Monsanto's CEO Presents at Sanford Bernstein 29th Annual Strategic Decisions Conference (Transcript)

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Monsanto Company (NYSE:MON) Sanford Bernstein 29th Annual Strategic Decisions Conference Transcript May 29, 2013 9:00 AM ET


Hugh Grant - Chairman, President and CEO

Brett Begemann - President and CCO

Bryan Hurley - Head, Investor Relations


Jeremy Redenius - Sanford Bernstein

Jeremy Redenius - Sanford Bernstein

It’s my pleasure to host Monsanto today. I’m joined on stage here by Hugh Grant, President, Chairman and CEO; and also, Brett Begemann, President and Chief Commercial Officer. Bryan Hurley, Head of Investor Relations is also here today with them.

I look forward to the presentation today, since I find the agricultural space very, very interesting. I also admire Monsanto’s position in this industry. In fact, probably, the most popular analysis I’ve done as the Bernstein analyst in the past few years, shows how farmers spend a greater share of their wallet on seed each year over crop protection chemicals, which fits very nicely with Monsanto’s position in the industry. I actually also see their European competitors working very hard to shift their largely chemical base businesses more and more towards seeds.

Hugh will start with the presentation today. He’ll introduce Monsanto, which will follow with questions-and-answers. We invite you to write your questions on cards and we’ll collect those and I’ll moderate a Q&A discussion for about 20 minutes at the end.

Hugh, let me turn it over to you. Thank you.

Hugh Grant

Thank you, Jeremy. Thank you. Good morning. I’m really grateful to the Sanford Bernstein team for the invitation to come back this year. It’s a conference I look forward to and I look forward to because a focuses on strategic decisions and how those are made, and I’m going to spend a bit of time today looking our strategy and looking forward.

So Monsanto is in growth mode. We see significant growth in the years ahead. We are a technology company. We are technology play and we apply a range of technologies on a range of platforms to increase yield in agriculture that’s kind of what we do everyday.

Today, particularly in the last five years we are operating on more platforms, so more crops on more global markets than ever before. And we are in the midst of strong year, where we confirm that momentum this morning, and we see as we looking the end of this year, we see the opportunity for another year of 20% year-on-year growth.

And even at this early point, as we wrap up the third quarter or come up at the end of third quarter, as we look into the coming year, we see the opportunity for good mid-teens growth next year as well.

So we are optimistic about the growth in this segment. So today I’m going to take a little bit time and look at layers of growth and how they play out across our key crops and increasingly across our key geographies.

So I will be looking forward that’s my intension and I’m as we always there is non-GAAP reconciliation in our, at the end of this presentation and also in our press release that came out this morning.

So let me begin, what this, yeah, just move on the slide, yeah. Thank you. Let me begin with a snapshot of this year. We are now in the last days of Q3, so third quarter is getting close throughout up, this morning we increased guidance again to $4.50 to $4.55. So we are on track for another year of 20% year-on-year growth and the sources of that growth, if you look at this year, there is two or three key sources of growth in cotton, which is our lead platform. We see another year of record volume and we will project mid-teens sales growth in our cotton platform this year and we also saw a nice contribution in our crop protection businesses particularly in Roundup and that’s the platform is really solidifying compared to few years ago. So good growth and Roundup.

If you look at the quarters and there is going to be bit of shift this year, I would expect, our third quarter will be a little bit smaller, our fourth quarter will be a little bit bigger. But the bottom line if you look at the year in its totality even certain year in the Roundup for the closing this third quarter and it’s going to be phenomenal year.

And in 2014 we see the continuation of growth despite closing this year on bigger numbers. So we see the layers have been build this year playing through ’14 and through ’15, I think, that’s a good set out for the conversation today.

So if you think about Monsanto, you really need to have to think about Monsanto, slide if you think about Monsanto you really don’t have think about agriculture, I am on slide five here, so to understand the drivers in our business, looking at the macro climate and agriculture at the moment, it’s the same story. We are looking for more grain on shrinking acres and the demand curves in agriculture of the life and wealth.

If you look at cotton and the conservative estimates in cotton we’d suggest going forward that we need about 500 million bushels of incremental cotton each year, so we need 500 million bushels of new cotton each year.

The past 10 years give you a really good pedigree trundling because its been increasing about that rate for the last decade and we would see the next decade without continued drumbeat of about half a billion new bushels needing to produce every year.

Over the next decades that represents about $200 billion of new cumulative value. So these are bushels are going to occur not for the first time and there is a hungry world out there looking for that.

So the demand curves looks strong. If you say where does that green going to come from, I would ask would be about 80% of that green will come ex-U.S., so it’s going to originated and growing ex-U.S. which really speaks to the imaginably of future international growth.

So when you think about the technology that we have it really becomes the fly field for about compounded growth rate going forward, the drive -- the demand for more grain and their ability to produce that grain through improve technologies.

So if you think about our, if you think about our strategy on this next slide. Here we go. Think about the strategy in the next slide here, surely underpin by the belief in that yield demand. I don’t think there is anybody in our space better position and there is really two elements the strategy, one is our technology drivers and the other one is our strong commercial position which is an untold story.

From technology point of view, as we control is the continue fight against hungry insect and it’s the integration of those technologies, the integration of that innovation going forward and then, and I’ll finish with this, a little bit on our new emerging platforms and precision agriculture, and more accurate and more knowledge base pharming on our new BioDirect platform, so its constantly bringing new technology leverage to the grower whose been expected to produce the half billion new bushels of cotton a year.

And then as you look around world and the key crops and the key markets around the world we are now consistently number one or number two in terms of access to the grower in the brands we provide and it’s the combination of that commercial position and a phenomenal strength in the technology delivery that makes us feel confident as the growth going forward.

So if you think about how all these comes together, if I presented here four or five, I think I did present you four or five years ago. The drivers that we were looking in our business at that time would have been predominately in the first column, it was mainly weeds and insects and its owns exclusively in the U.S.

Today the drivers are more divest in terms of the technologies and they are more divest in terms of the global markets. So we have the opportunity in layering this technologies across emerging global markets.

The three major trends that emerge in our growth story looking forward, one is our cotton performance, so the ability to produce more yield in an acre than our competitors across our range of graphic market. I suggest that’s now a trend, we repeat to also enough so that was a consistent trend.

In addition to that, we are upgrading mix on the acre, so increasing the technology density and the performance of those seeds on an acre and that also as a trend line that represents significant growth opportunity in the next few years.

The second trend is, we have grows corn, they grows soy, so soy is an emerging story, and within Monsanto, we say that this is decade of the bean, I know that doesn’t play well in New York but at least well in St. Louis. So this is the emerging decades of the bean and we see real opportunities for soybeans in the same way that we saw them in the past decades for corn.

And then the third one is the strength of our R&D capability and I’ll conclude a little bit with that. So if we begin, let me just take a quick look, germplasm and we’ll start there, on this next slide, this is kind of refresh on global germplasm. So it’s germplasm 101, the germplasm is the base seeds, its what makes that seed to take.

I’ve talked about cotton a few times this morning, I would say that in cotton the biggest blockbuster that we have is our germplasm, what higher yield than our competitors in all of the major markets. Half of our R&D spend today is spent on breeding, so we spend half on the biotechnology and half on the constant improvement.

We replace about 20% of our cotton portfolio every year, so those new models on the short flow on 20% of our line and 20% is new every year. The new stuff is priced 25% higher than the stuff is four or five years old, because it performance better and more reawarded for that functionality. And what that means is every four or five years, the entire portfolio turns over. So it’s a very dynamic environment and the grower is looking for the best possible performing material.

In the last decade because of that, our seed, our corn seed prices have increased by about 8% compounded a year. When you price on that bell curve and you constantly look in the bar that results in about an 8% price lift every year, which during that same time is created about $2 billion of incremental sales of our.

So the point this is, isn’t just biotech that drives performance the base seeds and the quality of that seeds is the heart beat that continues to drive our cotton platform forward and interesting thing about that is that means in markets where biotech still hasn’t arrive like in Eastern Europe, there is tremendous demand for improve seeds that yields more. So we see this is an early opportunity.

So let me just take deeper dive on the next slide and look at cotton in the Americas. The Americas in total is about half of the world’s 300 million acres of cotton, so it’s a big deal. We talked about the two big trends, so germplasm upgrades offering better quality seeds and also acceleration of new technologies and in Latin America, we’ve seen the tremendous appetite for that upgrade. So hundreds, roughly 150 million acres of -- in a 150 million acres of corn and we had owned about half of those acres in the Americas today, which is about 150 million acres.

So it’s a big, it’s a big market. If you look at 150 million acre block and everyone of those acres will be upgraded in the next couple of years. So there is that continued appetite for improving the quality of performance. Every few years -- so upgrade in the market both in germplasm and then thing that’s emerging on Brazil and Argentina is very rapid upgrades on the technology side as well.

So you see parallel upgrades both in germplasm and then technology that goes along side that, which means essentially you see 150 million acre market emerging every year or so because as the refresh occurs, we stop over in terms of that performance. So it’s a major source of growth for us in the next two or three years.

What we see happening in corn today, that’s been in the last 24 to 36 months, we’re now seeing the same process starting in beans thus the decade of -- decade of the bean. The opportunity just to scale it, that’s about 200 million acres of soybeans that are accessible, so again a very big market.

Three key technologies for us, so 200 million acre opportunity, three key technologies that were focusing on soybeans. Number one, Roundup Ready 2 Yield which as its name suggest that they are yield improvement investors of older technologies. Number two, Intacta that’s focused on soybean, primarily in Brazil and then Argentina and improves insect control as well as weed control. And number three, Roundup Ready 2 Xtend which offers a broader range of weed control options in soybeans.

So three lead technologies, that’s a multibillion-dollar driver for Monsanto and a player over the next five years. It’s early, early days. So with Roundup Ready 2 Yield, which is the first of these technologies to be launched and commercialized, we’re about 20% into this opportunity. So still early days and the best days are well ahead of us.

We recently announced a deal with DuPont Pioneer which entices the access and accelerates the access to these markets. And we’re very pleased to see that done. In Latin America, the Intacta launch which is still ahead of us, fits on about 100 million of these acres. So I wanted to illustrate that we got good experience in corn. We’ve seen the bean franchise now beginning to open up.

Its early in the morning so much gets lost in jargon and every business has its own acronyms and its own language. So I cannot link the idea on this slide that shown you a photograph. So focus lost in translation, really comes home in a photograph, Intacta which this is and a brisk yield by protecting against the insect.

In this picture, the Intacta soybeans are the bigger, healthier looking ones and the smaller beans are Roundup Ready 1 without insect protection and the list are scaled tonight because you think about that you’re growing beans on equator and it’s lunch time every day for the bugs. So they strip soybean, bugs are the bigger challenge than weeds in these equatorial growing region.

So this is a really big deal. This focus is a high impact in a ballroom in New York. When you got the field and you meet growers in Brazil, this is a really, really big deal. And so they are ready and waiting. We are even beta testing. We call it Ground breakers and we’re now second year of Ground breaker trial in Brazil. We have thousand of growers who grew the crop in this last season.

We are reconfirming. We’ve confirmed for the second year. And yield advantages are four to six bushels of soybeans. So this four to six bushels of new beans coming up at the party which kind of goes all the way in my opening remarks on, how do you satisfy this demand curve through technologies like this.

We expect Intacta to be the fastest road ramp of any product that we’ve ever launched. Big farms, highly technified, very focused on bug control that this should move off the shelves very quickly. So let me move towards the end and talk a little bit about our pipeline. I don’t think any talk in Monsanto is complete without talking about the pipeline. This is a really busy slide.

I simply prove there is no other company in our space can present a pipeline with this depth or this breadth. And it really shows in our breathing and it shows in our biotech trace as well. So we’ve more platforms across the world and across crops. We are integrating these technologies more successfully to drive incremental yield. And we are rocking more and more in collaboration and in partnerships to continue to build ourselves.

So it’s breadth, it’s the depth and it’s the partnership that drive us. We anticipate that we will be launching a major innovation in the ag space in one of these crops, pretty much every year for the rest of this decade. So this is a period for Monsanto for it will be rolling these technologies.

Let me spotlight very, very briefly two of our newest technologies and they have their potential to become two new platforms. It’s still early days but we’re encouraged to what we see. The first is an integrated farming, IFS that depends more on computers and satellite feeds than it does on biology. And it’s the link of big data, a lot of which has been generated to the on-farm with the data that we’re generating through genomic.

So the pedigree that we have in these seeds and linking that more intimately with the data that the farmer is generating today and the integration of those big data sets we believe unlocks incremental yield at pixelated level on farm. So variable planting and selecting seeds are better much the soil that a grower has today.

There is tremendous interest in this and in our trial so far, we have seen five to 10 bushels of incremental cotton, with some very sophisticated growers. So early days but we’re encouraged but the second one I wanted to touch on is a new technology area for us.

It’s branded as BioDirect. It really looks at taking crop protection to the next level. We’re looking at natural carving products, applied topically for the control of insects, diseases and viruses. And this is an illustration to (inaudible) but our early results in this space are again very encouraging.

So if I wrap up where I started and if you think of us financially, we’re seeing new layers of growth emerging. And those are translated to top line growth. Our businesses are (inaudible) that we are disciplined, we see leverage on the operating line through scale and just discipline on our spend. So we’re seeing nice leverage on the bottom line.

And if you look at that this year, we anticipate a 20% year-on-year EPS growth. We’re a technology company but we generate free cash and that’s a really nice suggestion to be in because many technology companies consume more cash than they generate. As we continue to drive that cash, we’re looking aggressively repatriating our owners through increased share buybacks and increased dividend. So we will be aggressive and repatriating owner’s cash to them.

If you’re summarizing the business, we focused on yield and we focus on delivering more yields to our grower customers. They have been asked to do more with less soil every year. We’re in a growth mode. We see nice momentum in the business. It’s a business that plans on a five to 10-year horizon.

The growth that we’re seeing is increasingly global and that’s a transition for those of you that followed this for the last decade and we see multi-layers of growth playing out on our global basis. And the yield promise that we’re delivering on is increasingly playing out through multiple platforms. And I hope in the years to come on our peer but one or two of these new platforms that we’re investing in today.

There is multiple platforms and multiple crops across diverse geographic reach which makes for some nice hedges in our businesses as well. So I’m really pleased that I got a chance to share the update on Monsanto with you. And with that, I look forward to your questions. Thank you very much.

Question-and-Answer Session

Jeremy Redenius - Sanford Bernstein

Thank you very much, Hugh. Lots of different questions already, light dry your topics, let’s first dive-in to corn since we started out and really kind of the corn macro environment. I look to take a few of the questions which suggest there’s been a quite a boost to corn demand, corn pricing from ethanol, corn ethanol use in the U.S. Has this given a meaningful tailwind over the past few years. Do you see this being less of a tailwind as the ethanol growth rate flows. Do you see any risks from actually Shell gas making its way in the fuel that would grow the business as well?

Hugh Grant

So I think -- so the ethanol contribution has been important. But it seems it slowed down a bit but I don’t think -- so we don’t do anything on ethanol. So what we see from a distance is, it slowed down but it hasn’t tailed off. We see a continued demand curve there and no viable return for bioethanol anytime soon.

And if you look at 500 million bushels of increased demand each year, that is an ethanol effect. That’s a hungry planet and it’s chickens and beef and particularly Asia. So I think ethanol represents a bump but it isn’t a trend line. The trend line is 0.5 billion new bushels being consumed each year.

Jeremy Redenius - Sanford Bernstein

Thank you. Several questions related to pricing and top line growth. One of the questions about, you showed corn growing at 8% CAGR, net sales price. Has that got a meaningful bump from this corn price inflation which has driven cost higher costs or your corn inputs?

Hugh Grant

No. We’ve delayed coaching and counseling not from this rooms but rooms like this over the years, where we should be increasing price more aggressively and et cetera et cetera. We budget we’ve been on the plan on cycle on roughly for dollar corn, corn straight much higher than that today. And we are in the business where continue is important, where consistency is important, where predictability is important and trying at price against the commodity side where price for given year, I think is unrealistic.

So we’ve really set our stall for the last three or four years of pricing at 5% to 10% window, some years about losing money on the table but we’ve had really fantastic feedback from our grower customers. They know where we stand. They know what to expect and we’re rewarded by volume. So the short answer, Jeremy, is no we are trying to take a much longer view and we tried the previous and it didn’t go through swimming quite well. So, I can like to try code on.

Jeremy Redenius - Sanford Bernstein

Okay. Sticking with the pricing theme, the question from the audience is, you can strike try to what I talk about in my research is pricing for crop protection chemicals not to see just specifically the chemicals. I have relatively cautious view on the industry’s ability to steadily increase crop protection chemicals prices. I’m wondering if you could comment on how you see the industry pricing from the crop protection side. I wonder, if you could do me the favor, maybe disaggregate how quite to say this price of Roundup is price versus many other crop protection chemicals?

Hugh Grant

I’m a new flight in this business totally. So our business is not exclusively but predominantly seed based. Really, really our main competition product is Roundup to say and our strategy for the last three years, which has been very successful and not very imaginative but very successful as we price pretty much in top of Chinese genetic prices.

We've seen some list in the last year but not a lot. We are roughly half of the world market. China is roughly the other half. They would be roughly the bigger half and we charge a small brand premium versus the Chinese material and we’ve competed very well. And goal as we sell as we make and it’s about that simple.

And the rest as a crop protection space, we don’t -- we’ve buy seed treatments and we buy some pattern material that we apply on our corn acre and on our soy acre. But we’re not really involved in that. I would say, it was like my earlier point, our entire price in philosophy and which kind of retreated to this because of works on entire pricing philosophy and this is really sum rather than algebra.

But really sum is, key new bushels that didn’t exist before. So the value on those new bushels about one third, two thirds and give about two thirds of that to the growth. And thus the sweet spot and if we over reach to that, our growth stalks and if we under perform we give away more value than we’re creating our reserve.

I don’t know how that plays out in the chemistry model because a lot of payments have to work out we’re value acclaim what we can see a bright line on if you produce new varieties and you unlock new bushels and the growth respect that technology leverage. Thus the long answer -- I don’t know what their pricing models are.

Jeremy Redenius - Sanford Bernstein

Shifting gears a little bit to Brazil and China, perhaps some clarity on the cause of weakness in Brazil?

Hugh Grant

Well, it seems -- because weakness but it’s -- it’s a golden opportunity. So the coin -- the two sides of the coin, we see -- as I mentioned in my decade of my being, we see tremendous opportunities in Brazil and Argentina in soybeans. It’s a significant platform upgrade to gold Intacta. So in each level of seeds, we will have weed control and bug control in the same seed.

And the weakness is we aren’t selling the product yet. And so we are waiting on a Chinese approval and that approval is an import approval. So China buys about two thirds of the beans that are growing on the planet plus minus. So you need an import approval in China to ship the beans that we still haven’t plants have been in Brazil.

The Brazil approvals -- so the weakness is just the latency period where we’re waiting China approval. We’ve said for a while we would anticipate approval by fiscal event and what we continue to be cautiously on that.

Jeremy Redenius - Sanford Bernstein

Yeah. I have heard this concern the delay of approval for GM technology for variety of crops in China, variety of trade. Did it say, has there been a new development that led to seeing more of an issue for the industry?

Hugh Grant

No, I don’t think so. I mean, there is always this overdramatization. China’s approval system has been slow but consistent unpredictable. And they had a change in premier and that has slowed for many, many industries and many regulatory events has created hiatus. And I think it’s not from -- ever since that we have even seen, it’s nothing more than that. So it’s always nice having the approval on hand. Well, I think it’s just how -- we just need to be patient but it’s just painful sometimes but that’s going to hurt.

Jeremy Redenius - Sanford Bernstein

Can you talk a little more about the opportunity you see from China whether it’s direct opportunity being there with farmers in China or is it more really indirect opportunity long term for Chinese imports of corn and soybeans continuing to grow?

Hugh Grant

I will let Brett say a few words because he spent a lot payment chain about and the indirect is China imports lots of grain. Maybe Brett you can talk to direct Chinese market, but the indirect is China consumes a lot of grain, they’ve and historically been long on carbohydrates, so starchy and they have been short on proteins, thus they buy two-thirds of the world’s soybean which is pure plan protein.

I saw report this morning on the breakfast there is the anticipation that protein consumption and bean consumption will continue to increase thus the decade of the bean. And I think carbohydrate we are seeing the front end of import of carbs as well. So energy sources, the sugar and starch which is carbs.

So it’s population growth which is much more dietary shift that isn’t simply more most feed its much more people eating different stuff. So I’m very bullish on that trend continue and even through the recessional and downturn and people have been and China really backed off much during that timeframe. So that’s the external piece, which is Canada, U.S. and Latin America and they are going to be the bread basket of the big piece of China. But increasingly Brett will seeing the domestic market beginning to cover as well.

Brett Begemann

I think if you look at China one other things that get gloss over sometimes just the second largest hybrid corn market in the world, second only to the United States, there is over 70 million acres of corn in China today and it’s all hybrid, and they’ve done a fairly decent job with their own genetics and breeding programs to increase productivity of their corn –base, but nowhere close to the level that they need to keep up with the internal demand and therefore the exports and imports that Hugh was describing were actively engaged with a partner Sinochem in China to -- in a joint venture to develop a hybrid seed business in China, we’re successfully selling products in China today and look forward to the opportunity to help them increase productivity.

And if you look at the world-class germplasm base that Hugh was describing and the ability to leverage the molecular tools that we have, we believe weren’t position to accelerate productivity gains in China for the corn business and believe over the next few years that will see that opportunity start to emerge as not only an opportunity to export grain from other parts of the world into China but also participate in the domestic production what would a directly in China.

Jeremy Redenius - Sanford Bernstein

And speaking up of international markets, what you see is the biggest challengers that taking your business more broadly for example to China or to Eastern Europe?

Hugh Grant

I think that genetic, I think we IPOed 12 years ago. We were domestic predominantly and for a long time, the last four or five years we’ve seen the international piece grown, last two years has grown fast. And I think the challenges we are seeing for it for any business. They probably move from east shores to (inaudible) world if, real of law, yet choose your, we are intellectual property business.

And I would say we’ve seen in India which is a big international business for us in the last decade especially five years continued increasing adherence to IT and lot of these external markets when you invent co-stuff yourself, you are very quickly become a devotee of patterns in IP, when you don’t have yourself because there is (inaudible). So I’m seeing signs for improvement. So protection of technology is one farmers are very similar around the world whether you farm in five acres or 5,000 these are technologies of skill neutral. So we’ve more corn acres and corn farmers in India today than we have in the US using these technologies and skill neutral in agricultural is unusual because it’s like mining big. It’s capital intensive. So I am very encouraged by them (inaudible) national piece. It takes more operational discipline and it takes more focus. I’m Brett leaving the charge, but we’re seeing really good growth.

Jeremy Redenius - Sanford Bernstein

In several questions that I’m addressing and several different types of risk you face, so the first one is really about the GMO acceptance or lack of acceptance and increasing number of protests around the world. One question asking if you might be the echo and could you comment on the pressure you see from the public?

Hugh Grant

Yeah. It’s interesting because it’s almost it could (inaudible) to a lot of my talk about. We are a seed company. We produce seed that somebody else grows and harvests and somebody else buys and trucks and somebody else process seed and then somebody else buys that processed material and makes brand of food that ends up in a [chilled cabinet] and some are rather in that very long the chain we’ve got more attention than we anticipated without (inaudible). So I think for us there was an education job and we need to do our job and explain what we do and because you’re explaining very often where food comes from and isn’t a chilled cabinet this starts in the field. So I think that for us specifically but for the industry in general we have to do much better job in telling an untold story, number one. Number two, I think there is a piece of what is mean more there is a complete gap of the understanding on the chorusing demand and how much more stuff have to go and I think that’s going to be a piece of this conversation and a piece of consumers and if you’re on every weekend you don’t know and you don’t care if I wanting more about our ability to satisfy the demand curve to what some of the problems that we’re facing at the moment.

Jeremy Redenius - Sanford Bernstein

And speaking of kind of the educational process just talked about (inaudible) they’ll be requiring GMO labeling on our foods and what do you think about the implications for that.

Hugh Grant

I think I am very pragmatic in this. I think we’re going to look like in five years say a whole lot that began such a heated discussion. This has been set up in such a confrontational way I think the reality is this we’re going to need all types of food from as many sources as we can find, and one end of this is organic. I think is mainly organic produce and we sell seed in that segment. Another end of this is going to production agriculture and at the moment it pitches an either or and it’s almost like to me this versus soybean there is no equilibrium and I think we will eventually reach a point where you’re going to price points on this, you’re going to reduce by hundred million more stuff and you’re going to need all hands on that. So I think if you take the long view and we’re planning on a 10-year horizon we’re going to need all this and more of what is need (inaudible)

Jeremy Redenius - Sanford Bernstein

And there is another type of risk we’re seeing in Europe which is basically the ban of the [neo Nixon] class sort of insecticide and are there any risks like that in your businesses that you would see from any of the chemical products that you’re selling or you think of any risks for the broader industry as a result of that.

Hugh Grant

No, as I said earlier, our chemistry piece is really quite limited to run. I think that what with the customer of neo Nixon in the U.S. we use them in our as a seed treatment and I think for an industry that does really well in a science-based regulatory environment and in that environment we’re answering scientific questions. When you address the science and you find yourself in a play arena then there is no goalpost and that’s what is mean when I look at what’s happened in Europe there with the neo Nixon it just looks a lot more play not scientific.

Jeremy Redenius - Sanford Bernstein

I’m speaking the regulatory environments here in the U.S. and I understood there was a delay for the – there is a continuing study of the chemical tolerance soybean in your portfolio. Can you talk about the status of that implication and certifications of that?

Hugh Grant

Yeah, this is probably more detail than ever what you would need to defend in a (inaudible) and so the product has (inaudible) the extend is soybean that would also be tolerant to (inaudible) two modes of action for weed control and (inaudible) find that product and a similar product from (inaudible) and we found out few two-three weeks ago will now get through an EIS, which is an environmental impacts, which will add in something like a year and a half or so to the launch, to the field trial period and we felt for this (inaudible) and not too worries about it. It gives us the opportunity and actually we’ve done this in Brazil. It gives us the opportunity for another season of groundbreakers. The frontend of these launches have been minimal and they’re financially immaterial but you get a chance to garner a bunch more farmer feedback where we recruit ambassadors and we held rooms of size with growers done (inaudible) and that’s what really, really well for us. So I think from the timing point of view it doesn’t change much financially it doesn’t change anything and we’ll be richer by probably a season more we perhaps (inaudible). I think it’s fine.

Jeremy Redenius - Sanford Bernstein

One of the major themes of the presentation was sustainable growth platform over the next decade. Question about why the 2008-2010 hiccups won’t be repeated.

Hugh Grant

We never see number right with our own business. This hiccup was a very polite description. The hiccup was roundup hiccups our seed business never missed and beaten up (inaudible) straight-line growth. It was predominantly roundup. So after (inaudible) rather than promising and the learning through that period was our roundup business is a small piece of growth and we reduce the skills we significantly reduce our cost. We completely set up a shop to compete with Chinese material and we price against that genetic. Does that guarantee success? No. If you think of our hiccup period, we had price $20 something a gallon. Today, we’d be like $10 to $14 spread. So I don’t have learned at once and at least I don’t see the risk that was previously.

Jeremy Redenius - Sanford Bernstein

Perhaps time for one last question here and forgive me if I haven’t got a great question. The financial question and correct me if I am wrong in that but the net cash for this year in the balance sheet can you talk about what that is.

Hugh Grant

Yeah. I mean I mentioned this in my presentation. So we’ve been accused on our balance sheet management guilt of charge. This is not Company is going to see much of leverage up or borrow money by share. So the commitment I made one is when we talk about last earnings call we’re going to be more aggressive than we repatriation we see continued strong cash generation and our responsibility if we don’t see investment opportunities so we’re thinking about the cash get reinvest in the business and the new opportunities build out in the platforms and the build out in the technology and if we don’t see opportunities in that area, then we will be aggressive and repatriation. But I think we’re always going to be very disciplined, very focused on cash management and I don’t think you’re going to see us taking extravagant positions.

Jeremy Redenius - Sanford Bernstein

Well, thank you Brett for attending today. Thank you, Hugh.

Hugh Grant

Thanks Jeremy.

Jeremy Redenius - Sanford Bernstein

I appreciate it.

Hugh Grant

Thank you. Thanks very much. Again.

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