2016 global farming equipment market fundamentals jan 2016

7/24/2019 2016 Global Farming Equipment Market Fundamentals Jan 2016

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John DeereCommitted to ThoseLinked to the Land

Market Fundamentals

Deere & Company

December 2015 / January 2016


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| Deere & Company | December 2015 / January 2016

Safe Harbor Statement & Disclosures

This presentation includes forward-looking comments subject to important risks

and uncertainties. It may also contain financial measures that are not in

conformance with accounting principles generally accepted in the United States

of America (GAAP).

Refer to Deeres reports filed on Forms 8-K (current), 10-Q (quarterly), and

10-K (annual) for information on factors that could cause actual results to differ

materially from information in this presentation and for information reconciling

financial measures to GAAP. Past performance may not be representative of

future results.

Guidance noted in the following slides was effective as of the companys most

recent earnings release and conference call (25 November 2015). Nothing in this

presentation should be construed as reaffirming or disaffirming such guidance.

This presentation is not an offer to sell or a solicitation of offers to buy any of

Deeres securities.

2


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Table of Contents

Slide

Ag Fundamentals U.S. 4

Construction & Forestry Fundamentals U.S. 11

Other Regions 14

Deere & Company | December 2015 / January 20163


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Ag FundamentalsUnited States


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U.S. Farm Cash Receipts

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F

$Billions

Crops Livestock Government Payments

Source: 2000 2014: USDA 25 August 20152015F 2016F: Deere & Company Forecast as of 25 November 2015

5


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U.S. Farm Balance Sheet Strong

10%

12%

14%

16%

18%

20%

22%

24%

26%

28%

30%

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015F

2016F

$Billions

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

Source: 1972 2014: USDA 24 November 20152015F 2016F: Deere & Company Forecast as of 25 November 2015

6


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World Farm Fundamentals

Global Stocks-to-Use Ratios

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

110%

1994 1997 2000 2003 2006 2009 2012 2015P

Source: USDA 10 November 2015

Cotton

Wheat

Corn

Soybeans


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Global Corn Supply and Demand

Source: USDA 10 November 2015

8

0

200

400

600

800

1,000

91/92

92/93

93/94

94/95

95/96

96/97

97/98

98/99

99/00

00/01

01/02

02/03

03/04

04/05

05/06

06/07

07/08

08/09

09/10

10/11

11/12

12/13

13/14

14/15

15/16

MillionMetricTons

Production Consumption


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Grain Demand With and Without Biofuel Use

Source: OECD-FAO Agricultural Outlook 2015-2024

1,600

1,800

2,000

2,200

2,400

2,600

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015F

2016F

MillionMetricTons

Consumption

1,6001,800

2,000

2,200

2,400

2,600

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015F

2016F

MillionMetricTons

Consumption less biofuel use



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Agricultural Growth Energy

U.S. Ethanol

U.S. Corn Used In Ethanol

Source: Informa November 2015

10

0

1,000

2,000

3,000

4,000

5,000

6,000

99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/14 15/16F

Bushels(

millions)


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Construction & ForestryFundamentalsUnited States


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U.S. Housing Starts

12

Source: 1962 2014: U.S. Census Bureau October 20152015F-2016F: Deere & Company Forecast as of 25 November 2015

0.000

0.250

0.500

0.750

1.000

1.250

1.500

1.750

2.000

2.250

2.500

1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016F

Housing Starts (Millions of Units)

Multi-Family Housing Starts

Single-Family Housing Starts


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U.S. Construction Spending

13

-160%

-150%-140%

-130%

-120%

-110%

-100%

-90%

-80%-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%10%

20%

30%

40%

50%

60%

70%

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,6001,700

1,800

1,900

2,000

2,100

2,200

2,300

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F

%TotalConstru

ctionSpend

Billions,

2009Chained$

s

U.S. Construction Spending (Billions, 2009 Chained $s)

Residential Investment in Structures

Nonresidential Investment in Structures

Government Investment in StructuresGovernment Infrastructure Investment

Source: 1997 2014: U.S. Bureau of Economic Analysis October 20152015F-2016F: Deere & Company Forecast as of 25 November 2015


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Other Regions


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EU 28

Macroeconomic Data


2014 2015F 2016F

GDP Growth (%) 1.4% 1.8% 1.9%

Inflation (%) 0.6% 0.1% 1.1%

Unemployment (%) 10.5% 9.8% 9.2%

Source: IHS Global Insight November 2015

5%

23%

72%

Labor Composition

Agriculture Industry Services

Source: The World Factbook, 2012 est.

2%

25%

73%

GDP Composition



-1.0

0.0

1.0

2.0

3.04.0

Germany UK France Italy Spain

Major Economies GDP Growth (%)

2014

2015F

2016F


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EU 28

Ag Economic Data


Utilized agricultural area ~ 190 millionhectares

Arable land ~ 110 million hectares

Growth potential for Western Agequipment industry in Central & EasternEurope

Ongoing farm & Ag land consolidationand yield improvements

Average farm size ~ 14 hectares

Number of farms ~ 12 million

Source: FAO, Eurostat Agricultural Census 2010

Production Net Exports

Total Grains 16% 8%

Wheat 21% 18%

Barley 42% 29%

Pork Meat 21% 32%

Cow Milk 30% 40%Source: USDA, November 2015; average 2013-2015(Total Grains: excl. Rice; Cow Milk: Net Exports of Cheese)

Share of the World Market

$0

$20

$40

$60

$80

$100

$120

2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F

U

S$Billions

Crop Value of Production

Crops included: Wheat, Barley, Corn, Rapeseed,Sunflower Seed, Soybeans, Sugar Beet, Cotton and Rice



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Deere & Company Forecast as of 25 November 2015

Economic UpdateEU 28 Fiscal 2016

Economic activity gradually improving, however event risksremain

Arable income remains under pressure, below the long-termaverage

Continued weakness in dairy sector

Beef prices remain solid, pork prices at low levels


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EU 28

Government Support of Agriculture

Source: EU Commission, Agra Europe

18

Delayed policy implementation phase: Uncertainty around investment subsidies in newmember states (Central & Eastern EU) until 2016, but short-term 2015 programs available

Common Agricultural Policy budget 2014-2020 frozen at 2007-2013 nominal levels(-14% in real terms)

Portion of direct payments (30%) tied to environmentally-friendly farming practices

Limited effects of direct payments redistribution in favor of new member states (Central & Eastern EU) In nominal terms & over the full time period, Pillar I ~ constant but bigger cuts in Pillar II

0

10

20

30

40

50

60

70

1990 1995 2000 2005 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

EUR

bn(nominal

prices)

Pillar I (Direct Payments + Market Expenditures) Pillar II (Rural Development)

2007-2013 2014-2020


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Brazil

Macroeconomic Data


17%

23%

60%

Labor Composition


Source: Brazilian Institute of Geographyand Statistics (IBGE), 2012


2014 2015F 2016F

Interest rate (%) 10.9% 13.4% 14.3%

CPI Inflation (%) 6.3% 8.9% 6.6%

Unemployment (%) 6.8% 8.2% 9.7%

1.82.7

0.2

-3.2

-2.1

-4.0-3.0-2.0-1.00.01.02.03.04.0

2012 2013 2014 2015F 2016F

GDP Growth (%)

6%

25%

69%

GDP Composition


Source: Brazilian Institute of Geographyand Statistics (IBGE), 2014


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Brazil

Ag Economic Data



Soybean 30% 41%

Corn 8% 19%

Sugar 21% 45%

Beef 16% 20%

Chicken 14% 34%

Agricultural area ~ 279 million hectares1

Arable land & permanent crop ~ 83 millionhectares

~ 5% CAGR in industry equipment salesthrough the end of the decade2

Average farm size ~ 64 hectares


Source: IHS Global Insight, 2015; average 2013-2014

1 Includes pasture, excludes double crop2 Deere & Company Forecast as of 25 November 2015 (volume only)

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


Crops included: Key Grains, Ethanol and Sugar


Crop Value of Agricultural Production

U

S$Billions

$0

$20

$40

$60

$80

$100

$120

2004 2006 2008 2010 2012 2014 2016F


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Ag budget* for the 2015/2016 season is R$187.7 billion; 20% higher than last seasons budget. Moderfrota/PSI-Rural budget increased from R$8.57 billion to R$10.0 billion.

Brazil

Government Support for Agriculture

21

1 Exclusively qualified products. Minimum of 60% local content (weight and value)2

Depending on Farm Size: lower rate if annual revenues is up to 90 million reais and higher rate when annual revenue exceeds R$90 million reais.3 4 years if used equipment.

Key Government programs to support equipment purchase

* Includes budget for financing input costs, investments and production trade. Season 15/16 = July 2015 to June 2016

Programs 1 Where

AnnualInterest

Rate

Grace Period(Max)

(Years)

Term

(Years) Maturity

Mais Alimentos: 50-78 HP Tractors

Pr-Trator: 50-120 HP Tractors

Trator Solidrio: 55-75 HP Tractors

Brazil

SP

PR

5.5%

0.0%

~ 2.0%

3

3

2

10

6

10

Perennial

Perennial

Perennial

Finame PSI-BK (new tractors and combines)

Moderfrota (new and used tractors and combines)

Brazil

Brazil

7.0%-9.5%2

7.5%-9.0%22

1.5

10

8 3Nov15

Jun16(SuspendedSep-Nov15)


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CIS

Macroeconomic Data



4%

36%

60%

GDP Composition



10%

28%

62%

Labor Composition



(Russia)

(Russia)

2014 2015F 2016F

GDP Growth (%) 0.9% -3.0% 0.0%

Inflation (%) 8.1% 15.7% 10.9%

Unemployment (%) 4.5% 4.6% 5.4%

-12.0

-9.0

-6.0

-3.0

0.0

3.06.0

Russia Ukraine Kazakhstan Belarus

Major Economies GDP Growth (%)

2014

2015F

2016F


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Total Grains 10% 19%

Wheat 15% 21%

Barley 22% 30%

Corn 4% 17%

Sunflower 53% 26%

CIS

Ag Economic Data


Source: USDA, November 2015; average 2013-2015(Total Grains: excl. Rice)

1 Deere & Company Forecast as of 25 November 2015

Source: FAO, CIS farm statistics 2006-2007 (Russia, Ukraine and Kazakhstan)



Significant opportunities exist to improveyield rates in all major crops1

Land under cultivation (sown crops)expected to remain nearly flat over thenext decade

Western-style equipment used on


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CIS

Government Support of Agriculture Wheat export restrictions introduced in February 2015 continue to put pressure on farmmargins in Russia

The fixed export duty was replaced by a floating tax regime at the end of May 2015

This change created additional uncertainty for Russian Ag operations (setting up to 20% of the wheatmargin at risk, depending on the wheat export price and RUR FX rate fluctuations)

Recently, the wheat export duty threshhold was eased, and the grain intervention prices were raisedsomewhat supporting the grain price outlook

Import policies continue to impact Western combine sales in Russia, Kazakhstan and Belarus

Risks remain for Western competitors given the Russia-Ukraine conflict, followed by Western

sanctions and the Russian Agrifood import ban

Restructured Russian National Ag Program 2013 - 2020 was set to increase Ag support byabout 50% by 2020 vs. 2012 in nominal terms, but expect large annual fluctuations

Agrifood import ban announced in August 2014 is set to encourage additional state support to fulfill self-sufficiency goals in 2015 and beyond; however, implementation and timing remain quite uncertain

Interest rate subsidies for Ag equipment largely eliminated, partly replaced with direct area paymentsto Ag operations and direct subsidies to the domestic Ag equipment industry

Ag equipment localization requirements re-considered/strengthened, additional risks given the currentgeopolitical tensions between Russia and the West

24


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China

Macroeconomic Data



Source: IHS Global Insight, 2014 est.

2014 2015F 2016F

Interest rate (%) 5.9% 4.9% 3.7%

Inflation (%) 2.0% 1.4% 1.7%

Unemployment (%) 4.1% 4.1% 4.3%


9%

46%

45%

GDP Composition


34%

30%

36%

Labor Composition


7.7 7.7 7.3 6.86.3

0.0

2.0

4.0

6.0

8.010.0

2012 2013 2014 2015F 2016F

GDP Growth (%)


26/31


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|

12

28

72

76

72

86

108

107

108

13

14

15

15

19

15

15

15

15

15

4

4

7

12

20

22

22

22

22

22

2

4

13

16

18

21

22

24

17

31

52

103

128

125

141

166

166

169

0 25 50 75 100 125 150 175 200

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

RMB (in billions)

Material Subsidy (basic subsidy for purchase of inputs)Grain Direct Subsidy (for growing encouraged crops)

Seed Subsidy (for purchasing high-performing seed)Equipment Subsidy (for purchasing encouraged equipment)


Source: China Ministry of Agriculture

China

Government Support of Agriculture

27


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IndiaMacroeconomic Data


Source: IHS Global Insight November 2015Source: The World Factbook, 2012 est.

2014 2015F 2016F

Interest rate (%) 10.1% 9.8% 8.3%

Inflation (%) 6.7% 4.8% 5.5%

Unemployment (%) 8.8% 8.6% 8.2%

Source: IHS Global Insight, 2014 est.

18%

30%

52%

GDP Composition


49%20%

31%

Labor Composition


5.1

6.9 7.3 7.3 7.5

0.0

2.0

4.0

6.0

8.0

2012 2013 2014 2015F 2016F

GDP Growth (%)


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$0

$30

$60

$90

$120

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F2016F

US

$Billions

Crop Value of Production

IndiaAg Economic Data


Crops included: Corn, Wheat, Rice, Oilseeds, Cotton


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



Annual industry tractor sales ~ 550,000units

Average farm size ~ 1.2 hectares



Production Exports

Total Grains 10% 5%

Wheat 13% 2%

Corn 2% 2%

Rice 26% 26%Cotton 25% 17%

Source: Global Insight October 2015, average 2013-2014


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185

262

325

766

530

623

672

610

633

680

231

240

313

438

560

638

728

850

850

1150

35

40

54

143

170

195

237

194

197

207

275

56

48

151

332

0 500 1,000 1,500 2,000 2,500

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Rupees (in billions)

Fertilizer Subsidy

Food Subsidy (for households)

Interest Rate Subsidy (for farmers)

Irrigation Subsidy

Electricity SubsidyOther Subsidies (mainly for seeds)

1,483

1,830


IndiaGovernment Support of Agriculture

Source: India Ministry of Agriculture (2005-2009), India Ministry of Finance (2010-2014F)

809

917

1,191

2,048

1,090

1,296

1,440

30

1,514

2014F


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2016 global farming equipment market fundamentals jan 2016

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