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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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| Deere & Company | December 2015 / January 2016
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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| Deere & Company | December 2015 / January 2016
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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| Deere & Company | December 2015 / January 20167
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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| Deere & Company | December 2015 / January 2016
World Farm Fundamentals
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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World Farm Fundamentals
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
Deere & Company | December 2015 / January 20169
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| Deere & Company | December 2015 / January 2016
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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| Deere & Company | December 2015 / January 2016
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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| Deere & Company | December 2015 / January 2016
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
Deere & Company | December 2015 / January 201615
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
Agriculture Industry Services
Source: The World Factbook, 2014 est.
-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
Deere & Company | December 2015 / January 201616
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
Source: IHS Global Insight November 2015
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| Deere & Company | December 2015 / January 201617
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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| Deere & Company | December 2015 / January 2016
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
Deere & Company | December 2015 / January 201619
17%
23%
60%
Labor Composition
Agriculture Industry Services
Source: Brazilian Institute of Geographyand Statistics (IBGE), 2012
Source: IHS Global Insight November 2015
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
Agriculture Industry Services
Source: Brazilian Institute of Geographyand Statistics (IBGE), 2014
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Brazil
Ag Economic Data
Deere & Company | December 2015 / January 201620
Production Net Exports
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
Number of farms ~ 5 million
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)
Share of the World Market
Crops included: Key Grains, Ethanol and Sugar
Source: IHS Global Insight November 2015
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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| Deere & Company | December 2015 / January 2016
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
Deere & Company | December 2015 / January 201622
Source: IHS Global Insight November 2015
4%
36%
60%
GDP Composition
Agriculture Industry Services
Source: The World Factbook, 2014 est.
10%
28%
62%
Labor Composition
Agriculture Industry Services
Source: The World Factbook, 2012 est.
(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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Production Net Exports
Total Grains 10% 19%
Wheat 15% 21%
Barley 22% 30%
Corn 4% 17%
Sunflower 53% 26%
CIS
Ag Economic Data
Deere & Company | December 2015 / January 201623
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)
Utilized agricultural area ~ 560 millionhectares
Arable land ~ 195 million hectares
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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| Deere & Company | December 2015 / January 2016
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
Deere & Company | December 2015 / January 201625
Source: IHS Global Insight November 2015
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%
Source: The World Factbook, 2012 est.
9%
46%
45%
GDP Composition
Agriculture Industry Services
34%
30%
36%
Labor Composition
Agriculture Industry Services
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 (%)
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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)
Deere & Company | December 2015 / January 2016
Source: China Ministry of Agriculture
China
Government Support of Agriculture
27
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IndiaMacroeconomic Data
Deere & Company | December 2015 / January 201628
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
Agriculture Industry Services
49%20%
31%
Labor Composition
Agriculture Industry Services
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
Deere & Company | December 2015 / January 201629
Crops included: Corn, Wheat, Rice, Oilseeds, Cotton
Source: IHS Global Insight November 2015
Source: FAO, Tractor Manufacturers Association of India, Indian Ministry of Agriculture
Utilized agricultural area ~ 180 millionhectares
Arable land ~ 157 million hectares
Annual industry tractor sales ~ 550,000units
Average farm size ~ 1.2 hectares
Number of farms ~ 129 million
Share of the World Market
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
Deere & Company | December 2015 / January 2016
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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