All right, everyone, let's do our next session here. We're going to do a fireside chat with Corteva. Just reported last week, had a nice update. Of course, Corteva is a very leading seed and crop protection company. We're happy to have the CFO, David Johnson, and Sam Eathington, who's the CTO, to talk about the company. We'd like you to make it interactive. Please submit questions on the app if you like, and I'll integrate them into the conversation. David, maybe we could talk about, you just reported last week, gave a nice update. Why don't you give a brief overview of the business and the outlook right now as you see it currently?
All right, excellent. Thank you, Joel. Thanks, everyone, for coming. Really appreciate being here. Yeah, last week we announced a really nice start to the year for us in the first quarter. We were up 15% in EBITDA over last year, so $1.2 billion. I think, again, a good start. When you look at kind of what generated that increase year- over- year, you know, Joel, pricing was pretty much in line where we expected it, so up in seed, a little bit down single digits in crop protection. Again, very much in line where we expected it. I think for us, the two elements that were really, I think, positive would be the volume. Overall in CP, our new products and our biologicals were up double digits. We're seeing nice momentum in our growth initiatives there. We're up slightly in our royalty income.
Again, a nice little uptick there. For 2025, one of our big drivers overall, if you know us, will be our cost improvements. A lot of that has to do with reduced input costs in CP, but also in seed and the commodity element of our COGS. Overall, $400 million for the year. The first quarter, we showed $200 million of positive year-over-year improvement. Again, a nice start there. Some would say, why $400, $200? It's a little bit, we always knew it was going to be front-end loaded, and we saw that in the first quarter. The only one big headwind for us in the first quarter, which is one we knew about, is FX. In total, it was about $90 million, which is a pretty significant, you know, headwind going into the quarter. Again, pretty much online.
We're very happy with the start, you know, again, up 15% year- over- year.
I mean, the feedback that you guys heard and I heard was being too conservative, right? You know, Chuck, the CEO, would say, we don't like to update guidance in May, it's the crops in the ground, the crops maybe two-thirds in the ground now, right? I think I said that before, but I think there was a view that maybe, you know, you guys are being a little conservative. Maybe we could go through some of the components. Because what you've really raised as an element to be conservative is that CP pressure, crop protection, chemicals pressure, pricing pressure, excuse me, is a little bit of a concern. Maybe you can talk about that a bit more.
Yeah, absolutely. I, you know, learning the ag business a little bit. I'm fairly new to the industry, but one thing I have learned is the first quarter doesn't make the year. I think we tend to look at our businesses on halfs. A lot of that has to do with timing, weather and what have you, between March and April can be a significant driver of our business. When we look at the business, we do look at it in halfs. Although we're very happy with the first quarter, that doesn't mean the year is going to lay out exactly the way we want it to. If you step back, our overall guidance, we're saying up 10% in EBITDA this year. We think that's a very strong guide going to $3.7 billion in EBITDA.
When we think about the elements of where we're going to get that growth year- over- year, which is over $300 million, we talked about the cost improvements. I think we started out pretty strong there, but we knew they were going to be front-end loaded. We think right now we're kind of balanced on cost improvements. To your point, Joel, the one element that we would say is a little bit negative from where our original thoughts were is probably the back half of the year in CP pricing. Now we're thinking more low single-digit negative, where perhaps before we were more flat year- over- year. That would be the one offsetting. That would be volume. We're seeing some pickup again. We talked about the double digits in biologicals and new products. Those two pretty much offset each other.
I know some people have a certain opinion on our guide regarding FX being - $275 million for the year. We started off with a 90.
That being too punitive?
Being, yeah, too conservative, perhaps. I think I would only remind everyone right now is the exposures are different as you go through the year. The first half of the year, it's more Canadian dollar, Turkish lira exposure, and we saw that in the first quarter. The back half of the year is more BRL. We did say that we have in about a six times against the US for the back half of the year. Right now the BRL, the spot rate is lower than that. However, if you're going to forward hedge that right now, it's about a 5.96. Could there be a little bit of upside there? There could be, but it's not to a significant number to where we feel like we're going to change our guide in the first quarter.
Actually, you guys had a really good Q1 for CP. Like if you look at some of your competitors like FMC and Bayer, you guys had a really great, I think you're up 15% in Q1. The other competitors there, major competitors, had contracted. Any view why you guys are so much better or just really mix and product portfolio? I mean, FMC has its own unique challenges, but Bayer was also kind of contracting in Q1 too.
Yeah, I think my opinion would be a couple of things. One, I think, you know, more planted acres. I think, you know, farmers are using the products. I think that's definitely the demand's there. I think our new products are doing really well. I mean, double-digit increases for new products and biologicals, albeit this is a small quarter typically for biologicals. I think those are the two strengths. I think that the cost work that the team has done on productivity, footprint, all this sort of thing, you've seen those benefits kind of in the last half of last year, but you see this also, Joel, continuing into the first part of this year. I think that's what's really driving our business at this point in time.
You guys also talked about how tariffs might impact the business by maybe about $50 million. It's not on your guide, and you think you can maybe mitigate it. Maybe any elaboration on that?
Yeah, I can, of course, that was last week. You know, it does change. I haven't checked this morning, but I assume that, you know, Monday was the last time we changed tariffs. Yeah.
Two days early.
Yeah, exactly. If you step back, one good thing about our supply chain is our imports into the U.S. from China are about 2% of our COGS. It is called a couple hundred million dollars, so it is pretty insignificant. When you look at all the tariff reductions and what have you that you can see, that is where we came up with the $50 million input. The other thing that is, I think, really advantages us a little bit, Joel, is the fact that of that 2%, 70% of that is multi-sourced. We are not sole-sourced. Our two largest franchises in Lisson's Spinozans for CP are U.S.-made. We are a little bit less exposed, perhaps, than others. We feel like we are in a pretty good position there regarding tariffs. I think the $50 million, we said that we will look at mitigating actions.
Some of those mitigating actions are the same playbook that anyone else would have. You know, we're going to look at really exercising our supply chain options to see if we can reduce that impact. We're also going to, you know, look at further cost reductions we can do to offset. Pricing would probably, you know, be also an option. The good thing for us, given the magnitude, it wouldn't take much of a price increase to offset that $50 million. I think that's good. Two other quick notes. This is mainly a CP issue for 2025. Really, seed, the only exposure seed might have would be in the future on seed treatment. For 2026, we're really not commenting given the changing nature of this particular issue.
As of Monday, with the 90-day delay and all this sort of things, I would say I wanted to shout out to our teams who do a lot of work, as you can imagine, they've been very busy going through these exemptions and what have you. Probably more of a $25 million-$30 million item now, Joel, versus the $50 million. When we say it was manageable, we have offsets, we're looking at ways to manage it. I think that still holds true today.
Mitigations, just wait a couple of days and see how they work.
We'll see how it goes. Part of our mitigation is mitigating.
We're mitigating. Look at us. We're still here.
Yeah, exactly.
Maybe Sam, you can chime in this too. Let's talk about current grower sentiment. You know, this spring, how's the farmer feeling and all these world things? You know, you've seen any changes in purchasing behaviors, just in time, whatever, like some of the things we've seen, anything different this spring, other springs?
Yeah, no. First of all, thanks, Joel, for letting us come here and chat a little bit. Really appreciate it. Actually, I was just out Monday with a bunch of reps and talking about how their experience with the growers have gone. In general, I'd say growers are still fairly positive out there. I mean, the corn acres are going in from everything we can see. There's probably a little bit of replant coming on some soybeans where we got some heavy rains here and there. We haven't seen a shift in mix. Farmers are not trading out genetics yet for anything else. Everything continues to look good on that front from a seed and crop protection for what we're seeing.
Do you believe the USDA asked for 95 million acres for corn?
Yeah, I'd say it feels pretty close. I mean, there's still some acres that got to go in the ground, so we're not completely in yet. Again, I was chatting with some of our farmers and reps, and they were all believing that number's pretty close, and the order books would say that that feels like it's pretty close. Anyways, got to wait and see till you get that last little bit. Ohio was, you know, they're behind with all the rain they've had. Of course, you got to watch the Dakotas, but they're actually doing pretty good right now.
Any views on South America, Brazil, what you're seeing down there, getting into the Sicerina?
I think we're going to see some acres respond down there and bounce back. We're waiting to see what that number could look like, but we're in a good position if we get to see a little bit of growth there.
In your guide, I think you're talking about low to mid single-digit price mix lift in the second half of the year, right? That's kind of a comment on South America more than anything, right?
Yeah, so it's probably a little bit of a function of what happened, what we did last half of the year in seed last year. If you may recall in the seed last year, we had quite a bit of, I would say, high-cost inventory that we wanted to work through. We wanted to make sure we get that out of our inventories by the end of the year. We did lower our price, increase our volume, and push that seed out so that we started the year, I would say, in a good position. When you look at that year- over- year, it's going to look like an uplift in price because we did reduce the price last year, Joel. You also see, I would say, a little bit of reduction in cost.
We do expect volumes to be, you know, pretty strong. I mean, I think it's moving a little bit more towards corn, which is good for us. I think the ethanol market in Brazil is strong. It might continue to be strong for quite a long time. We are pretty excited about that.
I permit you to submit questions on the app so I can ask the team here. Okay. And something else in South America. Okay. Before we get into a little more discussion on technology and going, maybe talk about free cash flow. You're a relatively new CFO. You know, how do you feel about free cash flow conversion targets? Where you can go over time?
Thanks for the question. Because one of the things that, you know, I think Corteva really sets us apart is the strength of our balance sheet. The other thing that's new to me, you know, coming from the industrial world, I'm not used to the seasonality of cash flows that we have, which is pretty significant, right? You know, first quarter, I would say we're $500 million plus ahead of where we were last year. I think that's trending really well. The things we control in free cash flow, obviously, would be working capital. I think that we're in a really good spot on working capital. On CapEx, you know, as we've grown the business over time, I think we've been very judicious in the way we handle CapEx, keeping it around that $600 million.
I think I feel really good about the fact that we have a strong balance sheet with strong, beginning of the year. That being said, when you get later in the year, it really comes down to this cash credit mix, that happens right at the end of the year that really determines our overall number. I think there's no reason to think that that wouldn't be anything other than typical. Therefore, I think we'll have a strong, cash flow year this year. The other thing too, I think, Joel, you'll know is we do, I think, a pretty good job of deploying that capital back out to our shareholders. You know, we're committed to $1 billion of repurchases this year. We do offer a dividend. We'll spend between $400 million and $500 million on that.
One of the things also thinking about the bridge for this year was we know that Bayer's had a lot of challenges, with the Dicamba, well, the over-the-top, registration or label in the States dragging on. It's cost them some royalty revenue. They talk about the hit to their earnings. You guys really haven't talked about whether you have upside to that. Do you have upside to that? Are you seeing upside to that? Is it in your back pocket? Like, what are you seeing?
I appreciate all the upside questions.
Yeah, yeah.
but,
We can talk downside too.
I will say that, you know, in all seriousness, we are seeing a little bit more of our order book being strong in the South. I think that's.
In the South, yeah.
In the South, which is typically where our competitors would be strong.
On soybeans.
On soybeans. You would say in this trade, we always say about 65% market share. Could it be up a couple of three points? It could be. Is it overall material to our business? Probably not. I don't know.
No, I think you're spot on. That Southern market is historically a very strong big canola market. We're seeing slight shifts in soy and cotton.
Sorry, you're saying, maybe you said, I think you said like a 3% share gain, maybe in the South, in that part. Yeah, yeah, a little bit. Okay. Okay. Let's say that that registration, my personal view is it'll get solved. Let's say it doesn't get solved indefinitely. Is there more share to gain?
You know, we're probably starting to reach a limit with what where farmers are and what optionality they want, depending on what weed controls they're trying to kind of deal with. You know, if we maybe get a few more points here and there, we're probably starting to hit the limit.
The farmers do have options. Yeah, Sam. That's right.
Because remember, you can also, you know, use glufosinate and still use Roundup. And so there's optionality out there.
I know what got a lot of investors excited last year on Corteva was the opportunity for seed cost deflation. You guys talked about your investor day in November about cost deflation coming up, you know, on the seed side and the seed side. Can you talk about that? I mean, we've had corn prices come back a bit, but how much is embedded into 2025 seed cost deflation? How much could you see in the next couple of years?
Yeah, so stepping back to our investor day, we did show a three-year plan of increasing EBITDA by $1 billion. So, and a lot of that $1 billion was this cost element on seed and CP. Of that, you know, billion dollars, about $700 million was cost-oriented and about $400 million's in our current guide. I think it's pretty rolling out the way that we would expect. I think one of maybe the misnomers about this commodity impact to the seed COGS is the fact that it's mainly, it's only 50% of the total COGS. All right. It is a driver of that reduction, and we're seeing that through our COGS number, but it's only half. The other half would be things like labor, transportation, all these other sort of things, which I would say, generally speaking, have been inflating over time. Okay.
There is a little bit of a headwind there. The second thing I will also say is in Europe, a little bit different story. The commodity costs have not gone down in Europe. When we talk about deflation, it is typically mostly for us, the material size of it would be in North America. It is a real item for us. That is why we are driving the 10% EBITDA growth rate this year. Actually, if you look over that three years, it is a 10% growth rate over those three years.
Okay. Okay, why don't we talk a bit now about some of your longer-term plans, some stuff in the pipeline, next few years. First thing I want to talk about is just genetic gains. Typically, you know, we've seen trend yield goes up, I don't know, a percent a year. It seems pretty reliable. It's always weather shifts, but anyways, trend yield. We've got maybe something in corn happening in the next bunch of years between reduced stature or short stature corn, but like, are there limits to the current system? If we don't go to short reduced stature corn, can we keep pushing yields higher? Or do we have to, or is, and this, the new systems might be a step up? Like, how do you think about it?
Yeah, no, great, great question. If you kind of step back, remember, as Joel said, corn yields historically have gone up, let's say 1-1.5% on aggregate. The U.S. average has gone up. It varies by regions. Some areas like, you know, Illinois, Iowa, for example, would have a little faster growth rate than maybe some of the dry land market would have at the end of the day. The way we've historically increased that yield is farmers put out more plants per acre. They increase their, what we call their plant density. They, you know, one year they plant 30,000 seeds, and next year they might plant 30,300 seeds, and the next year is 30,500 seeds.
We have bred corn to actually just tolerate higher plant density, which lets it then produce more yield. We do not see a limit to that today. You know, average yields in the U.S. are, let's call it 180. Record corn yields are 637, I think right now. Plant physiology studies would say corn yields could be 1,000 bushels per acre. We still keep seeing in our research plots, we just keep seeing our ability to increase yield year- over- year. What are the impacts to the system then, right? What happens typically if you think about planting and out in mainly, let's just talk U.S. corn, row spaces used to be 40 inches and they went to 38, they went to 36 and they are kind of 30. That has allowed us to space the plants out better within the row.
You start to get to, let's say, 42,000-44,000 plants per acre, that row spacing becomes a problem. We are going to have to do something to change that in the system again. Before we get there, this is where reduced stature corn is really nice. If we make that plant more tolerant to that pressure of higher plant density, we can actually put more plants out there per acre. We are going to see, I think, a little bit of a step change in that plant density, which changes the yield potential of that crop. Farmers will be able to manage it the same way, the same equipment for quite a while. At some point down the road, we are going to have to talk about changing row spacing again in agriculture, but we are not there yet. No limits.
I haven't seen one yet. I'll be retired, probably dead before we had a limit in corn.
I mean, gene editing is getting a little more interest lately. Some regulatory hurdles maybe will start to come down. I think Chuck's talking about the, he needs a license to operate, but, you know, how might gene editing affect that and some of your stuff in your pipeline?
Yeah, no, you're spot on. Of course, the regulatory world continues to be pretty dynamic, maybe not quite as much as tariffs, but pretty close. We know Europe, they have now entered what's called the trilog phase where the three bodies are negotiating the last stage of the gene editing regulatory. Every indication is probably Europe will probably reach some agreement this year that they would actually be in a position to say you could use gene editing in agriculture in Europe. Now it'd be still a few years as they work out how to implement all the policy and the laws and the process. That's a huge shift, right? I mean, they've never allowed biotech to be grown in Europe, other than a few small places in Spain, for example.
The ability to use gene editing, not only import, but cultivation in Europe would change the game. We're seeing a lot of positive movements in China around their gene editing policy. India, if you just watch the news, they came out and talked about they've created some gene-edited rice that's going to help in the productivity. You're seeing a lot of positive movements. Why that matters is because then gene editing is really the next extension of plant breeding. It's the next way we get to accelerate our plant breeding programs. Just like 25 years ago, it was DNA and marker-assisted plant breeding. Now it's gene editing is the next wave. We're doing a lot. We talked about our genetics platform at the November investor event where we've built a whole ecosystem around it. We're investing in it. We're doing all sorts of experiments.
We've got a lot of stuff in the field. We're focused on changing disease and changing yield potential of the crop. I think what it lets us do is accelerate that genetic gain. Instead of 1% a year, you know, how do we get this to 2% or a little bit more per year? That's what it ultimately can do.
When do you think we first start really communicating some results and some gene editing work?
Yeah, you know, we chatted a little bit in November about the platform, the scale and the scope and our targets. We showed some results about our disease program. What we did in the disease area, which, again, one of the challenges still in plants is, as the environment changes, pests move. We see more and more pressure from insects and disease problems on growing any crop anywhere in the world, not just corn, but any of your crops. That's always a challenge as a plant breeder to work with all that disease resistance that's genetically in the plants. We simplified that. We call it our disease super locus, where we took all this genetic resistance that's in plants naturally, and we put it all in one spot in the DNA. It is really simple for us to work with it.
That works. You can come to Iowa and see it if you want. It's quite impressive. I mean, that's in the field. It's in plants. It's in products. We're just working through the last steps of regulatory around the world so that if a farmer grows it, that grain could go to Mexico or Chile or China, excuse me, wherever it may end up being. The yield stuff, we'll probably, you know, we got a lot of stuff in yield trials going right now, probably, you know, in 2026 when we have our next big showcase, 100-year Pioneer celebration, we'll probably let you all see some of that actually in the field.
Day one, one day one. Okay.
Yep.
We talked about gene editing. Let's talk about, you talked about a lot of sort of post-2027 growth drivers at your event in November. I'm just going to name them all to sound smart, okay? Gene editing, reduced stature corn, which is kind of gene editing, biofuels, hybrid wheat, biological growth, although you have some of that now, some new traits, Cereviza, Canraza. So which bucket do you think has the highest expected magnitude of contribution? What's the biggest blockbuster there?
Maybe put it in time frames. If you think about, say, next five years, Haviza is going to be a great molecule. It's a fungicide for us, for Asian soy rust. We'll be launching it in 2026. It's going into Brazil. That's a big product for us. Canraza, it's an insecticide it'll hit later in the decade. It's going to be a great product for us. And put in perspective, Haviza's, we've talked about that fungicide being a billion dollar sort of franchise as part of that, excuse me. On the seed side, hybrid wheat, where our plan is still to launch in 2027, it looks great. You've probably heard a lot of people talk about hybrid wheat. What we announced was a very different hybrid wheat. We did a very different genetic mechanism to make ours very stable and usable.
The problem with hybrid wheat has been you can't get sterility and you can't get seed production. The cost of goods just chews up all the advantage that you get from the yield increase. We think we've solved that. We created a different mousetrap. We've tested it now for three or four years across lots of germplasm, lots of different backgrounds. It looks great. You can come see that if you want to come look at it in Iowa or Kansas where we got trials. We see that 10-12% yield increase, but we can actually go ahead and produce it. That is why we're so excited about that. Once that one gets rolling, that's a billion dollar product, we think. It probably does not peak until we get into the next decade, you know, by the time we ramp up and convert things.
Total magnitude, you know, you give us a decade, gene editing is a big, big deal, right? I mean, if we, if we double yield gains in crops, there is a lot of value creation.
Double the yield gains.
That's right.
Two, three %.
Exactly.
Yeah.
Change disease profiles, quality profiles. Gene editing is a, is a big deal.
I mean, it's great for humanity if you can double your, the 2-3% yield growth. It's bad for commodity pricing.
Yeah.
Bad for your returns. Like, how do you, how do you think about, is it circular?
It, you know, look, it could be. Of course, the hybrid wheat, we think we're going to get a 10-12% yield increase there. What I think it opens up though is optionality of what you do with farmland. Thinking about hybrid wheat, the winter crop, we actually now have our biofuels, our winter canola concept that can slot right into those acres. Part of what we're doing is creating optionality of what you do with that land, whether you want to produce different foods, you want to go ahead and use that commodity different ways, or you want to produce energy, we're creating that scenario. I think that's a good thing at the end of the day.
Joel, I'd just add, you know, the demand for crops and oilseeds continues to go up every year. I think there are different drivers to that, but biofuels, I definitely.
It's a big driver.
One. Assuming that that trajectory of demand keeps on there, I think, you know, that with the gains in yield, you know, commodity prices will be fine.
You guys introduced like, not necessarily a concept, but you gave it a name. It was, in November, it was, food for the summer, fuel for the winter, right? Because you'd be growing like a cover crop. Sure.
Hopefully not just to keep carbon emissions down, but then be able to sell, maybe get a carbon credit for that, but then be able to sell like a decent cover crop and make money on it.
Right.
Maybe talk about that kind of concept.
Yeah. This is what we call our winter canola project today. It is a collaboration with Bungi. We go down into Tennessee, Kentucky, kind of the mid-south is where we started. This last year we have 35,000 acres out with growers. Our winter canola, which is a crop we grow in Europe, is called oilseed rape. We can bring that to the U.S. A farmer can plant that in, say, September, October. It grows. It is a cover crop officially, but it produces an oil crop. We are getting about, you know, 50-60 bushels per acre on our trials and even the last couple years results. It is a great cash crop for farmers.
They get to harvest it in right about now, so they can still plant soybeans if they want to come back in, which is what a lot of them are doing. They are able to take that oil and our current collaboration, Bungi takes it and crushes it. We basically, that can go into a biofuels market opportunity. What is nice about it is there could be subsidies around the, you know, being a cover crop, but actually you do not need it to make money as a farmer. They are actually making a nice return on that crop, even more than they were on their hybrid wheat or their, excuse me, their winter wheat.
Because it does feel like, I mean, I did a lot of work on the thematic two years ago, three years ago about no-till cover crop, all these carbon programs, but it was difficult. Farmers do not seem to want to do it. They are worried it could be a burden. The yields might go down for a bunch of years. The incentives were not great. Obviously there has been a bit of a less focus on ESG in the last couple of years. It makes sense that, you know, you would have to actually try to grow a crop in the winter that you make money.
Yeah. Yeah. No, this crop, we started with the goal that a farmer has to be able to make money without subsidies on it, and that's what they can do.
They'll probably get subsidies in the end anyways, right?
That's it. Take it, take it if you get it.
Yeah. Yeah. For sure. Okay. Talk about biologicals a bit. Maybe before we talk about, so you did a couple of acquisitions over the last couple of years, Stoller and Simborg. Maybe talk about that. How's that integration going? What lessons have you learned? What's the remaining low-hanging fruit?
Yeah. Yeah. Stoller, obviously a Brazil company, had a really big footprint in biologics in Brazil. They had a very novel way of how to interact and sell with the customers out there. Simborg was a startup in Spain that had some neat technology, which we call Utrisha N, which is a microbe that helps produce more nitrogen in the plant. It was a neat story of how those came together because, as we've integrated them, we brought our regulatory and formulation capabilities to expand the platform of Utrisha N. We've actually improved cost of goods. We've improved stability. We've deregulated it on a lot more crops and applications. Stoller has been able now to take that to the field, especially in Brazil. We're seeing, you know, four-six bushel yield advantages in corn and soybeans in Brazil.
We're excited about this year. We think this is a good year to really test it in Brazil. We've seen good uptake so far. We'll see how the rest of the year goes. It was a nice learning of a company with the right technology, but they didn't have the scale and the ability to do anything with our ability to apply certain technology to make it better and then a sales force that could actually go out and deliver it. We're seeing it. We're seeing a nice, nice uptake there.
Stoller got you the channel, right?
That's right.
Simborg got you a lot of IP.
Simborg had the microbe.
Yeah.
That was turned into Utrisha N. They had the organism. They had done the initial research, testing, proved it worked, and then we helped scale it and deregulate it.
Okay. One of the things you guys also talked about last year was you were, you know, increasing the R&D spend, but decreasing the SG&A spend. Maybe talk a little bit about that balance.
Yeah. I mean, right now we, we're basically, I would say in 2025, as a percentage of sales, Joel, about flat. So our R&D will be about 8%.
Yeah.
You know, I think 22 or whatever in total for SG&A. I think right now it's fairly stable, growing, but less than our sales growth. I think the most important thing Sam and his team are doing is getting more for those dollars than we've had in the past. I think we're using artificial intelligence, all these other different tools to make that spend really valuable for us.
Yeah. We're constantly looking at, look, driving efficiency in the R&D program. I will go put our results up against anybody in the industry. I think for what we spend, our output and effectiveness is quite, quite good. We continue to pressure test that and make sure it's right. You know, even every year we take a hard look at every project.
The capital allocation on every project has to be reviewed every year, not only technical feasibility, but the business feasibility. There are projects we stop. There are projects we invest more in.
Right. Just to give everyone a magnitude scale, that's about a $1.4 billion spend in a year.
Actually, I'm talking about another deal like that's upside, another one of an upside, the royalty, the seed royalty, excuse me, opportunity, which, you know, you've reduced your outflow by $100 million, $100 million, maybe $500 million the last number of years. You have another sub $300 million to go. You've gone to hit royalty neutrality in, I think you're saying by 2028.
2028.
2029. Yeah. 2028. Talk about to get that, because now it's about the next step, it seems to be about licensing your own traits and germ a bit. Talk about the next step, not just reducing your outflow to Bayer and others, but now actually getting paid for your technology and how do you get that the next step?
Yeah. No, you're spot on. We went from an in-licensing company and paying a lot of royalties to kind of.
We had $700 billion and now we're net $200 billion at the end of last year.
Yeah. To where really if you kind of look at where we've moved as a company, we've developed and we've co-developed some of the traits we have currently. As we get to the end of the decade, these are 100% developed by Corteva. The ones that matter, corn insect control, which we have our own above ground and below ground traits. You can go ahead to your point, Joel, and out-license those traits now to other companies. We have soybean insect control that builds off our Concusta in Latin America. We have another HT4 herbicide combination coming that builds off of Enlist. The key ones of herbicide and insect control, corn, soy, and cotton, as we turn the sort of corner in the decade, will actually be proprietary, our traits.
Now we still may in-license somebody else's trait to make the right stacks and combinations and durability, but we now have a whole bunch of traits we get to out-license and charge to other people too.
It's a multi-billion dollar opportunity that we haven't really participated too much in. It's about North America, Latin America. There's essentially the market today.
To get to net royalty, whatever, zero, net zero, by 2028, does that incorporate, do you need to be able to sell some of your germ to private label, seed players, like some of the retailers, or can you get there by 2028 without doing that?
We would have a small amount of out-licensing in corn in that number. We would have some out-licensing in soy.
That you do not have now.
That we're growing right now.
You're growing, yeah.
Again, it looks quite feasible and it's not a very big number at the end of the day.
It's not, it's a small part of the royalty.
That's right.
Exactly. Okay. Fair enough. Okay. So when are we, okay, because I think that's interesting. I think one of the goals was, you know, like, you know, Monsanto and Bayer is very good at getting their germ into lots of private label. You think with Pioneer being such a strong competitor and product that there could be a lot of upside to that, you know, opportunity. And especially Chuck, knowing the retail game, you would think, you know, he would have been pushing that more. I was, that's, I was, it'd been a fascinating topic for me.
Yeah. Of course we created a Brevant brand.
Right.
Which is the brand we go into with retail.
That was the Dow, what was it? my good tech brand.
My good tech. Yeah.
That rebranded.
Yeah.
Yes. You replaced it with better.
Genetics.
DuPont. Yeah. Let's just say it. DuPont Genetics.
Yeah. Exactly. We moved Pioneer type performance.
Yeah.
Into Brevant with our PowerCore and Lists and Chrome type products. We've seen great performance. I would say the retailers, they go out and test and evaluate and check and make sure it's right. The feedback's been very positive about the performance they're seeing. We think there's upside there in the future as we continue down that path.
I mean, Corteva's been a good stock. It's outperformed a tough crop input space for a lot of years. This year is obviously a good year for crop input stocks, but I mean, the last few years, what do you think is the biggest misconception? I mean, you're newer to Corteva. What do you think is the biggest misconception about Corteva when you talk to investors that, you know, you want to correct?
I guess for me, it's just, you know, it's a technology company. And I think sometimes when you get into the ag space, maybe they don't realize it as much. I mean, everything Sam's doing, I mean, how many companies have multiple growth opportunities that start with a billion dollar opportunity here and there? I think that the thing that takes a little bit of time is these things are, I'm not used to, you know, in my old days, the long term was two to three years, and now we're talking thirties and thirty. First thing I ask Sam when he gets excited about things is like.
Like 36.
Yeah. Exactly. It's like.
I'm talking about 36.
I'm excited for six and all that. Yeah. I think all this layer on top of each other. I think we have a lot of, we're controlling our controllables. I think we're a really well-run company, which is on one end, but we are a technology company on the other hand. I think it's a really exciting place to be.
All right. Thank you very much guys .