground pests relatively soon or is that going to take a while longer?
We're very excited about the RNAi technology. As you know, this was a recently discovered mechanism in biology. In fact, the original university scientists who discovered this technology received the Nobel Prize for it. We've worked on it very aggressively. You may not know that in addition to the Corn Rootworm III product, our new Vistive Gold product also utilizes the RNAi technology and will be one of the first agricultural products commercialized with it. So it's an exciting opportunity. And as I mentioned in my comments today, Rootworm III represents a really unique and novel mode of action. I think the way -- as you think through the commercial development, you've seen us stack multiple modes of action together, so it gives us the opportunity to build on the SmartStax platform, but also the opportunity to create new combinations of products for the future. And one of the things I see really exciting about the RNAi technology is that we're advancing the first product. But in our pipeline, we're testing other RNAis with different modes of action and mechanisms that are completely different. So that's very exciting and really a centerpiece of technology for us.
Our next question comes from Kevin McCarthy of Bank of America Merrill Lynch.
Kevin W. McCarthy - BofA Merrill Lynch, Research Division
My questions relate to the vegetable platform. I think you have a goal there to grow profit to the point where it becomes the third largest contributor behind corn and soybeans. Some of the commentary this morning sounded incrementally a little bit more cautious. I think you referenced limited growth opportunity for the year. Sales and earnings were down in the quarter. Maybe can you elaborate a little bit on what is going on there and whether or not you still feel there is an opportunity to achieve that third place status, if you will, in the portfolio?
Kevin, we still see -- we mentioned this in November, we still see this having the capacity to become our third biggest platform. I think that's going to take time. I don't know if Robb's going to say a few words on markers and really -- we're very enthusiastic with the progress that we're making in new product development. I think what we're seeing this year and will -- I think Pierre's comments were cautious as we look at the projections for the remainder of the year, a big piece of that business is European, and we've seen softness in that European market. Our assumption is that's tied to the general turmoil in Europe. I think we’ll be a bit smarter, come another quarter or 2. But as we look out over the year, we're a bit more conservative for our veg projections in Europe. The rest of the business is actually tracking pretty well. So I think long-term, we still see the opportunity of that becoming a third platform, we see really good advances in the technology and in product development. But as we look out over the next 2 or 3 quarters, we're going to be a little bit more conservative until we see how Europe shakes out. But I don't know if my colleagues have got anything to add to that.
Robert T. Fraley
I think the only thing I would highlight and you see it in my deck that we're just starting now to see the wave of really unique technology differentiation coming through the application markers in the vegetable platform. I think our team there, Marlin Edwards and his team, have just done a spectacular job of really bringing the new marker and sequencing technology into vegetables, and so I'm really excited about the -- starting to see the wave of pipeline advances. And I think that's really what drives the ultimate differentiation of the business for us and continues to keep it as an exciting growth platform.
Kevin W. McCarthy - BofA Merrill Lynch, Research Division
As a follow-up if I may on the subject of timing issues, I heard you mention the $0.04 related to cotton in Australia. Were there any timing issues in North American Seeds and Genomics as it relates to sales and earnings impact as distinct from the prepay or cash flow impact that you referenced?
No. Actually, in the first quarter, the U.S. plays a very small role and we didn't see any significant change from a year-to-year in the first quarter. So really speaking about the U.S., we are mostly speaking about the order book because in the actual results, the U.S. doesn't weigh a big weight in the first quarter. So really the way to look at it is really the first quarter is South America from a corn perspective with some support from South Africa, but that's pretty much it.
Our next question comes from Bob Koort of Goldman Sachs.
Robert Koort - Goldman Sachs Group Inc., Research Division
You have a very good preorder book, and I'm just curious to what extent do you worry that might be farmers themselves worried about availability and double ordering. I know that some of our contacts suggest there's the risk of selling substitute from some of these smaller farms that will have some challenge for you guys providing guarantees on availability. And then for Robb, it seems like for the first time in a while, with your dicamba trait in the soybean, you've actually got a competitor that is on a reasonably similar time frame, so I'm just curious if you could size up how important first mover advantage is versus the Dow Enlist product and also the fact that they've got multiple modes of herbicides instead of only 2, does that really matter?
So on the order book, we feel very good. Pierre's point -- even though it’s a small quarter for the U.S., but as we look at the order book and how it's firming up, we feel very good as we go into the season. There's a lot of noise out there on seed availability. We feel confident on our ability to supply across brands and across zones. And I think the piece that’s given us reassurance as we turned the year into 2012 is we passed our early December cancellation date. And as you pass that date, the order book firms significantly. So I don't see this as panic buying as much as a recognition on the yield increment that we're delivering and farmers rewarding us for that with their early commitments. But the fact that we've passed that first week in December is another level of commitment as you pass those early cancellation points. And then, Robb, maybe a few words.
Robert T. Fraley
Sure. On your question relative to some of the competitive traits, Bob. So first of all, I'd tell you upfront that 2,4-D and dicamba are both very good established broadleaf products. They’re a similar oxin [ph] class of chemistry, and I think they'll both be 2 really almost brand-new tools in the context of biotech traits for growers to have access to. I think I've tried to highlight what I think the benefits of dicamba are. Basically we're working closely with BASF on new reduced volatility formulations that look very, very good in development. Some of the things that we particularly like about the dicamba chemistry are the fact that it has a very broad spectrum of all broadleaf weeds. It has very few resistant weeds that are known. And the nice thing about dicamba is that we're seeing a surprising level of residual activity, which means the farmer can put the dicamba application and then be able to control emerging weeds for several weeks afterwards, and that's a real advantage. So I think it's well positioned. I mean, we're looking at other herbicide-tolerance traits, we're combining Liberty Link and others. I think our key advantage is we're working on a program with a great chemistry, we're going to stack it with Roundup Ready 2 Yield and we're going to be doing Ground Breaker trials in 2013. So I think we have a timing advantage and I think that's terrific. And again, I can't overstate how important it is to have the ability to combine those traits with a genetic platform that has the strong performance that we're seeing out of our soybean breeding effort and out of the Asgrow brand.
Our next question comes from Michael Picken of Cleveland Research Company.
Michael Picken - Cleveland Research Company
I just wanted to circle back here with South America, and it seems like we've had some dry weather and some real hot weather as we've entered in the pollination season, probably more so in Argentina than Brazil. But do you think that's going to have any impact on the [indiscernible] volumes potentially in Brazil? And then secondarily, how reliant are you guys on the South American seed production? Is there any issues to some of that crop coming into the U.S.?
So 2 or 3 points. I guess the first one is, every year, we do winter production in Latin America, so we have experience in that. And you're right, Argentina is warm. It's warmer than it is in Brazil. If you look at our seed production down there, 100% of what we produce is irrigated. So it doesn't guarantee success, but it certainly mitigates the risk of dry conditions. So as we think about bringing seeds back, we feel good about our processes and our logistics, and we feel good about our production fields down there. So I think that, that kind of covers that end of it. And then if you look at production in general, Argentina's had a lot of coverage in the last few weeks. The piece that probably isn't covered as much is you look at Mato Grosso in Brazil and they’re forecasting significantly higher yields. So I think Argentina, there’s areas in Argentina are going to be stretched. As we look at our own seed production, we feel okay. As we look at the region in general, you have to imagine late June, July in the U.S., and that's kind of the timing we’re at right now, so you’re right, it's a squeeze right around the time of pollination but from our own physical production, we feel good.
Our next question comes from Andy Cash of UBS.
Andrew W. Cash - UBS Investment Bank, Research Division
Just a question on soybeans. Pioneer's been out there dotting the Midwest with these bulk bins about every 15 to 20 miles, and their customers are claiming that it's convenient for them to make seed pickups and it lowers their cost of seed treatment. I'm just curious what’s Monsanto's answer to Pioneer's program.
We -- our focus in this really has been -- our focus in this really, Andy, has been on delivering better beans that provide better yield. And logistics is one component, but I think genetics, at the end of the day, makes a really big difference. I don't know, Robb, if you got any answer.
Robert T. Fraley
No. I mean, I think that's the key. In the end, the yield advantage we're seeing with our Roundup Ready 2 Yield technology and the ability to stack with dicamba is great. But I think the other point that I just ought to emphasize is, as you look at our strategy and both our licensed genetic platforms and our brands, we have -- our retailers and dealers are also doing bulk availability of beans, so I don't really see that as a differentiator at all.
Andrew W. Cash - UBS Investment Bank, Research Division
But just as a follow-on, Pioneer has been pretty successful with their value pricing strategy in beans and so far, they haven't signed up for the Roundup Ready 2 Yield license. So I'm just curious, if that continues to be the case, are you going to have to rethink your pricing strategy around Roundup Ready 2 Yield beans?
I mean, we've -- it's so speculative, Andy, because as we sit here today, DuPont hasn't made that step in license in Roundup Ready 2 Yield. I've been very clear in the last year that our stall is open and we'd be very happy to have them as a licensee. We've made that offer but they've never closed that deal. I'll tell you, the way that we think about this isn't from the perspective of what kind of bag or what kind of box you deliver it in, we feel good about where we are in our bulk delivery systems. What the grower’s looking for at the end of the day is who delivers more bushels. And when you look particularly in the environment at the moment where commodity price are, and you look at the switch that's occurred in the last 24 -- well, actually 36 months now on the Roundup Ready 2 Yield platform, I think the results speak for themselves. So the grower's going to look for performance. He's going to look at optimizing every acre he has and it's our job to get the best possible genetics and the best possible performance out there. And that's how we're thinking about the run-up for this spring.
Our next question comes from Jeff Zekauskas of JPMorgan.
Jeffrey J. Zekauskas - JP Morgan Chase & Co, Research Division
I just have a two-part question there. First question is to Robb in that your nitrogen uptake for corn, your nitrogen utilization trait, didn't advance this time. And I was wondering whether you were running into some obstacles in that program. And if you were, what were they? And then the second part is, to go back to a previous question or your deferred revenues are up about 50% year-over-year or about $660 million. So I was wondering why that rate of growth didn't really translate into an appreciable change in your earnings outlook.
So Robb, maybe a couple of words on nitrogen. I think nitrogen advanced the [indiscernible].
Robert T. Fraley
Yes, Jeff. If you look at the slide, you'll see that it advanced phase last year, so we're pleased with the progress. In fact, we've, this year, studied a number of second-, third-, fourth-generation nitrogen leads. This is an area where the research is quite active and we're excited about the early results.
And then on the deferred piece, I’ll maybe defer the deferral to Pierre. But Jeff, just a couple of words on philosophy, we've -- the first quarter's 10% a year, we get 90% to play for. But I'll tell you, if I look at the order book, if I look at what's happened in Latin America, I feel very good at how the year's panning out and I also feel good about the move that was made to the upper end of our guidance. So maybe you're looking for more but I think where we're sitting, I think is exactly the right stance to take. But Pierre on the deferral again, just...
So speaking back to the deferred revenues on the balance sheet, I mean, really, as we said, a big factor in those deferred revenue is the amount of available cash at farm gate. I mean, that's really where the key driver of those prepays is. What is great is that it definitely supports our order book, and that's really the way we look at it. And that's why we feel extremely good about it, collecting the cash, having the vote from farmers, at the same time, we don't consider that yet as a significant upside. I mean, this is really -- we look at it more in terms of a cash flow management from the farmer's side and a vote of confidence at the same time.
This is Bryan. With the extended Q&A here, I think we're still running with a few minutes. Why don't we take 2 more questions before we let Mr. Grant wrap up.
Our next question comes from Frank Mitsch of Wells Fargo Securities.
Frank J. Mitsch - Wells Fargo Securities, LLC, Research Division
Robb, you were talking about the drought-tolerant corn that you got the USDA approvals last month. And then, as you're looking to commercialize this in the 2013, 2014 time frame, you need to get the international regulatory stack approvals as well. Can you talk a little bit more about the process involved, the countries and the expected timing, where you need to get those international approvals?
Robert T. Fraley
Sure. So on the -- with the U.S. approval, that gives us the ability this year to put the seed out into the U.S. market and to do our test with growers, which is a great advantage and lets us follow up on larger scale testing of the trait and the genetic packages. And then to the heart of your question, for many of the import countries, the data packages for the ultimate product have to be based on all the integrated traits. So once you get the approval for the D1 gene and it's now stacked as you would commercially with the Double PRO or Triple PRO product, we need import country approvals for all of the traits as a stack package. So we've submitted those, but those take additional time. And in some cases, the clock doesn't start until you get the deregulation of the drought gene in the U.S. in certain countries and regulation, so that's what's going on. And then over the course of the rest of 2012, 2013, as we go into 2014, we'll achieve the full set of international approvals and be able to go into launch of the integrated product package.
Frank J. Mitsch - Wells Fargo Securities, LLC, Research Division
Do you think that it might be a situation where it takes through 2013 in order to get the full approvals? I'm just trying to gauge the likeliness of a commercial launch in '13 versus '14.
Robert T. Fraley
It depends on the final countries and timing. But generally, we would expect to have everything done in '13.
And our final question comes from Elaine Yip of Crédit Suisse.
Elaine Yip - Crédit Suisse AG, Research Division
With some farmers experiencing issues when they continue with corn and with some of the bug resistant headlines that popped up over the past few months, have you seen any changes in farmer behavior as to what crop they intend to plant this year? What hybrids to use? What chemicals to apply?
Elaine, I'll maybe let Robb say a few words. But I'll tell you, as I've traveled and I've done some of the sessions in the countryside with growers this year, they are focused on optimizing profitability, and it's maybe changed the way that they're looking at incorporating insecticide into some of those programs. But in general, they are selecting the hybrids and they're selecting the best possible technology practices to drive yield, so we haven't seen the shift there. The acreage involved in this is 0.5% or less, it's a very, very small area. But I'd say that the closer you get to the farm, the more aware they are and the more practical -- the more practical the approach to driving solutions around us. But it's much more a mitigation -- it's more a mitigation and insurance approach than anything else. But Robb, I don't know if you have anything to add.
Robert T. Fraley
No. I really can't add much, I mean, other than we actually are sitting down with corn growers. This is not an item that comes up. I mean, corn growers like to talk about what's going on with ethanol subsidies or with corn prices, but I get very little feedback on rootworm, and that's because such a small percentage of the corn production has dealt with any rootworm issues. There's a tremendous amount of excitement with the SmartStax, RIB Complete and the Double PRO RIB products. So we certainly haven't seen any changes reflected either in the order book or in grower purchases.
Yes, and I guess that would be the final validation point to Robb's last point. If we look at the composition on order book and we look at our projections on the RIB family and our triple stacks, it really -- it tracks exactly in line with where we were projecting, which is kind of validation in terms of how our customers are purchasing them.
Thanks very much for the questions. And I think Bryan and I will -- just a few very brief words to respect your time. I think in closing, on behalf of all of us here at Monsanto, we'd wish you a happy and a healthy new year, and thank you for your support and for joining us this morning.
As I mentioned in my opening comments, this was a -- this first quarter was a strong quarter, and that gives us the data points that reinforce the 2012 opportunity and the drivers that we see in continued growth. In the near-term, we're seeing momentum from the growing Latin American opportunity, and we featured that in our November Investor Day and it's really playing out in this quarter. But we also see the opportunity in our corn business in the U.S. And that's reflected in our confidence in delivering at the high end of our original EPS guidance expectations.
Beyond this year, we've increased our focus on becoming the yield company, delivering valuable yield to our grower customers. That shows in our strategy, it shows in our products and it shows in the pipeline that Robb shared with you today. What matters most to growers is yield. And I tell you that I believe we're in the best position today to deliver that yield. We're extending our competitive lead and that's what drives our opportunity to serve our farmer customers.
So again, all the best to you and yours as we start this new year. And thank you very much again for joining us this morning.
This concludes today's teleconference. You may now disconnect your lines at this time and thank you for your participation.
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