Good day, ladies and gentlemen, and welcome to the Corteva Agriscience Investor Update with Chief Financial Officer, Greg Friedman. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Megan Britt. Please go ahead.
Good morning, everyone. Thank you for joining the call this morning. We're making this call available to you via webcast. We have prepared slides to supplement our comments during the call. These slides are posted on the investor relations section of our website and through the link to our webcast. Speaking on the call today will be Greg Friedman, Executive Vice President and Chief Financial Officer. In addition, Jim Collins, our Chief Executive Officer, will join the Q&A session. During this call, we will make forward-looking statements regarding our expectations for the future. I direct you to slides two and three of the prepared materials for our forward-looking statement disclaimers. All statements that address expectations or projections about the future are forward-looking statements. These statements reflect our current expectations but are not guarantees of future performance and are subject to risks and uncertainty regarding assumptions.
We are providing information on a pro forma basis, prepared in conformity with Regulation S-X to provide the most meaningful comparison. Please take note of the pro forma basis discussion in the slides. We will also refer to the non-GAAP measures. A reconciliation to the most directly comparable GAAP financial measure and other associated disclosures are contained in the appendix of the prepared slides and on our website. Let's turn to the purpose of the call today. With our earnings release on August 1st, we provided updated 2019 full-year financial guidance for net sales and pro forma operating EBITDA. With the recent filing of our 10-Q, we wanted to take this opportunity to provide some supplemental information on our 2019 modeling guidance, a preliminary recap of our midterm financial targets, and a few reflections on cash flow and free cash flow conversion.
Following Greg's remarks, we will take your questions before wrapping up the call. With that introduction, it's now my pleasure to turn the call over to Greg.
Thank you, Megan. With the financial filings accompanying our second quarter earnings release, we provided historical quarterly pro forma data, a full company cash flow statement, and additional disclosures on assumed heritage obligations, namely liabilities relating to discontinued and divested businesses and a pension obligation. I wanted to host this call to help provide some context and perspective on this information to ensure that our disclosures are well-characterized and understood by our investors. To start, I'll provide context on our recent financial filings on slide five. Listed are the filings that have occurred leading up to our spin on June first, 2019, and more recently, the filings that accompanied our second quarter earnings release.
The filings of our second quarter 10-Q on August sixth marks an important milestone in our financial disclosures as a new independent company, as it includes important historical restatements and disclosures reflecting the business, operational, and separation agreements finalized upon spin. Taken altogether, these filings frame the financial history for our new company and highlight some unique conditions for Corteva that are worth exploring in greater detail. I noted a few of these conditions on the recent earnings call regarding the seasonal pattern of our operational results, which is now more evident from the historical quarterly data for pro forma sales and operating EBITDA filed in the recent 8-K. As a spin, we also have assumed obligations where we have made additional disclosures in the recent 10-Q. Additionally, in conformity with GAAP requirements, the full company cash flow statement includes all of the cash impacts for continuing and discontinuing operations.
This means that the businesses that are now with new DuPont and new Dow and not with Corteva are also reflected in the year-to-date statement of cash flows. Along with our financial filings, I'm certain that you have also seen the new information from the USDA, which shares the outcome of the acreage resurvey. This report is a further step towards understanding likely 2019 crop production levels and the trajectory for 2020. With this data and our confidence on our full-year guidance, I will also spend time reviewing a few updates to our financial targets. On slide six, we are now including operating earnings per share guidance and some directional commentary on cash flow, supplementing the modeling guidance that we shared on the second quarter earnings call. First, a brief recap.
We expect to deliver essentially flat organic sales for the full year and pro forma operating EBITDA in the range of $1.9 billion-$2.05 billion. Looking at some key drivers of operating earnings per share for the year, we lowered the guidance for interest expense. Given better visibility into our de-levering of heritage debt, we narrowed our range for interest expense to be $140 million-$160 million for 2019. Other drivers of operating earnings per share remain unchanged from our prior guidance, with a base tax rate of 19%-21% and depreciation and amortization of $1 billion. Note that we exclude all amortization expense from our operating EPS, as that amortization is due to the merger. Amortization is estimated at $400 million for 2019.
In addition, we have provided forecasts for exchange gains and losses and non-controlling interests, which impact our operating EPS. We are guiding diluted share count to be approximately 750 million shares. In terms of our stock repurchase program and potential impact on our outstanding shares, I would expect that we will capitalize on some opportunity in 2019, depending on the current market environment, cash levels, and operating needs. We expect that the size of the share buybacks will largely be muted by the weighted averaging impact, providing minimal change to our share count in 2019. Taking all these elements together, we expect operating earnings per share to range between $1.06-$1.31 per share for the full year. I'll comment on cash flow. In the cash flow statement furnished in the second quarter 10-Q, we were required to show a full company view.
This has resulted in the inclusion of results in the cash flow statement for businesses that are now with both Dow and DuPont, but no longer with Corteva. As we look at this statement through the period end of June 30, 2019, it is not easy to parse the cash results for Corteva given this U.S. GAAP requirement. For cash flow modeling purposes, capital expenditures are expected to be approximately $650 million in 2019, unchanged from prior guidance. Directionally, net working capital is expected to change consistent with our sales and earnings forecasts. This is an area where we expect our disclosures to improve over time as we begin to produce true standalone cash flow statements. I'll turn now to slide seven and cover the walk from pro forma operating EBITDA to operating earnings per share.
On our second quarter earnings call, we shared our results on pro forma operating EBITDA of $1.45 billion, down 6% versus the same period last year. This translated into operating earnings per share of $1.42, down 9% from second quarter 2018 on a pro forma basis. We had several questions on what is included in the operating earnings per share calculation and how it is computed from pro forma operating EBITDA. On chart seven, we have provided a bridge showing how operating earnings per share is calculated. Important to note, amortization is excluded from operating earnings per share, as amortization is due to merger-related asset step-up. Also, an important feature is that exchange gains and losses and the impact of non-controlling interests are included as an element of operating EPS. Turning now to slide eight.
We have also received several questions regarding our expectations for 2019 U.S.-planted acreage for corn and soybeans. During the earnings call, we highlighted that our first half performance reflected our expectation for lower corn and soybean acres in the United States and lower canola acreage in Canada. We did not size the declines, opting to wait for the USDA report. Earlier this week, the USDA released the results of the acreage resurvey in the U.S. Corn acres were reported to be 90 million acres, up approximately one million acres relative to 2018, while soybean acres were reported to be 76.6 million acres, down 12.5 million acres overall. In our first half results, we experienced volume declines in both corn and soybean, which led us to expect acreage declines in both crops.
As we noted on our earnings call, we have seen corn and soybean volumes in North America shift into the third quarter this year. Growers obviously stayed engaged in planting much later into the season than is typical and disproportionately favored corn in late planting. While this is unusual, it can be explained by the surge in commodity corn prices that shifted favor to corn over soybeans. Market Facilitation Program provisions rewarded planting over prevented planting. We have seen some reports suggest that reported corn acreage may imply share loss. It is too soon for us to make statements on market share. As we noted at earnings, we are still recording seed sales in the U.S. in the third quarter.
The final acreage numbers for 2019 will be released in January of 2020, and USDA will have an opportunity to make further updates over the next few months with their crop production reports. We will closely monitor the USDA estimates for the 2019 crop each month. We will also track the ratio of corn to soybean futures prices to understand where 2020 acres may be tracking. In the interim, our teams are focused on delivering against the commitments that we have made using the levers that we can control. Turning to slide nine. As it relates to costs and the current market environment, I'll emphasize the focus the organization has on delivering on our commitments given the current market situation.
This includes delivering on the synergy targets that we have communicated, executing on the additional $500 million in operating EBITDA improvements over the next five years from ongoing productivity actions driven by Execute to Win, integrating the disparate IT systems that we inherited at separation. On merger synergies, we continue to make progress relative to our $1.2 billion merger cost synergy target and are on track to deliver $350 million in cost synergies in 2019. For the first half of 2019, we have realized $200 million in incremental cost synergies in COGS, R&D, and SG&A relative to last year. In the second quarter alone, R&D costs were down $85 million or 24%. SG&A costs were down $28 million or 3%, net of increased commissions resulting from changes in our route to market programs globally.
We estimate that full year R&D spend will be $1.2 billion for 2019, and SG&A will continue to decline in the year. These results demonstrate our ability to dynamically manage the business in the context of challenging market conditions and to remain on track with our cost synergy commitments. A critical focus of the merger cost synergy efforts has been optimizing our global asset footprint across our large functions. We have been able to deliver meaningful reductions in seed production sites, down 24%, R&D sites and breeding stations, down 32%, crop production manufacturing sites, down 7%, and commercial offices, down 55%, all since the close of the merger. Primarily due to the long agriculture inventory cycle, seed and crop protection manufacturing are expected to continue to deliver cost synergies in 2020 and 2021.
In total, we are expecting to see $200 million in additional cost savings in 2020 and $200 million in 2021. These cost savings will primarily trace through the COGS line of the income statement. Turning to slide 10. The top portion of this chart captures the summary for merger cost synergies. In addition to merger-related cost synergies, we have also launched a company-wide effort called Execute to Win, focused on delivering an additional $500 million in EBITDA improvement over the next five years through a combination of sales growth and margin improvement efforts. As highlighted on our August 1st call, this productivity initiative is an effort that seeks to help every employee act as an owner. It pursues the engagement of the entire organization in driving productivity and sustaining EBITDA improvement.
Seed productivity was the focus of the first wave of deployment, and the leading-edge projects are expected to deliver $30 million in EBITDA in 2020. I will share a little more on the seed productivity efforts in a moment. At our main Investor Day, we also highlighted our ERP Harmonization Effort. ERP Harmonization will align the dissimilar IT systems used across the business today and allow process optimization and automation. In becoming an independent company, we now incur certain costs associated with the system inefficiencies that we inherited from our heritage parent companies. We recently announced the launch of an ERP Harmonization Effort targeted at removing $200 million of costs beginning in 2022 through full implementation in 2023. As this summary shows, we are committed to driving sustained productivity throughout our organization.
Over the next five years, we are targeting about $700 million in additional productivity improvement beyond the additional $400 million in merger cost synergies. This is expected to take our cumulative EBITDA improvement since merger to close to $1.9 billion. Turning now to slide 11. Let's take a closer look at how EBITDA improvement will be delivered from our first wave of seed productivity efforts. The seed production process is a good example of where strong cultural reinforcement will help ensure that productivity efforts are sustained given the complexity of the process and the number of handoffs involved. The graphic on Chart 11 shows the end-to-end seed production process. Improvement in one area is often interdependent with improvements in another area, requiring strong overall cross-functional facilitation to deliver sustainable results.
In the last few months, we have convened several workshops involving representatives from all parts of the seed production process to help identify opportunities to improve. For example, in the area on the chart noted as quality check, number 4 at the bottom, effective coordination between the sales team and seed production team has been needed this season to improve return velocity to allow enough time to test, release, and rework seed to reduce discards. This work has well-positioned us for next season and has helped reduce the inventory impact of the unprecedented weather events in North America. This is an area where we see additional opportunity to improve moving forward. Another example is related to product count, where R&D, sales, and product development coordinate market demand signals to drive product life cycles that inform supply plans.
On the chart, the areas involved in this are strategic and business planning, field and plant production, supply chain, and marketing and sales. Here, a large driver of additional productivity improvement is the simplification of the product count to enable more accurate demand assessment, which is expected to reduce production demands and inventory in the future. I'm excited by the progress that I am seeing from the initial wave of seed productivity projects, and we'll continue to provide updates on our progress. Turning to slide 12, I'll cover a few updates to midterm financial targets and a preliminary view of where we see 2020 so far. We have a total of $230 million in EBITDA improvement opportunity from cost synergies and productivity. As we look towards organic growth next year from price and volume, we expect to deliver an additional $100 million in growth from our new product pipeline.
This is distinct from the return of $250 million in EBITDA, as we expect more normal market conditions in North America next year. The $250 million for normalized North America market conditions represents corn and soybean acreage at the 2018 level. We would expect free cash flow conversion for 2020 to also improve, growing to greater than 50% of operating EBITDA, driven by working capital improvement and disciplined capital investment. This brings me to a few important points about our midterm targets. Given our 2020 expectations, we see enough support for next year and beyond to raise our midterm targets. We now expect sales to grow between 4% to 6% in the midterm and operating EBITDA to grow 12% to 16%. We would expect operating EBITDA margins to grow between 100 to 200 basis points, consistent with these overall targets.
Of course, as we monitor the market conditions, we will provide more robust 2020 guidance, which we expect to share in January when we issue our full-year earnings results. As 2019 has proven, market conditions in agriculture can shift quickly. We will still need to see where North America harvest leaves us and how the two cropping seasons in Latin America shape up. On slide 13, I'll now shift over to several cash and valuation topics, starting first with the impact of seasonality on cash flow. Corteva has seasonality in net sales and cash flow, which is primarily driven by the seeds segment. As you can see, about 80% of our seed sales occur in the first half of the year, and the first half seasons are primarily the northern hemisphere. The second half shifts to the southern hemisphere.
As a result, working capital builds through the third quarter with a significant decrease in the fourth quarter, driven by harvest term payments, largely in North America. Similarly, our inter-year debt builds through the third quarter, which we expect to be funded by commercial paper and largely repaid by the end of the year. Chart 14 provides additional information related to the terms of our separation agreements regarding the sharing of liabilities, including those related to PFAS. First, over half of our accrued liabilities for environmental and PFOA are subject to indemnification by Chemours or New DuPont. For obligations associated with other discontinued or divested businesses, Corteva will assume up to $200 million in costs related to these stray liabilities overall, and any additional costs over this threshold will be assumed by New DuPont up to their $200 million threshold.
Any amounts over the collective $400 million threshold will be shared based on the split of 29% Corteva, 71% New DuPont. Under the Chemours separation agreement, Chemours is obligated to indemnify the company for PFAS liabilities subject to the limited sharing arrangement. Under the agreement, for a five-year period beginning July 6, 2017, Chemours will annually be responsible for the first $25 million of any future liabilities. Corteva will be responsible for the next $25 million, with Chemours responsible for any amounts beyond that amount. In our recent 10-Q, we have added more specificity around the terms of our separation agreement that pertain to PFAS. For PFAS, any costs not subject to Chemours' indemnification, including the $25 million I discussed under the limited sharing arrangement, are shared on a 50/50 basis between Corteva and New DuPont, starting from the first $1 and up to $300 million.
Once the $300 million threshold is met, the companies will share proportionately based on a 29% Corteva and 71% New DuPont split. Moving to slide 15, I wanted to share how we think about the calculation of enterprise value for Corteva. From my comments on seasonality and net working capital patterns, recall that our financial net debt at the end of the year is expected to be very small, as year-end cash collections provide for the paydown of short-term debt. In thinking through how to frame total debt for the purposes of enterprise valuation, we recommend looking at rolling four quarters for the balance sheet to normalize the seasonal cash flow pattern. We do not see a rationale for including the pension obligation in debt at this time, as our plan is frozen to new participants with service no longer accruing and the obligation is long in duration.
With that, I'll now turn the call back to Megan to open Q&A.
Thank you, Greg. With that, let's move to your questions. I'd like to remind you that our forward-looking statements apply to both our prepared remarks and the following Q&A. Hannah, please provide the Q&A instructions.
Thank you. Ladies and gentlemen, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please ensure that your mute function is turned off so that your signal may reach our equipment. We ask that you please limit yourself to placing 1 question. We take our first question from Jeff Zekauskas from JPM organ. Please go ahead. Your line is open.
Thanks very much. Since it's one question, it has two parts. When you talk about your cost savings for, say, 2020, do you mean that if everything else in the company remains equal, your EBITDA should improve by the amount of your cost savings, or are there other subtle offsets? Secondly, in terms of your seed pricing for 2019-2020, do you plan to wait until you see the September WASDE before issuing your price cards, or will you issue them in advance of the September WASDE?
Great. Thanks, Jeff. On the first part of your question related to cost savings, you asked if the cost savings that we provided would be an improvement to EBITDA, all else equal. The answer to that question is yes. If all else is equal, then that cost savings would be additive to EBITDA. One thing that I would highlight is that as we sit here today, we have a little bit of time to go through and see how the North America harvest progresses and how the Latin America season, actually two seasons, shape up. Also between now and the end of the year, we'll be able to identify if there are certain headwinds that we will be subject to in 2020. On seed pricing, Jim, do you want to address that?
Sure, Greg. Jeff, it's Jim. Thanks for the question. We kind of tend to anchor on Farm Progress Show as a guidepost there. The difference this year is this year's harvest is going to be late, and we do a lot of our work with growers on value pricing and thinking about product performance. We do a lot of that on the combine as we're watching yields coming off of these fields. I would say that we'll be in a normal range, but we're going to wait to see some of that data in our product performance this year before we go fully out with that full price card opportunity. Stay tuned.
Thank you. We will now take our next question. This question is from Steve Byrne from Bank of America. Please go ahead. Your line is open.
Hi. There were various reports about soybean seed pricing in recent months for the 2019 crop in the U.S. that were pretty aggressively priced. I was just curious as to your view. Do you expect that to remain an aggressively priced market in 2020, particularly with your launch of the Enlist soy? Do you still think you can get eight million acres of the Enlist, or perhaps you could get even more than that for the 2020 crop?
Yes, Steve, this is Jim. I'll take that. As you said, North America was a really tough market, and you had a lot of dynamics that were going on there in 2019. We had the weather effects, as we've talked a lot about. We also had the replant rates that kind of came up, and there were a lot of swapping that was going on in terms of seed maturity ranges. You can kind of clearly see that as an offset in our pricing. On soybeans, definitely there was a very strong competitive environment that unfolded there. You had kind of a large amount of seed quantity that was chasing, as you see from these acreage reports, fewer and fewer acres. As the season unfolded, it got pretty tough.
As we reported at second quarter, we felt pretty good about the way we performed, and we felt like we met some of that competition in the marketplace and held share pretty well. Some of that demand was essentially important for us, the key aspects of that market. I think the thing to also remember in soybeans is our A-Series Soybeans performance. We're at the top of the pack in terms of those comparisons. Even though things got competitive, growers invested for yield, and in our overall kind of review of how we performed, we can see that as well. On our second quarter call, I know we had Tim Glenn with us. He talked a lot about how those strong competitive forces that you just mentioned were really offset by our product performance, and we were able to go out and price appropriately for that.
I would just add, Jim and Steve, the other impact that we really saw this year that was unique is that in 2018, we had a very late harvest and the germination rates of our beans were lower than, not our beans, but the beans in the market, were lower than normal. That actually had an impact on pricing in 2018. We'll have to wait and see how this year's harvest goes in order to make a better assessment on 2020.
Steve, you asked about Enlist. No change in our expectations. We talked about it being about 10% of the market and in our lineup in 2020. We're still planning for that. That seed production is in the ground now. We feel good about our seed planting progress. Obviously monitoring quality very closely. Yeah, we feel good about our opportunity as we have previously articulated going into 2020.
Thank you. We will now take our next question from Christopher Parkinson from Credit Suisse. Please go ahead. Your line is open.
Great. Thank you. You gave a healthy breakdown of key EBITDA considerations for 2020 on page 12. Can you just comment on whether that slide was identical a few weeks ago regarding the normalized North American conditions and inflation headwinds out in the line items? In other words, is the USDA's report on Monday in line with your late July expectations regarding U.S. acreage, the way you saw things transpiring? Regarding the potential benefits that you view as normalized, you mentioned the normalized benefit line is off of 18 levels, but the 2019 corn acreage has now applied up. Can you just help us reconcile a few of those expectations versus where you were in July, understanding there are some moving parts? Thank you.
Great. Thanks, Chris. Let me just start off by saying that our view of 2020 that we're sharing with you today is really unchanged from the view that we had just two weeks ago. When we look at the savings from cost synergies and productivity, those numbers are unchanged. We gave a little bit more specificity today around productivity. We looked at normalized North America market conditions comparing 2019 to 2000, and are really looking at our results versus 2018. The impact versus 2018 is that $250 million that we articulated two weeks ago and we're confirming today. When we look to 2020, we expect that that $250 will come back.
Yeah. Chris, you're obviously asking about the USDA data that was reported, as you mentioned. Like many others, I think we're all still trying to digest that report. As we came out on our earnings call, we actually completed a sales invoice reconciliation right down to the farm level. That's real invoice data that we have great visibility of because of our route to market and how we serve our customers. We had some estimates around acreage based upon that analysis. Again, we're still going to continue to watch as USDA continues to fine-tune their analysis. It's a new methodology that they're using this year, so there could be some adjustments that they make as they firm that up. Personally, it may be a little on the strong side, but it's a little too early.
I would say, as we still think about 2020, as Greg said, we're using a return to about that 2018 level, which is about where we're sitting today with corn and probably a little bit of a return from these numbers on soybeans. We don't need a really huge market recovery off of where we're sitting right now to deliver on the plan that we're building for 2020. It's essentially no change in our expectations based on that report.
Thank you. We will now take our next question from Adam Samuelson from Goldman Sachs. Please go ahead.
Yes. Thank you. Good morning, everyone. I guess my question relates to change in the medium-term guidance that you laid out today on slide 12, and it would seem like the revenue growth expectations changed on the crop protection side, not the seed side. Just trying to understand how your view of the world and your business outlook has changed relative to the last time you formally updated us that, I guess at the May Analyst Day. A little bit more color around the updated margin expansion guidance that you laid out targeting 100 to 200 basis points per annum. Thank you.
Great. Thanks, Adam. I think the changes that you're asking about are really related. What we did is we did increase our crop protection revenue growth guidance from 3.5%-6.5% now to 5%-7%. We increased our overall revenue growth to 4%-6%, which was previously 3%-5%. Our assessment of the market remained the same at 2%-4%. Now, we are still saying that within that range, our above-market growth is still 1%-2%. Your question of what changed and why did we change? Between the time that we came out with our original targets and today, we continue to develop and implement our product launch and our product ramp plans throughout our businesses globally. Those plans continue to evolve, and in fact, we've got to continue to update our plans there.
What we've done over the course of time is we've instituted some route-to-market changes globally. Moving into our direct-to-farmer model in some areas and expanding our retail presence in other areas. We implemented our brand rationalization work that was predominantly incurred in 2019. We have a new view of how our markets will operate going forward beyond 2019. Finally, we talked a little bit about our productivity program, Execute to Win. While some of that Execute to Win productivity is specifically related to incremental EBITDA improvement, a lot of the Execute to Win focus is focused on providing us with confidence in our ability to execute on the plans that we've laid out. By implementing this owner mindset for every employee in the organization, we are now developing better ways to track the progress of our improvements.
Like I said, this gives us better confidence in our ability to execute on the plans that we've laid out. All of that has driven a larger top-line growth for us, as I mentioned. From an EBITDA growth perspective, we were able to narrow the range of EBITDA margin expansion to 100-200 basis points with operating EBITDA growth of 12%-16%, which is up from 6%-10%. We will now take our next question from Mark Connelly from Stephens. Please go ahead. Your line is open.
Thanks. Just one quick thing and then hopefully something more useful. How late do you think farmers actually sold corn seed this year? I would've thought that when you reported on August 1st, you would've had a lot more clarity than it sounds like you did. The second question is, can you tell us how different Corteva's approach to hedging is versus old Dow and old DuPont, neither of whom were really known for their hedging transparency?
Hey, Mark, it's Jim. I'll take the first part of that, and we'll turn it back to Greg Friedman on the hedging piece. Yeah, a lot of the latest acres that we saw were obviously in our soybean business, and we talked a little bit about that in second quarter earnings. We saw that as we rolled then on into July. The interesting point I would make about the USDA data, however, that we were talking about a minute ago is if you look back on chart eight, you can see the states where we saw the largest jump in corn acreage. Those are those deep Southern states. You saw a jump in Texas, Oklahoma, Nebraska. You saw Arkansas, Louisiana. Those acres could have had a tendency to have gone later as well because you have enough days there to support full maturity of a crop.
As we were moving seed around, there was a lot going on in North America as we were chasing all of that. I think the other thing to recognize about some of those states is what we're really focused now on is yield and overall total production that will come off of those acres. That's where we're going to stay focused and monitoring. I'm sure we'll feel that from USDA as well. In those states, an acre, let's say in Texas, is very different than an acre in Illinois. You look at very different seeding rates. You look at very different yield and productivity rates from the combination between a dry land market crop versus a state like Illinois.
Even though we picked up a lot of acres in some of those dry land states, it didn't translate to maybe a large number of new units that went on the ground.
Great. Then on your question regarding hedging. Our hedging strategy continues to evolve now that we're a standalone company. What's great is that being an agriculture-focused company, we're able to deploy programs that really benefit our business specifically. That's an advantage that we have. I'll mention that we do continue to hedge the balance sheet
That we avoid the significant fluctuations that can occur based on the net monetary assets that we have outside the United States. That is a program that we are continuing because there is a benefit to not having significant swings on a monthly or quarterly basis. From a currency or cash flow hedging perspective, there are some drivers that we look at in order to determine whether or not to impact programs like that. One of the key drivers is cost of the programs. We're constantly evaluating that, and like I said, we will continue to evaluate and evolve into a program that allows us to be very focused on our agriculture business.
Thank you. We will now take our next question from David Begleiter from Deutsche Bank. Please go ahead. Your line is open.
Thank you. Good morning. Jim, just on Execute to Win, you gave some nice detail on the 2020 $30 million benefit, beyond that, can you give a little more color on some of the larger buckets you might be expecting to realize in that program? Greg, just on the 2020 bridge, the headwinds of $100 million, any more clarity on some of the input cost headwinds you're looking at for next year? Thank you.
Thanks, David. Yeah. Greg went through one example of where we'll see the front edge of those seed productivity efforts coming through is in the seed productivity area. As you know, those can be a little bit sticky. It takes time, as Greg explained, for all of that to flow through to really impact COGS. We would expect that first wave to continue to really contribute even greater towards that overall $500 million target. We'll have opportunities in the sales markets. How do we drive the penetration of our new brands even further, faster through better selling and better effectiveness? We have opportunities with SKU rationalizations and looking at adjustments to our selling focus. We'll have some pricing opportunities, I'm sure, as we get very focused on a more disciplined approach to pricing for value in the marketplace.
A big area that is just starting to emerge as we dig in is in the crop protection manufacturing arena. We inherited the supply chains of the two different companies, and we kind of got them together and got them up and running. We rationalized a few of the facilities, but crop protection production processes, the process itself, the site where it's made, and that actual flow of goods and materials all the way through the supply chain, that entire thing is registered, not just the finished product. It takes us some time when we make footprint changes to our sites to kind of go back with the key regulators around the world and re-register these new supply chains. It doesn't take the seven years that it takes to register a new product.
It's a year-long process with different batch analyses and quality analysis, but it takes a little bit of time. We've been at some of that work since merger close. Now with Execute to Win, we'll have an opportunity to really accelerate that as well. Those will be the few areas that are kind of top of mind.
Perfect. Let me add a little bit on Execute to Win relative to the benefits that we expect to see in 2020. Then I'll move on to the headwinds question. Just a couple items that I think that are really going to help us have an impact. First is that example of reducing late return write-downs. Not only does that have an impact in the current year, it also helps us make sure that we have the seed that we need to sell for the next year. That will have a benefit to us in 2020. There's a couple other projects that I think are important here that they're simple, but they're really impactful when you think about our business. One in the plant optimization area, we're installing some provisions to minimize the damage to the crop as we process it in our plants.
There's a few changes that we're making in our production process that allows us to get better yield, and that will have a positive impact next year. Thirdly, some projects around freight and warehousing that are just going to have an impact on maximizing, things like maximizing the percentage of shipments that are done at a full truckload level versus partials. While these are efforts that are small individually, collectively, they do have a big impact. That's how we see this starting as early as 2020. From a headwinds perspective, there's several impacts on headwinds, but I would say the most notable headwind is the seed production that comes out of the ground this fall. Yield and quality could have a real negative impact on our cost of goods sold next year. It could have a positive impact as well.
Until we see how that crop comes out of the ground when it comes out of the ground, we'll have to make an assessment then. That's a potential headwind. Another one that is a big one is commodity prices. We are competitive in what we pay for our production. Now while there's a short dip in commodity prices, if you looked at the prices just a couple of weeks ago, there was a big spike. Depending on the volatility of commodity prices, that could have an impact as well.
Thank you. We will now move to our next question. This is from Don Carson from Susquehanna Financial. Please go ahead. Your line is open.
Yes, thank you. I want to go back to the normalized North American market conditions, Greg, $250 million. Your base is 2018, when we had 89 million soy acres. We've got 76.7 this year. Given if there's an ongoing trade war and also given high global stocks to use for soy, does that mean that we have to get back to 89 million acres in 2020 for soy plantings in the U.S. for all of these headwinds to go away? That seems like a bit of a stretch. Then I know most of the headwinds were on the seed side. On crop protection, do you still have excess channel inventories of nitrogen stabilizers and pre-emergent herbicides given the wet spring? Is that a drag on shipments as you get into 2020?
Great. Thank you. The 250 is based on 2018 levels. If we saw a change in acres that would shift from one product to another, that certainly could have an impact as well. Given where we are in trade and the pressure on soybeans, if there is a reduction from that 89 million and an increase in corn, there would be potentially a shift between those two. We're capturing that 250 million as the return of all those acres.
Yeah. Don, you asked about channel inventories. We are watching that. It certainly is something that we're thinking about as a potential headwind for 2020. We've got high stocks as we came through the spring. Our nitrogen stabilizer business just did not have the year that we had originally planned, and tanks are essentially full. There is a fall apply opportunity for that chemistry, we're hopeful that window will show up. The problem with that is, as you know, this season is going to go long. Farmers will delay harvest as long as they can to get the maximum amount of productivity that they can out of that field. We've dialed that into our second half plan. It was part of our guidance that we gave, that Greg gave for full year.
It could suggest that as we start out in 2020, that nitrogen business could also still be a little bit challenged going into the start of the year. On crop protection, there is also a fall apply opportunity as farmers try to get out and take some of the load off of their burndown market going into that spring. Gosh, given this year, we're again hopeful that growers will look for fall windows to set themselves up and prep for the start. We'd expect 2020 growers are going to want to get out. They want to get out early, get a good crop in the ground, and anything they can do to take the workload off of them in the spring and the number of passes they need to make given the weather, they will do that.
We think we've got it dialed in about right for those two expectations, but no doubt the channel is pretty full out there.
Thank you. We'll take our next question from Joel Jackson from BMO Capital Markets. Please go ahead. Your line is open.
Hi. Good morning, everyone. A two-parter for me, too. You talk about $100 million of expected EBITDA growth next year from new product growth. Can you maybe talk about if that is net of cannibalization of other products? You have a footnote about a 200-basis point improvement would eliminate the unfunded pension obligation. What would happen if you had rates drop 50 or 100 basis points? Thanks.
Maybe I will take the last question first on the pension. On slide number 15, we do have a footnote that a 200-basis point increase would eliminate the unfunded pension obligation. The important element here is that assumes all other factors are equal. Relatively, this pension obligation that we're showing here of $3.3 billion was measured at the end of 2018. We will remeasure our pension obligation again at the end of 2019, and we'll disclose the unfunded portion at that time. This 200-basis point comment really reflects the market conditions as of 12/31/2018.
Joel, the new product growth number that you were referring to on chart 12, the $100 million, that is largely attributable to crop protection. Our crop protection pipeline continues to deliver. As we've shared before, those dollars are typically very additive to where we are. We're showing this $100 million as incremental and would be net of any cannibalization that would go on in the portfolio.
With that's actually going to be the last question for the call this morning. We really appreciate everyone taking the time to join us.
Ladies and gentlemen, that now concludes today's conference call. Thank you for your participation. You may now disconnect.