Corteva Inc (CTVA) — Q2 2025 Earnings Call Transcript

Good morning, and welcome to Corteva's Second Quarter and First Half 2025 Earnings Conference Call. Our prepared remarks today will be led by Chuck Magro, Chief Executive Officer; and David Johnson, Executive Vice President and Chief Financial Officer. Additionally, Judd O'Connor, Executive Vice President, Seed Business Unit; and Robert King, Executive Vice President, Crop Protection business unit, will join the Q&A session. We have prepared presentation slides to supplement our remarks during this call, which are posted on the Investor Relations section of the Corteva website and through the link to our webcast. During this call, we will make forward-looking statements which are our expectations about the future. These statements are based on current expectations and assumptions that are subject to various risks and uncertainties. Our actual results could materially differ from these statements due to these risks and uncertainties, including, but not limited to, those discussed on this call and in the Risk Factors section of our reports filed with the SEC. We do not undertake any duty to update any forward-looking statements. Please note, in today's presentation, we'll be making references to certain non-GAAP financial measures. Reconciliations of the non-GAAP measures can be found in our earnings press release and related schedule, along with our supplemental financial summary slide deck, available on our Investor Relations website. It's now my pleasure to turn the call over to Chuck.

Thanks, Kim. Good morning, everyone, and thanks for joining us. We plan to update you today on our second quarter and first half performance, share our expectations for the second half of this year and provide some early thoughts on 2026. In the second quarter, Corteva delivered top and bottom line growth and more than 200 basis points of operating EBITDA margin expansion. For both the quarter and the half, we saw net improvement in price, volume and cost versus the same period last year. This should tell you two things. First, there is strong demand for our proprietary technology as our growth platforms continue to deliver. And second, our operational excellence initiatives are creating value. In fact, we exceeded our 2025 net cost improvement target in the first half alone, allowing us to raise our full year target to $450 million from $400 million. Seed continued its impressive performance in the first half of the year with 280 basis points of operating EBITDA margin expansion and pricing gains in most regions. The volume improvement we delivered in North America made a significant contribution to Seed's first half results. We also feel confident that we delivered healthy branded share gains in both corn and soybeans. This is a testament to the Pioneer business model and the strength of our product portfolio. Our outperformance in North America was also visible in our first half out-licensing results, where we achieved a $70 million benefit in net royalties versus prior year, exceeding our own expectations of a $65 million net benefit for the full year. Turning to our Crop Protection business. As the results made clear, our technology remains critical to farmer productivity. Our global operations are also becoming more efficient, which contributed to over 350 basis points of operating EBITDA margin expansion for the half. Productivity and deflation benefits as well as volume gains drove the largest improvements in Crop Protection's solid first half performance. The volume improvement was most significant in Brazil, where we saw strong applications on additional planted area as well as expansion in our direct sales channel. Although the industry is expected to be about flat overall for the year, our Crop Protection business continues to navigate a competitive market, and we expect low to mid-single-digit pricing headwinds in the second half of the year. However, it's worth noting that this is now our fifth consecutive quarter of Crop Protection volume gains with double-digit volume growth in the second quarter. So we are confident we have the right channel strategy and that pricing remains a key constraint to the industry getting back to its normal low single-digit organic growth rate. For Corteva as a whole, we remain on track for double-digit bottom line growth and meaningful margin improvement. In fact, as you saw from our announcement, as a result of our record first half performance and derisked expectations of modest growth in the second half, we are raising the midpoint of our full year operating EBITDA guidance to $3.8 billion, a $100 million improvement versus what we guided last quarter. We're also improving a favorable update on free cash flow expectations and forecasting a full year conversion rate of about 50%. David will go into more detail on all of this in a moment, including our latest views on tariffs, and how these updates fall within our 2027 financial framework. Turning now to the market outlook. Overall, ag fundamentals remain mixed. Demand for grains and oilseeds continues to grow as farmers prioritize top tier seed and crop protection technologies to maximize and protect their yields. However, overall crop prices and margins have moderated. The U.S. mix shift from soybeans to corn played out as expected, and corn futures reflect the fact that crop condition ratings have been running above 5-year averages. Time will tell, but the market is certainly expecting a record harvest in the U.S. We all know that the technology keeps getting better, and farmers know how to produce more every year. But what is just as important is that global production continues to keep pace with record setting global consumption. So much so that stocks-to-use ratio for corn is expected to remain below historical averages, even considering this year's big crop. We're getting close to harvest here in North America, and opening up global markets to allow for trade of these critically needed crops would help American farmers continue to feed the world. Regarding ag policy, we're seeing positive signals on the biofuels front. Corn ethanol in Brazil now accounts for 20% of the country's total ethanol production. And in the U.S., the EPA's 2026 renewable fuel standard proposal should spur additional demand for soybeans. On gene editing, we remain optimistic that policy proposals in the EU for this critically important technology will be passed by the end of the year. We're also encouraged by the fact that the new tax bill includes several changes that provide additional support for farmers in this very important industry. Finally, a few comments on 2026. It's still early, and we need to see how the full year plays out, but we remain constructive on our views for growth next year. And we are on a path that would keep us well within our 2027 framework, which was set last November. We feel good about what we can control, investing and executing on our growth platforms as well as delivering meaningful royalty productivity and cost benefits on a year-over-year basis. We'll also provide more detail on our views of 2026 on our third quarter earnings call in November. In the meantime, we will continue to deliver top-tier technology that gives farmers a competitive edge in achieving higher yields and greater sustainability in every acre they plant. With that, let me turn it over to David for more detailed insights into our financial results and outlook.

Thanks, Chuck, and welcome, everyone, to the call. Let's start on Slide 6, which provides the financial results for the quarter and the half. Sales and operating EBITDA for both the quarter and the half were up versus prior year and better than our latest estimate, driven by a strong finish to North American season and continued execution on controlling the controllables. Briefly touching on the quarter. Organic sales were up 7% compared to prior year, with gains in both Seed and Crop Protection. Pricing for the quarter was up 1%, with gains in Seed partially offset by continued pressure in Crop Protection. Second quarter volumes were up 6%, with Seed gains in nearly every region and double-digit Crop Protection volume growth led by Latin America. Top line growth and meaningful cost improvement translated into operating EBITDA growth of 13% in the quarter and 215 basis points of margin expansion compared to prior year. Focusing on the half, organic sales were up 5% over last year, again, with growth in both Seed and Crop Protection. A continuation of the price for value strategy, along with increased corn acres and market share gains in North America, drove Seed price and volume gains of 3% and 2%, respectively. Crop Protection price was down 2% in the half as expected, driven by competitive market dynamics, mostly in Brazil. Crop Protection volume was up 8%, with gains in nearly every region. Notably, new products and biologicals delivered double-digit volume gains compared to prior year. Operating EBITDA was up 14% over prior year. Operating EBITDA margin of nearly 31% was up about 300 basis points, driven by organic sales growth, coupled with significant benefits from lower input cost and productivity. Moving on to Slide 7 for a summary of the first half operating EBITDA performance. Operating EBITDA was up more than $400 million to just over $3.35 billion. Price and mix, volume gains and cost benefits more than offset currency headwinds. Seed continues to make progress on its path to royalty neutrality with about $70 million in reduced net royalty expense. This improvement was driven by increased out-licensing income in North American corn and lower royalty expense in soybeans. Seed and Crop Protection combined to deliver more than $400 million in productivity and cost benefits, including lower seed commodity costs, raw material deflation and continued productivity action. In the first half, SG&A was up compared to prior year, driven by higher commissions, compensation expense and bad debt. This increased investment in R&D aligns with our target and is on track to reach 8% of sales for the full year. As expected, currency was a roughly $150 million headwind on EBITDA, driven by the Turkish Lira and Canadian Dollar. Both Seed and Crop Protection had an impressive first half performance and delivered double-digit EBITDA growth and meaningful margin expansion over prior year. With that, let's go to Slide 8 and transition to the updated outlook for the year. Our updated 2025 guidance reflects the strength of our first half execution and continued confidence in delivering the second half. We now expect operating EBITDA in the range of $3.75 billion to $3.85 billion, representing 13% growth at the midpoint. This increase is driven by broad-based organic sales momentum and incremental cost improvement benefits. While the majority of cost actions were realized in the first half, we anticipate continued gains in the back half. As a result, we now expect operating EBITDA margin expansion of approximately 150 basis points, reaching the upper end of our prior range. We're also raising our operating EPS guidance to $3 to $3.20 per share, up 21% at the midpoint versus last year. This reflects stronger EBITDA performance and lower-than-expected net interest expense. Finally, we are increasing our free cash flow guidance to approximately $1.9 billion with a cash conversion rate of about 50%. This improvement is primarily driven by earnings growth and lower cash taxes from recent legislation. We're keeping an eye on a few items as we head into the second half. Specifically, farmer economics and liquidity, as they influence amount of prepaid deposits we receive in the fourth quarter. Let's turn to Slide 9 to walk through the key drivers of our first half performance in the setup for the second half of the year. In the first half, we delivered strong execution across both Seed and Crop Protection. North America's Seed performance was particularly strong, supported by increased corn acreage, market share gains and favorable weather. We saw low single-digit price gains in Seed, while Crop Protection pricing was down modestly, reflecting ongoing competitive dynamics. We captured meaningful benefits from controllable levers, namely productivity actions and raw material cost savings, which more than offset SG&A increases tied to commissions, compensation and bad debt. Currency remained a headwind, primarily driven by Turkish Lira and Canadian Dollar. Looking ahead to the second half, our assumptions remain consistent with what we shared in May. We expect corn acreage to increase in both Brazil and Argentina, supporting volume growth in both businesses. Volume growth in Crop Protection is expected to remain strong, particularly in new products and biologicals. On pricing, we anticipate low single-digit gains in Seed and low to mid-single-digit declines in Crop Protection. That said, the magnitude of cost and productivity benefits will moderate in the second half as we lap the deflationary impacts we saw in the second half of 2024 for Crop Protection. Finally, we expect a currency headwind from the Brazilian Real due to hedge impacts. Our first half/second half operating EBITDA split is expected to be aligned with our historical average. As a reminder, we anticipate a typical seasonal earnings pattern with a third quarter operating EBITDA loss at least as large as what we saw last year, and all second half earnings delivered in the fourth quarter. This is after dialing in an expectation that Crop Protection second half EBITDA will be down high single digits due to an exceptionally strong second half in the prior year. Overall, we still remain on track for mid-single-digit growth in the second half. With that, let's go to Slide 10 and summarize the key takeaways. First, while we still have half of the year left to go, we delivered a strong first half, ahead of expectations. Organic sales growth was driven by our leading North America corn portfolio and broad-based volume growth for Crop Protection. We delivered over $400 million in cost savings from lower Seed and Crop Protection raw material costs, along with productivity actions. The combination of organic sales growth in both business units, $70 million in net royalty improvement and enhancements in our product mix contributed to about 300 basis point margin expansion over the prior year. Given our strong first half performance and continued confidence in the second half, we've raised our full year 2025 outlook across all key financial metrics. And finally, we remain on track for $1 billion of share repurchases in 2025. We also announced a nearly 6% increase in the annual dividend, our fifth consecutive annual increase, consistent with our dividend growth strategy. Combined, this translates to roughly $1.5 billion of cash returned to shareholders during 2025, a testament to the strength of our balance sheet and cash flow outlook. With that, let me turn it back to Kim.

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

Distilling the prepared comments, it seems there are four key factors for the second half that are influencing your forecast. One of the main issues is the challenging Crop Protection comparison and the negative pricing in Brazil, which is a significant part of the second half. I'd like to hear more about the Seed acreage expectations for the second half and the anticipated year-over-year increase. Additionally, from a cash flow perspective, I'm curious about the prepays and their expected outcomes, as well as how foreign exchange will impact things. Considering all these points, is this how you’re approaching the potential range of outcomes for the second half, and whether you're leaning towards the lower end, the higher end, or potentially exceeding the higher end?

Yes, this is David. I believe you summarized it well. Looking at the year-over-year results for the second half, I want to remind everyone that typically, the second half accounts for only 12% or 13% of our total EBITDA for the year. This year, our expectations align closely with previous years. In terms of Crop Protection, they had a strong second half last year, so we are comparing against that. We're also considering the cost deflation we observed in the second half of last year, along with the price declines and the foreign exchange impact, which is largely affecting Crop Protection due to their product flows. As for acreage, Judd, would you like to provide an update on the acreage received?

Yes, Vincent, I think it's fair to say we're looking at mid-single-digit acreage increases for summer, which will start going into the ground here in October as well as we move into safrinha, which a big portion of those safrinha orders that will go underground in '26 will be realized here at the end of 2025 from a revenue recognition standpoint when growers take possession. We also see a little bit of a rebound, mid-single digits. We're confident about, maybe a little more in Argentina coming off the down acres that we saw in '24 and the first part of '25. So should be in a strong position acreage-wise and planted area-wise, I should say, hectare-wise and planted area-wise in Latin America.

I want to talk about the free cash flow conversion or the free cash flow guidance. I mean, obviously, on a $100 million EBITDA raise, you're upping free cash flow by $300 million, the conversion is better. Talk about what's going on specifically there? And then the second question is, $100 million EBITDA increase here, Chuck, you sort of alluded to a little bit about '26. Some of that, can we assume you may have gotten in '26, $100 million boost here? Like maybe just think about how you think about if you borrow on a board, but got a little early advance on some earnings in '26?

Okay. Yes. So we'll have David talk about...

If we examine our current cash generation for the first half, we are $900 million ahead of last year. We anticipate that our free cash flow will be around $1.9 billion. The adjustment to our overall guidance is twofold. First, we have increased the midpoint of our earnings guidance. Additionally, with the new tax legislation, we expect to pay less in cash taxes in 2025, which will improve our overall conversion rate by about 4%. Combining these factors, we are now forecasting a conversion rate of approximately 50% for the anticipated $1.9 billion. It’s important to note that this does not mean we are accumulating cash on our balance sheet; rather, it reduces our need to borrow additional commercial paper. Consequently, in the first half, we borrowed significantly less commercial paper, leading to a decrease in interest expenses, which has contributed to the increase in our EPS for the first half. Additionally, our $1.9 billion projection is highly dependent on our cash credit mix at year-end, and we have established a figure similar to previous years. We will continue to monitor this as we move through the fourth quarter.

Yes, it's Chuck. Regarding 2026, it's a bit premature to discuss, but to answer your question, there hasn't been any advances from 2026 into 2025. Let's return to the financial framework we established last November for EBITDA; we're aiming for a $1 billion increase over three years. We've adjusted our guidance from $3.7 billion to $3.8 billion, aligning with that framework. The key drivers for achieving that $1 billion remain consistent with our previous discussions: the three primary growth platforms. We're witnessing strong growth in Seed out-licensing, our biologicals segment, and new products in Crop Protection, all of which exceeded expectations in the first half. We are optimistic about the next two to three years. Additionally, cost management and productivity have been significant focuses in the first half, with both the Crop Protection and Seed divisions maximizing their productivity initiatives. We have a multi-year strategy in place, which includes restructuring within Crop Protection and enhancing Seed production automation. For the first half, we've achieved $400 million and revised our full-year target to $450 million. To meet our goal by 2027, approximately $700 million of the $1 billion will come from this area, and with the current $450 million, we feel very positive. Overall, I'm quite satisfied with our performance in the first half. As for the second half, while it is less critical, we anticipate positive developments in Latin America, particularly Brazil. The order books look promising, and our Seed cost positioning is strong for the second half in Latin America. Ultimately, it will depend on Crop Protection pricing, but we remain on track within our framework for the next two years.

It seems the U.S. Seed price cards are already tracking out from you in certain cases and some of your competitors, and it seems like it's indicating low single digits for both corn and soy, maybe a little bit healthier in the corn side. Could you just discuss kind of the pricing strategy into the end of the season? And also how those embed and how your expectations on a preliminary basis would embed the ramps of both Vorceed and PowerCore, just given your confidence in those launches as well?

Go ahead, Judd.

Okay, Chris. This is Judd. And just as we are launching price cards, you've probably seen some of our brands are in the market. We certainly see some competitors in the market as well. A couple of things from a North America perspective. One, mix improvement with Vorceed and PowerCore. Number two, germplasm performance and the fact that we've continued to bring genetic gain and new hybrids into the lineup that allows us to leverage more price, and farmers are more than willing to share in that as we bring higher levels of productivity. And then there's a little bit of organic price lift in there as well. So the combination of those will get us to low single digits. Maybe about where we were in 2025, maybe a little more dependent on how the year plays out, but we feel very good about what 2026 looks like from a pricing opportunity and our mix.

Yes. And maybe, Chris, just a couple of other comments. So if you look at the first half for Seed, EBITDA is up $250 million or 11% with 280 basis points of margin enhancement. We’re seeing market share gains in corn and soybean, where we’re already number one in both technologies. This business is performing exceptionally well. What's particularly exciting is the growth of out-licensing and its potential. We've already estimated the market for corn and soybeans worldwide, mainly in North America. In Latin America, it represents a $4 billion opportunity. We’ve indicated that we expect to be royalty neutral by 2028. Post-2028, we anticipate even more exciting developments as we gain increased licensing income and more freedom to operate with our technology. I think we’re at a really interesting strategic pivot concerning Seed, where our focus is shifting from in-licensing technology to out-licensing it. That’s the long-term goal for this business.

I wanted to unpack the Crop Protection volume a little bit. I appreciate the details that you provide on Slide 17. And in particular, I want to dive into fungicides, which was up 40%. Can you help us understand how much of that was market related versus your ramp of picolinamide products? I think you're still ramping on Inatreq to some degree and a more recent launch of Adavelt would be the first part of the question. And then looking ahead to next year, you entered into a partnership recently with FMC for fluindapyr. So maybe talk about what that might mean for Corteva and fungicides next year?

Kevin, this is Rob. In the first half, we saw solid performance in fungicides. Reflecting on 2023, we noticed falling prices and chose not to engage in some business due to low margins. Our strategy has involved cutting costs and reshaping our overall footprint and network, which has been effective. This is evident as we returned to the market with our Onmira brand, achieving acceptable returns and re-entering the Brazilian market. This has significantly contributed to our fungicide growth in the first half, as our strategy is yielding results and we're achieving strong volume. Looking ahead to the second half of the year and beyond, we formed a partnership with FMC for a new 3-way fungicide brand, Forcivo, which marks our entry into this North American corn market. This premium product complements our existing Aproach Prima and enhances our portfolio. We are excited about scaling this opportunity and expanding our presence on more acres, providing farmers with additional choices as we develop our fungicide offerings. These are exciting times as we introduce new products in Crop Protection.

Congratulations on a very strong quarter driven partly by share gains. I was wondering if you could opine on what your expectations were for share gains in both corn and soy? And I wonder to what extent, given the fact that we are looking at a potential record harvest in corn, obviously, that's driving the price of the commodity lower? Chuck, how do you feel about what impact that may have on 2026 corn acres?

Yes. So why don't we have Judd talk about performance and the share gains, and then I'll come back and talk about the market.

Very good. Thanks for the question, Frank. And from a share gain perspective, right, we still have to get to the final numbers in terms of where we landed with acres. It does feel like the number we have out there with USDA at 95 makes sense. If you look at what our volume is versus where we believe acres are planted, we've picked up share in both corn and soy. Very, very strong performance on the soy side with not only our Z-Series beans and our Pioneer brand, but our regional anchor brand is performing very, very high. And we are providing our licensees with some of the very best germplasm and product performance in the industry on soy. When you think about PowerCore and Vorceed, performance, again, has allowed us to continue to pick up share. And we've clearly taken a leadership position in the above and below ground protected market. And our doubles or our aboveground performance has been exceptional. So we're excited. Maybe one other piece, our retail partners with Brevant and the initiative and strategic play that we had in terms of entering that retail space with a premium brand has had tremendous success as well, and they picked up some share here in '25. So feel good about where we're at. Chuck?

Yes, Frank, when it comes to the fundamentals, we're seeing another year of record demand for grains and oilseeds, paired with strong production levels. This balance is encouraging, but global stocks, particularly for corn, are tight despite expectations for substantial crops from the U.S. and Latin America. It's interesting that crop prices are relatively low, yet stock levels aren't increasing. A shift in total production or changes in China's purchasing behavior, since they haven't been buying much yet, could lead to even greater strength in agricultural fundamentals. We're monitoring this closely. While it's too early to make predictions for 2026, the current futures prices suggest uncertainty. It seems likely that there will be slightly less corn acreage and perhaps a bit more soybean acreage, but the U.S. is still expected to plant 180 million acres of both. The ultimate deciding factor will be the economics at that time, along with ongoing trade discussions and geopolitical factors that could influence farmers' planting decisions post-harvest and into next year. Time will reveal how this unfolds, but that's where our thinking stands today, Frank.

Chuck, just on Crop Protection pricing. Can you talk to what you're seeing in terms of the price of Chinese and Indian generics? And overall, are you seeing Crop Protection pricing in the back half get any worse or just more stabilize here?

Yes. So why don't I have Robert talk a little bit about what he's seeing in the markets, and then I'll come back with just a few high-level comments on the Crop Protection market generally. Go ahead, Robert.

Sure, David. We believe that Crop Protection pricing will finish the year at low single digits. In the second half, we're focusing heavily on Brazil. In the first half, pricing was mostly flat across all regions, except for Brazil. The second half of our business will primarily be in Latin America, with Brazil being a significant part of it. We're monitoring the situation closely. Imports in Brazil have increased slightly, but we're entering the season with a high supply. The channel is as full as expected, indicating ample supply. Given the economic conditions in the area, we're experiencing pricing pressures from competition. However, comparing year-over-year or quarter-over-quarter as we head towards 2026, pricing is showing improvement. The decline in pricing isn't as steep as it was previously, and we expect it to continue to get better. I'm optimistic about this trend because I believe pricing will improve as supply tightens and exports from China remain stable, even if they are at low levels. These are positive indicators. Chuck, do you have anything to add?

Yes, David, when considering the overall fundamentals of the Crop Protection market, it's clear that while it is well-supplied, there are signs of improvement. We believe the market is gradually enhancing, with the major markets having moved past destocking. We've observed healthy conditions across all channels. We're closely monitoring pricing, which has stabilized in most major markets, and in some cases, it's starting to rise after years of decreases. Brazil remains a concern, as it's currently the most competitive market for Crop Protection, and we've indicated that pricing in the second half could drop by low to mid-single digits there. However, leading indicators show that China’s generic pricing has been stable for four consecutive quarters, which is promising after a long period of decline. Additionally, inventory levels in China are improving, resulting in less product being exported. This situation gives me optimism that 2026 may surpass 2025, although we lack clear insights until we progress further into the second half in Latin America. We'll keep the market updated as we gather more information, but this is our current perspective on the Crop Protection agricultural fundamentals.

Two-part question. Can you talk about how tariffs have affected your supply chain, that is, with different tariff issues arising? What are you doing differently in terms of sourcing and in terms of shipping? And for David, inventories really look like they're in pretty good shape, where year-over-year, they're down $600 million, and they were down sharply in the first quarter. By the end of the year, do you think your inventories will be much lower than they were last year?

Jeff, I'll take the first part of that one and talk a little bit about what we're doing from a supply network to work through these challenges. I think as you look at the overall supply chain for Corteva, recall that we've started in on this strategy a few years ago to improve our resiliency. And in doing that, we've been working on increasing our multisourcing. And as you know, this is not a fast process. With regulatory requirements, as you move a source, you have to get it registered, and it does take some time. But we're making great progress there. And so from a tariff standpoint, we've been able to navigate the water so far. And the impact is, I'm going to call it, minimal from an overall standpoint. And that's really because our supply chain teams have been hard at work well in advance of this. I'd like to say we're that smart, but we were ahead of this before it ever started. And we're in a pretty good position from a multi-sourcing standpoint. So we don't see a big issue right now as it stands from what we know today, and I think we're in a pretty good position to manage these things as we move forward.

Jeff, regarding inventory, yes, thanks for putting out the fact that we are in a very good trajectory so far in this year. We do expect the back half of the year to add some working capital, and we've had a really good run so far in the first half of this year. But by the second half, we expect inventories to be around flat to prior year, maybe down slightly from where we were in 2024.

Chuck, given the strong first half of the year and the raise of the full year guide, I was curious your thoughts in terms of where do you think the market has really surprised you since the Investor Day and since you set the targets for this year? And then you talked about the progressing ahead of schedule on the net royalties as well as on the cost side. Any chance we could see a pull forward in terms of those targets? You mentioned $700 million in costs. Could we get there sooner than originally thought? And same question in terms of the net royalty neutrality target of 2028. Can we get there ahead of time?

Yes. Good question, Richard. So look, on the net royalty, we've already pulled it forward, right? So it was end of decade, 2030, now it's 2028. We're feeling very confident around that timeline. And I think that the first half performance would be reflective of that timeline. From an overall market and what has surprised us, look, I think we've all kind of been focused on the growth platforms, the way we've outlined them. And really, if you've heard me talk before, I'm a big believer in controlling our controllables, and the growth platforms are what we can control. So the new products, I think, are performing well in Crop Protection. The out-licensing, there just seems to be a lot of interest in the major markets to have another set of technology in licensor hands. So I think that that's really good. And we're going to go as fast as we possibly can, and we've already pulled some of that, I think, forward a little bit. When you start thinking about the other surprising area, though, it is Crop Protection. When I look at this year's market being flat, our business is going to be up. And I think that is some of the hard work that Robert just described, which is on the cost and productivity front. So where I think we've probably seen the market in Crop Protection at the low end for a little longer than we all expected. Even though I just said it is getting better, and we believe it is getting better, I think we've been able to find ways to offset that with the levers we can pull, namely on cost and productivity and then leaning into the strengths of our technology. And so the formula is pretty boring, but it's one that has worked for us and will continue. When I look at the targets, all I'll say is that there's a wide range there, and we feel comfortable that we're well within that range today. And we'll continue to update you as we learn more through the business operations.

I wanted to ask a little bit about your second half Seed assumptions. Just as we're shifting to Brazil in this half, you mentioned order books are looking healthy. Can you maybe articulate a little bit more on some of the velocity of those order books? And then specifically on your Seed assumption, it does look like the price expectations are maybe down a little bit more. I think previously you were low to mid-single digits, now or plus low single digits. So just off that easy comp, help us understand the moving pieces around Seed pricing in the back half?

Kristen, this is Judd, and thanks for your question. For the Seed business, the second half is primarily focused on Latin America. Starting with Argentina, we have some products that moved from the first half to the second half as Argentinian growers have adopted a just-in-time purchasing approach. Credit issues have been a factor, and with the currency being more stable, Argentinian farmers are buying closer to their actual needs instead of purchasing far in advance like they did in previous years due to currency hedging. We're optimistic about the recovery in area and our current position. However, to be fully transparent, our product portfolio in Argentina is not where we aim for it to be at this moment. While we've made significant progress, it will take us another year or two to bring new products to market. We are encouraged about what lies ahead, and the team is effectively identifying the right acreage where we can deliver for farmers, although we do have some gaps we are addressing. Shifting to Brazil, regarding the summer crop, we currently have around 90% of our orders secured. For safrinha, we are almost at 40% of orders, which is unusually advanced for this time. We’re ahead of schedule, with firm orders in place for products intended for planting in January, and we feel positive about that. Price expectations in the low single digits seem appropriate due to the competitive nature of the market. Two months ago, the corn market was strong with local prices and demand, but that has softened slightly, though it remains favorable. We anticipate moderate increases in both summer and safrinha acres. Additionally, there has been a decline in summer planted area over the past decade, but we are finally beginning to see an increase in that area. It's a promising outlook, and now we need to deliver on our plans. Thanks again for your question.

You mentioned some upward movement in production there. Are you seeing any interest in your products as an alternative to China generics, perhaps in other parts of the world?

Aleksey, thanks for the question. When you think about China, there's a few things going on here. First, let's go back to a little bit of where we had a lot of excess production. I believe what Chuck's referring to there is we feel like production is tightening up, getting back more in balance, move in that direction. As far as the exports go, most of it is impacting Latin America right now. We are starting to see a little bit into Eastern Europe. But it's manageable and not that much different than normal. It just has a little more noise because of just the climate of the world. But primarily, it's a Latin America phenomenon. Asia has always been a big generic market, so it's nothing new there. So our focus is really on Latin America. The other regions are about normal. And we don't see any big disruptors happening in those regions.

Yes. I think the one key thing to call out is we don't go head-to-head with the generics. We don't have to. We have different customer base. And usually, the customers that we're selling to, we have a direct model. As you know, we rely on that a lot. And the customers that we're selling to want differentiated technology. What the generics do is provide the floor. And so if the floor is stable, that helps everybody. So it's less of a competitive issue for us and a substitution of product, but it helps to understand sort of the overall health of the market.

Thanks. I have two. The first is like, I can guess what your answer is going to be here. But would you say you benefited at all from the absence of dicamba this year? And your thoughts on the potential return next year, given some new registrations maybe moving to the pipe? And then as we look at the margin in Crop Protection, year-over-year, it's pretty impressive, and you discussed a lot of the productivity benefits they're resonating here. So if we think about how that margin should translate to 3Q, can we keep a lot of this traction? Or are they going to be give backs here depending on, like, mix?

Okay. Well, let's start with Judd for dicamba.

Thank you, Matthew. I’d like to share a few thoughts. The EPA took action at the end of July, initiating a 30-day comment period regarding the possible return of a dicamba label. We’ll observe how that unfolds, particularly regarding the restrictions and its availability for growers. It's important to note that we support growers having access to all necessary tools for productivity and crop management. Reflecting on the market entry of E3 and Enlist, we gained significant market share while dicamba was still labeled. Although losing the dicamba label may have had some impact, we continued planting dicamba-resistant beans and adapting herbicide use accordingly. Thus, we aren’t overly concerned that the potential return of the dicamba label will significantly affect us. Our germplasm remains crucial and is currently the best in North America for soy. Our brands and licensees share this sentiment. We have over 65% market penetration with Enlist, and despite the heavy weed pressure from recent rains, we believe our spray rate remains at or above 70%. We’ll have clearer insights once market research is completed. Overall, we feel confident moving into 2026 and beyond, and we’re in a strong competitive position.

Let's discuss the Crop Protection margin and how it aligns with our goals for 2027. Last year, we invested significantly in cost reductions and are targeting around $300 million to achieve our 2027 objectives. This effort is ongoing, and we are working to establish a capital-efficient, lower-cost manufacturing process compared to previous years, which we believe will positively impact our margins in the future. Much of this initiative was set in motion early on, and we are committed to its continuation. When I consider margins for this sector, I think about our growth platforms, particularly our new products and biologicals. Currently, about two-thirds of our portfolio is differentiated, which translates to a gross margin that is approximately 15% higher than our overall average, thereby providing us with significant advantages. As Chuck mentioned, there is considerable demand for our technology. Farmers are facing increasing challenges, including more resistant weeds and pests, especially in Latin America, and require effective solutions. We are excited about several upcoming launches, such as Haviza, our soybean rust product targeted for Brazil, which we anticipate will generate peak revenues around $500 million. Additionally, we've just received permission for Reklemel in California, a novel nematocide that selectively targets harmful nematodes while preserving beneficial soil organisms. This innovative technology adds value to farmers, enhancing both our margins and their profitability. Biologicals represent another key area of growth for us, currently accounting for about 10% of the global market, with potential growth to 25% to 30% over the next decade. This segment offers faster growth and higher margins due to its value on the farm when utilized effectively. Overall, our portfolio positioning is favorable for margin expansion as we continue to reduce costs. We are optimistic about entering the second half of the year and progressing towards 2027.

Just on the realization of COGS benefits from Seed commodity cost deflation, how sizable has that benefit been in the first half of '25? And should that still be a sizable benefit in 2026 given the direction of grain prices?

Thanks, Patrick, it's David. Yes, I would say that we're slightly ahead in total for our net cost improvement in Seed, and some of that is definitely the commodity impact. I think we'll remind everyone that, that commodity runs through our P&L over a 2- or 3-year period, and it has to do with commodity hedges and our inventory positions and so on. So we would say, if you step back and think about the $700 million net impact for a 3-year plan, half of that being Seed, I would say that, that lines up pretty well and gives us a little bit more confidence in the plan for the next 2 or 3 years.

I mean, Chuck, you've been involved in all aspects of the crop market. So your insights here are really appreciated. So there's clearly a disconnect between crop prices and input costs, right? So how does that disconnect get corrected? Will they have to be like a correction in input prices? And related to your company, like how can Seed prices continue to move up in that environment?

Yes. I wouldn't say there's a huge disconnect. Look, we watch farmer margins very carefully. And today, I'd say if you just take the U.S. farmer and say, the Brazilian farmer, they're operating in a market that they've seen many, many times before in their history, right? So we have relatively low crop prices. If they own their land, they're still quite profitable. If they're renting land, margins are quite thin. And in some cases, depending on productivity, they could be negative. And they will farm like that all day long. Look, I'll tell you, I just spent most of the spring season traveling through Argentina, Brazil, Canada and of course, through the U.S. And every farmer that I talked to wanted more of our technology, especially when it comes to Seed technology. They need the yield. When things are this tight, they really need the yield. It could be the difference between being profitable and not being profitable with a few bushels per acre. So as long as we have the price for value, in other words, we bring genetic gain to the farm and that's our promise to the farmer, right? If you buy their new products, yes, they may cost you more, but you're better off financially. It's a very simple process. And so I'm actually very hopeful that we will just continue with this strategy because farmers are asking for it. In fact, I'd say farmers want us to take the returns from our Seed and put it back into our R&D pipeline, and they know that that's not free. So I think we've got a great view here. Do we all wish that crop pricing was a little higher? Absolutely. And like I said, I've got a view today that the fundamentals of this business are actually stronger than the crop pricing. And what the market is expecting is a huge crop. And then the trade uncertainty is also weighing on the futures price. So we'll know a lot more, I think, in the next quarter or two. But with the consumption continuing to increase, I think that over time, this thing will normalize. But I haven't met one farmer that doesn't plan to increase their production and productivity over my travels this year. So hopefully, that helps.

Great. That's the end of our call. We thank you for joining and for your interest in Corteva. And we hope you have a safe and wonderful day.