On the restructuring, for the Crop Protection business in terms of cash outflow on a year-over-year, there are some other puts and takes. But next year should be a good year for cash flow for the company. Thanks for the question.
Operator: Thank you. We’ll next go to Adam Samuelson from Goldman Sachs.
Adam Samuelson: Yes, thank you. Good morning everyone. I wanted to maybe come back to the Brazil destocking and Crop Protection volume outlook a little bit more closely. And maybe just can you be a little more clear on what the volume expectations would be for Brazil and Latin America broadly in the fourth quarter on volumes? And how at this juncture, are you thinking about the shape of that volume through 2024 given what potentially could be more carryover inventory if channel inventories are still high and planted area, especially for corn isn’t actually growing?
Chuck Magro: So, Dave, do you want to cover that and I can provide some comment–
Dave Anderson: Yes, yes., So we will see some growth in the fourth quarter in Brazil. And part of the reason is it compares to — and this is on the crop protection side. It compares to an order pattern and a sales pattern last year, which, as you recall, was much more significantly accelerated. We saw basically a very significant increase in orders last year for Brazil. compared to this year in terms of the quarterly pattern. When we look for 2024, our preliminary thinking, and I think I had mentioned this earlier in the prepared remarks, we’re looking at basically kind of flattish or muted volume growth on a year-over-year basis. We expect some of the macro conditions to continue that are characterized in the second half of this year.
Chuck Magro: Yes. Adam, the way I think about this is if you think about Q4, CP Brazil, the midpoint of the guide or the guidance range we’re going to see continued weakness both in volumes and CP in our business and price because of the influence that that Dave just described. And the channel still has to go through some destocking. So, the way to think about Q4 is continued weakness in terms of volumes and some stress on price because of the destocking that we expect will continue at least into the first couple of quarters of 2024 because the channel is destocking, the rate of destocking, though, is just lower than we had expected. And so when I look at this, I’d say we’re going to get to a destock Brazil. I can’t tell you exactly when. But from a planning perspective, going to assume that at least for the first two quarters of 2024 that we’re going to see some weakness when it comes to overall volumes because of the destocking.
Dave Anderson: And let me correct because I was looking at another data point when I referenced the Latin America Crop Protection, we’re actually going to see volume declines in the fourth quarter in Crop Protection. So correct that.
Operator: Thank you. And next we’ll go to Aleksey Yefremov from KeyBanc Capital Markets.
Aleksey Yefremov: Thanks and good morning everyone. I just wanted to follow up on competitive dynamics in Brazil. Specifically the shift to more generic supply? And how do you think this is going to evolve in terms of long-term competitive status of that market and also pricing next year?
Chuck Magro: Yes. So, I guess at the highest level, we still think Brazil is a fantastic market. It’s one of the only markets in the world that will continue to grow production. And certainly, Corteva is absolutely committed to the market. In fact, if you think about Brazil over the last — in 2015, the last time we sort of had a pause in that market, soybean hectares are up something like 30%. Corn hectors up something like 40%. So, it’s just been a great growth market. And a lot of companies have enjoyed that. But Brazil has never been a straight line up nor will I believe that it will ever be an easy market to do business in. And there’s going to be periods I think where we’re going to see a pause or even a step back. But we’re still highly committed to this market.
Now, when I talk about generics, I guess, let me define it for you. These are organizations that produce molecules that are — it’s not the off-patent companies. These organizations have no local representation in country and no service, which is very important. They ship the bulk molecule into the country and then they assume that it will be picked up distributors or a lot of times it goes direct to large farmers. That’s how we define generics. And generics have always been a part of the global CP market. I don’t think there’s anything new here except potentially one thing. So generics have always been part of the global market. It’s always been a slightly larger part of the Brazilian CP market. Where I think we’ve been observing in the last, I’d say, three months or so is that there’s a new level of aggressiveness when it comes to pricing.
And in fact, we would say that a lot of these molecules, the prices that they’re selling for would not cover their full costs. So, where does this go to your question? We think that this is not sustainable, and there’s a lot of reasons why that is. But there is a performance trade-off for these AIs that I think it’s important. Many of these AIs are older chemistry and so they’ll have resistance issues. And a lot of the farmers, I’d say many or most of the farmers, really want the service. And in Brazil, especially technology does matter. Given the insect and disease pressure that, that country has, you can get away with generics for a short period of time, perhaps and make the cost performance trade-off. But longer term, I think that there’s going to be a growing place for differentiated technology, especially when it’s backed by high service.
And so we don’t think that this is a structural change in the country, but it is a reality today that we have to deal with.
Operator: Thank you. And we’ll next go to Ben Theurer from Barclays.
Ben Theurer: Yes, good morning and thanks for taking my question. Just wanted to — if you can maybe elaborate a little bit also on what you’re seeing in the other markets. We spent a lot of time in North America and South America right now. But looking into some of the dynamics in EMEA and Asia-Pacific, like early stage, how do you think about these two regions looking into 2024? In a similar way, you’ve provided us a framework for North America and Brazil and some of the commentary. Anything you can share on EMEA and APAC? Thank you.
Chuck Magro: Yes. So, let me give you the backdrop and then I’ll turn it over to Tim, maybe you can cover Seed and Robert, you can cover CP. The backdrop, as we said in the prepared remarks, the fundamentals are still they’re still robust. They’re mixed, given the Brazil weakness we’re seeing. But there has been record demand for biofuels. And in fact, feed demand is quite high in North America. So global stocks to use are ticking up a little bit. But overall, what we’re expecting is that there’ll still be healthy farmer dynamics, and that’s exactly what we’re seeing. Farmers are still prioritizing their investments in yield and production. They’re managing this very, very well. And we don’t see a very significant shift in sort of buying behavior, except for the kind of the thing we’ve talked about many times, they move just in time.
