All right. Next we'll stay in seeds and chems, we're gonna go to Corteva, of course, one of the leading ag chems producers in the world. Has a very promising multi-year growth and margin opportunities, very robust seed and traits portfolio, and attractive Crop Protection pipeline. All good things. Please welcome, we've got, the CFO, Dave Anderson. We have CTO, Sam Eathington. Sam, I think you're first gonna present, a few minutes, some highlights. We're gonna dive into Q&A with Dave and Sam. If you please, you had great questions the last couple sessions, please submit your questions via the app or raise your hand. We'd love to integrate them.
Great.
Sam.
Well, good morning, everybody, Joel, thank you for the opportunity to be here. Dave and I are happy to take some questions and talk to you a little bit more about Corteva. I'll just be real brief, but just a couple things to set up. One is, you know, as a company, last year we really started on a journey of looking at our strategy and focusing on what our portfolio should look like. We did a lot of simplification of our portfolio in both Seed, like where to play, what countries, what crops, Crop Protection, what actives, especially actives that had low margin opportunities for us.
We're on a journey really to shift away from that to deliver sort of a higher- quality earnings and margin improvement, and we're starting to see that already showing up in the business. The other real big journey we're on is in the biotech trait platform, where as a company we have historically in-licensed a lot of biotechnology and pay a lot of royalties on those traits. we're really in a transition now where we're starting to see some of our own biotechnology traits or some co-development traits, Enlist soybeans being a really great example of that, where it's, you know, we expect it'll be on about 50% or more of the market in North America and sort of can test a similar sort of platform in Brazil. This is really shifting us to reducing our trait royalty structure.
This year it'll be about $100 million of reduction to the company. I think that grows to almost $250 million in the next year or two after that for a total. It also unlocks out-licensing opportunities for us. As we start to get our own traits, we can create our own sort of stacking strategies and directions. Now all of a sudden we're out licensing, and that's another growth opportunity for us as a company. On the Crop Protection side, we're on a journey of how do we continue to create more patented, differentiated products out of the pipeline that really have a favorable sustainability profile.
We set some very aggressive goals about sustainability criteria and characteristics. We're now 100% of our Crop Protection pipeline achieves those sustainability criteria, but it's also driving new product sales, which this year will be about $300 million of this new differentiated material. By about 2025, we'll look quite different. About two-thirds of our portfolio will be patented, differentiated, Crop Protection material. The last area just to kinda hit on is we had an Innovation Update just I guess it was just last week.
Yeah
... as time goes. It was a build off of what we did in September 2022. It really is about how we are an ag technology company. We rolled out some metrics about return on investment of our R&D program. I think it was the first time we've showed some of those metrics, and we look quite good relative to the ag industry. We also framed up that to achieve our 2025 financial goals and targets, we've already invented those products. We still gotta deliver a little bit to our commercial team, but those products are there. We're launching things like PowerCore, Vorceed, we have Optimum GLY in canola. We've got new products in our Crop Protection platform that launch like Adavelt. We've got the material to deliver that.
We focus on 2035, which is this journey about biotech trait royalties and CP differentiation that I just mentioned. We also opened up that, look, there's a lot of opportunities in emerging tech like gene ` or new frontier markets with energy, renewable energy shifts that are occurring, what we see in especially proteins and of course the biologic space for us. These are all other fabulous growth opportunities for us as a company. Overall, company looks quite good, and we feel quite confident about our 2025, our pipeline out to 2035, and new opportunities on that. With that, turn it over to Dave and Joel.
Great. Remember, you can submit questions or raise your hand. Okay, let's start short term. We'll kind of move out to long term, some of the great things in the pipeline. 2023, talk about 2023, sort of what the drivers and some of the headwinds and tailwinds that are sort of setting up for the outlook this year.
Sure. Well, just as a reminder and, as Sam said, we did raise our guidance, Joel, as you know, for 2023 when we released earnings week before last. We're now looking at 7% in terms of top-line growth year-over-year at the midpoint of our new guidance, so $18.75 billion, you know, midpoint of that guide. That's impressive. We're looking at EBITDA growth of 13% on a year-over-year basis. You know, two things that really contributed to that guide raise, and then we can come back and talk a little bit about what's new, what's different, you know, some of the things that we're seeing over the course of 2023. Two things. Number one, as you'll recall, and Sam stated the close on our acquisitions. March 1, 2023 we closed on Stoller and Symborg.
Stoller is significant for us in 2023. It'll add about $450 million of revenues, about $90 million is our forecast of EBITDA contribution. These are real businesses, right? These are really creating for us, I'll call it critical mass in terms of our positioning in the biologics segment of the Crop Protection market, which we think is gonna be a fast grower as well as a significant value contributor to us, to our customer franchise. The second component of the guide increase. By the way, on the EBITDA, we went from $3.5 billion at the midpoint of our prior guide for this year, up from $3.2 billion last year, 18.5% EBITDA margin last year.
We took our guide up to $3.65 billion, a $150 million increase. $90 million of that's the biologicals acquisitions. The rest of it is improved operating performance. We had an overdrive in the first quarter. Some of that is translating into full year benefit. 2023 is shaping up to be another good year for the company, a little different than we anticipated on the front end. Number one, we've got less corn production in Europe as a result of the Russia-Ukraine war. Reduction in acreage planted, as you know, as well as a shift to sunflower out of corn. Of course, in Latin America, specifically Argentina and southern Brazil in terms of drought conditions and the impact there. We're looking at increased acreage, as you know, in the U.S.
Our forecast, consistent with USDA, is 92 million acres for corn, which is a positive, obviously, for us. We're also seeing, now in this season to start, good plantings, and I'd say, Sam, consistent with five-year average in terms of row crops, in the US, in North America. The other thing is we're seeing a bit of a change now in order patterns. The term we've used is normalization. This is particularly, we're seeing this in Latin America, specifically Brazil, and what that's doing is it's causing a shift in timing from 1H to 2H in some of that order pattern, and therefore some of the revenue. More like historic, because 2022 was a bit anomalous in terms of what we saw in terms of that demand pull. We've forecast in terms of inflation, continued high. Obviously commodity cost impact on Seed.
We're more than offsetting that in terms of pricing. Saw nice margin growth in Seed as well as Crop in the first quarter. The forecast is to continue for that for the full year. On the Crop Protection side, you're gonna see a lowering of the rate of inflation over the course of the year, to, you know, significant reduction in the back half of the year in the fourth quarter. Also what you're gonna see is in a pricing standpoint, pricing is gonna more normalize as well in the Crop Protection business, but still good revenue growth, good margin growth on a year-over-year basis. That's what's embedded in our numbers.
Okay. You and Chuck and the team put in a pretty good cost optimization program. You were taking a good look at the business. Working rational as a business. This is the first year you're really starting to see how much fruits of your labor are you seeing this year, and how much more do you have to go? Anything this year you discovered that maybe you've got some more dry powder on that program?
Well, what we're seeing is more favorability. You saw that when we finished 2022, I mentioned the $3.2 billion of EBITDA. We have a very strong finish to 2022, not just on the revenue side, on the commercial side, but we saw very good translation of top line to bottom line, so good operating leverage. The operating leverage of Corteva continues to improve. Saw that again in the first quarter. One of the things, Joel, to your point in terms of cost management that we highlighted was improvement in SG&A, not just as a percent of sales, but on a nominal basis. On a year-over-year basis, we're basically flat when adjusted for the inclusion of the Stoller acquisition. That brought in some G&A, obviously, together with the revenues that we saw in the first quarter.
On a full year basis, the outlook continues to be positive. The actions that we took in 2022, and you may recall, we took a restructuring in 2022, and we said the majority of that would be completed by the second quarter of 2023. That's translating to over $100 million of improvement on a year-over-year basis, which combined with other productivity actions is about a $300 million contribution to our P&L in 2023. That's gonna continue. We've got very good line of sight in terms of managing, if you will, our overhead, our overheads.
As we grow revenue, as we enrich the product mix, you know, the portfolio simplification and the exits that Sam talked about, over 20% of our active ingredients on the Crop Protection side, selective geographies in terms of our participation, 30 - 40 countries we've decided to exit. The combination of those new technology, new products, combined with this improved mix, combined with the overhead management, means gross margin expansion translating to EBITDA margin growth. This year, our latest guide, 19.5% EBITDA margin for 2023 compares to 18.5% last year. By the way, up about 400 basis points over the last four years in terms of margin growth. Our 2025 guide is for a 22% midpoint operating margin, $4.4 billion of EBITDA in 2025.
We're on track to that. We feel very good about that. We think 2023 is gonna be another important installment towards that.
Okay, let's talk about seeds. Seed pricing has been very strong. You're gaining share in, you're being paid for your royalties as you grow your Enlist trait programs or portfolio. Tell me about seed pricing and how has it fared this year versus your expectations, say, six months ago?
I would say seed pricing is pretty much on track, maybe some upside to what we originally told forecast. You know, we're gonna see, we've guided to in the high single- to low double-digits for seed pricing increase on this year. That's a global number. Obviously, you're gonna see differences by crop, by region, by specific market. I would say we feel very good about that. We're more than offsetting obviously commodity costs, other costs, freight, logistics, other costs as a result of that pricing. We'll see margin expansion again for the Seed business this year. You saw nice performance of the Seed business in the first quarter.
Yep.
Sam, anything you'd wanna add to that?
Yeah. I would just say, you know, part of our first quarter was driven by Brevant where
That's a good point.
... out into our retail market. That's, you know, a market we hadn't historically played in. It's about 30% of North American farmers buying in that space. We're seeing nice, steady growth as we've launched that brand and brought traits and technology to it. Then Q2 really leans into more of our Pioneer agents and reps that driving the Pioneer brand in corn and soy.
Remember on the Innovation Day last week, I asked a question. I said, "Chuck," I said, "the word Brevant never came up in the presentation." Here you, "Hey, don't forget Brevant.
Right.
Maybe talk about that. Like, is it sort of forgotten as the opportunity, or is it kind of a small opportunity? It's nice, but it's not one of the biggest drivers.
Yeah. Yeah. You know, we're new, right? You gotta remember, kind of put our history of as the companies came together, there was a seed brand that was in retail by one of the heritage companies.
Dow.
It was Dow. It wasn't really viewed as a very competitive brand and in performance. We retooled that. We launched Brevant. We launched it in Latin America. We launched it in North America. We brought Pioneer-level genetics and performance to it, which gives those farmers about a third of the market, different choices than they've historically had. We're small, right? We don't wanna mislead that. We're still a small player, we think there's opportunity for us to have steady growth in that market over time as we bring our technologies to that market.
Fair enough. just a little bit on Crop chems. The market's since gone to more leaner supply chains. How is that changing your business, working capital?
It's really changing. I kinda mentioned that earlier, but good, very good to expand on that a bit. In the Crop Protection business, what we're seeing is demand patterns are definitely going to more of a historic norm. 2022 was really anomalous. It was, you know, it was a scarce— there was scarcity value, real concerns in terms of supply availability. We had force majeure as an industry, obviously, spec chem broadly. Second half of 2021 into 2022 and through most of 2022, that was. That really characterized the marketplace. We're seeing now, Joel, much more of a normalization. We spoke to that in the first quarter, and it influences our guide. Just talk about that for a moment, and then maybe come back a little bit to specifically to Crop.
When you look at our guide that I referenced earlier, what we shared was if you look at our first half to second half revenue distribution, that doesn't change too much, but our EBITDA distribution does. Partly is it's a result of the change that we're seeing in Crop. Some of it's related to Crop Protection, some of it's related to just dynamics in Latin America broadly. Specifically, what we've shared with the group is that in 2022, 85% of our EBITDA generated in the first half, 15% second half. It's gonna be closer to 80-20. Not precisely, obviously, but closer to 80-20 this year. Still very much on track in terms of achieving our full-year targets, and by the way, a constructive setup, we think, for 2024 as well.
In Crop, what that's meant is we are carrying a little more inventory because that seasonal pattern now or that sales pattern, rather than being as much as we had originally planned in the first half, a little more in the second half. We also see that just in terms of some receivables. In terms of the overall volume, we're looking at market in the mid-single digits in terms of growth for the Crop Protection business, and we're looking at Corteva in terms of performance basically being in line with that.
Some of the earnings split between first half and second half. Some of the feedback I've heard from investors is, "No way. You guys are too conservative. That Q2 is way too conservative." Dave?
Yeah. Well, there's the... You know, we like to have numbers that obviously-
Right
... that we can achieve.
Would you like some softballs?
We like to have numbers that we can achieve. Let me give you some good talking points there, some reality. Number one is this change in terms of LatAm and specifically Brazil. Brazil's gonna be much more like on a revenue distribution this year, probably more like 20% 80%, 20% first half, 80% second half, compared to 30%, 70% last year. I mean, that's meaningful for us in terms of that business. That's number one.
Number two is I mentioned on Crop, because of this change in order patterns, some of that's related to Brazil, but more broadly, Europe and other markets, we're going to see, you know, by virtue of that, we're going to see a stronger second half on a relative basis compared to 2022. Finally, we had I would almost call it a pull forward of our European business into the first quarter. You saw the strength of Europe. Last year, Europe was affected back at supply and challenges there. Europe was affected because frankly the product was challenged in terms of availability and therefore being able to fulfill on time to customer requests. This year, we had the supply, we were able to do it.
When you look at the comps, we had a much stronger first quarter, you know, compared to the second quarter. All of those things are sort of in the mix relative to what we think 2 Q. We're still gonna have revenue growth, we're still gonna have EBITDA growth, but it's gonna be more muted against the averages that we're gonna see.
Okay
... for 1H and 2H.
Well, we have Sam here, so let's get into some more innovation. You know, Enlist has been phenomenal, and, you know, your competitor in that space has talked about now we've hit a steady state of market share between Enlist and, I don't know, Xtend and XtendFlex. How do you feel about that? Have you hit steady state? You got more to go?
If you look at the Enlist soybean platform in North America, right? We launched that in 2019. you know, we hit over 45% of the acres last year. We think that'll be north of 50% this year, and we still believe that's a 60% product out in the marketplace in North America. We continue to see farmers excited about it. We continue to see adoption growing on it. For us, it's what the big shift has been the last year or two as we switched over to essentially Pioneer genetics in most of that, and so we see great performance in that line up. We think there's a little bit more left in it.
When you try to push more, like at some point in some regions, you probably start hitting kinda limits. Is that limit because, I don't know, is it that Dicamba performs better here, and is it again just some of the sort of nuances like that?
There are definitely segments across North America where the Dicamba product, maybe it's even with the presence of cotton, where it's got a strength and farmers are trying to play up the, "Do I wanna mix between different chemistries when I'm running my spray programs?" There are markets where that is a stronger sort of burden to adoption, and then there's other markets where, look, it's flipped 100% Enlist already out in the marketplace.
You're investing in more spinosyn insecticide capacity. Can you talk about the opportunity there?
Spinosyns, our insecticide franchise, two products really, Qalcova and Jemvelva. Qalcova plays in the organic market. Jemvelva, we do a little bit of synthetic chemistry modification to the product and it goes out. This platform services, you know, I think it's 130 countries, like 250 different crops, so, you know, couple hundred pest problems. We've never produced to the demand curve yet, right? We're always essentially allocated or sold out, we think there's still continued opportunity. That franchise will cross about $1 billion in sales in 2023, and we're looking at what's the next tranche look like in the next, you know, three to five years and what's that forecast demand and opportunities for us.
Obviously now you've closed Symborg and Stoller, so you've purchased some channel in Brazil. You've got a biologicals business. Talk about the most exciting prospects from those acquisitions?
Maybe I could talk a little bit about just the deals and, and sort of the background of the strategic rationale.
Yeah
... maybe you could talk a little bit more about what that represents and in terms of product development, innovation, et cetera. One of the things we had was obviously we had a gap in our portfolio as regards biologicals. It meant for us being patient, but also being, you know, sufficiently assertive in terms of filling that gap. We had the ongoing relationship, a distributor relationship, commercial relationship with Symborg, which is a Spain-based microbials business. Very impressed with their technology and really saw it as they did as well, the commercial significant commercial opportunity for expansion with Corteva.
Then Stoller, of course, being able to consummate that transaction, which really brings much more scale and critical mass in terms of micronutrients and PGRs, so plant growth products. What those bring to us, and I mentioned this earlier, is they also bring real financials. $450 million this year in terms of revenue, approximately $90 million of EBITDA. We expect those revenues to compound top line anywhere 15%-20% over the next several years out to 2025, and then obviously good growth we believe beyond that. EBITDA, we think will grow very nicely in the neighborhood of 20%-25% compound.
Real businesses filling a real, strategic as well as operational fit with the company, and obviously a big fit, Sam, with your platform and what you guys are doing.
I mean, if you look at what Symborg brought to us is microbial expertise, right? They have discovery programs. They have microbiologists. They've delivered products to the marketplace. That's a real plus up into our pipeline and capabilities. What we've seen as the kind of the reverse is we have some opportunities in formulation, so we have a lot of experience about how to do formulations. We have a bigger regulatory organization and capabilities. As we think about getting registrations of Symborg and Stoller products around the world, those are things that the Corteva system brings to it. It's a nice marriage already, and we're working down the integration path and figuring out the best model of how to operate it.
Okay. Maybe I'll drift into some other questions I got, some high-level questions I got from the audience. When you think of the business, what are some of the long-term and near-term impacts of climate change and regenerative ag on the business, and how might this change your R&D efforts?
Yeah. If we think about long-term climate change, you know, what are we gonna see most likely is, you'll continue to see pest problems expand. In the simplest model, if you think about, from a temperature point of view, the equator is expanding towards the poles, right? That's the simplest way to think about what's happening in temperature shifts. Some of it's nighttime, daytime differences. That means pests can go with it. Increased insect pressure, we already see some of that. Increased disease pressure, we already see some of that in different places. That's why our discovery and research programs on how to control insects, whether it's chemistry, biologics, biotechnology, our work on disease control, especially with gene editing, we think is really important in that space to bring different solutions there.
We gotta continue to do that to make sure we don't have yield loss due to that pest expansion. The other thing we see is, you're probably gonna get some shifts in rainfall patterns. A lot of things we're doing is how do we make sure a crop is optimized for water use, the farming system is optimized for water use. Whether it's the rotations, cover crop systems, and doing the research to make sure we've got crops that work in that space at the end of the day. I think on climate change, we're pretty good. Regenerative ag's interesting because it could open up new opportunities for farmers from a-
Mm-hmm
... from revenue, right? If they could get, say, a carbon credit by doing a different farming practice, you know, a no-till or a winter crop, reduce their nitrogen rates, things like our Utrisha N with Symborg works very nice in that, right? How do you have a microbial produce some of the nitrogen that you need-
Mm-hmm
in that space? We've got efforts on cover crops. We've launched the collaboration with Bunge and Chevron to bring winter canola into the mid-south and south, which serves as a cover crop but also as a lower carbon energy source. Of course, the biologics fit nicely into different nitrogen applications and uses. We're playing across the space, and we're helping farmers, very small, but we're helping them understand what the carbon credit market could look like and what are the shifts they would have to make in the farming practices and how to manage through that.
On your Innovation Day the other, I guess last week, how you did talk about some of the opportunities. I think you called them frontier opportunities.
Yep.
Gene editing, renewable fuels, specialty oils and proteins. Maybe we could go through each one. Gene editing.
Yep.
I know like a couple years ago, there was a concern that maybe it wouldn't get the right regulatory approvals.
Yep
... support. It seems like it has. Maybe talk about that.
Yeah, yeah. Joel's right. We talked about some new opportunities in what we call emerging technology with gene editing and then frontier markets. First on gene editing, look, it's an incredibly exciting space. I'm gonna tell you, I believe it'll be more transformative of global ag than biotech's been, right? Because its ability to really accelerate what plant breeders can do in a lot of crops. The question's always been what's the regulatory policy gonna be around the world and back in 2008, Europe really kinda threw a curveball to the world and said it's GMOs, and it's not allowed. Two years ago, they really sort of rethought that.
They had a commission look at what's their regulatory policy. They're, they're leaning a lot more favorable towards a regulation world. We think somewhere around 2024, we'll probably get some clarity around Europe. It'll probably still be regulated somehow. It'll probably still have labeling laws, but it'll be workable versus GMOs you really can't cultivate in Europe today. The rest of the world's moving quite favorable. Canada has really just came out with some new policy that's quite favorable to GMO or gene editing, excuse me. U.K. passed some new legislations, very favorable. China just about 10 days ago approved for cultivation the first gene-edited soybean in China, right? India's shown some positive movement. We're seeing a lot of movement around the world to a more favorable regulatory environment.
What we've been doing is investing in core capabilities and product concepts assuming somewhere in that 2024 or 2025 we get some more clarity of how to operate, and we've got a pipeline that's ready to go with that. On the frontier markets that we've talked about biologics already, the other two that we've highlighted is renewable energy. If you just look at what's going on with, you know, just California alone, the credits on renewable diesel coming from plant-based oils is quite positive. You see a lot of crush plant going in to handle this.
We worked out a deal with a collaboration with Bunge and Chevron, where basically the full channel from farmer, we're a seed provider, the crush to take the oil, sharing that value across the channel to bring winter canola to really the mid-south. We think that could be up to a 10 million acre opportunity where a farmer can produce, as a food crop if they want, but it's also a energy crop. It plays nicely. You know how to grow it. It's agronomic. You know, it's a viable crop. We're starting down that path. We're launching that this year. You know, about 5,000-8,000 acres out there with farmers, we're excited about where that could go.
The specialty protein, we announced a collaboration with Bunge also, where, look, if you look at the value of amino acids in the soy, space for animal feed, you know, it's about a $10 billion market today. With a closed loop system with Bunge and the feeders, we can now apply gene editing to really make those changes in soybeans really fast. We think, again, this is easily another 5 million acre sort of opportunity of value creation that we share across the channel. We're looking at those and we're taking a very much a how do we collaborate and find the right parts of the value chain to really unlock the value and make the whole system work.
Dave, when you think of all these opportunities that the company can invest in, and you did a lot of work looking at this last year, you're doing an 8% spend on R&D, percentage of sales.
Right.
Why 8%? Why not 7%?
Yeah.
Why not 9%?
Yeah. That's a good question. You know, it's directional. It's targeted, but it's also directional. Just as a backdrop to Joel's point about R&D and the 7%, so we're actually a little bit less than that.
Right
... 2023 or 2022, given our spend and given our revenues.
Revenues.
We're on track for that now. Then the growth that we'll see this year, we expect to continue in the R&D spend. What it's doing is it's facilitating the expansion beyond the what's necessary to deliver 2025, 2025 and the performance, as Sam talked about in his opening remarks. The other thing it's doing is it's giving us the ability then internally, for internal development, to really leverage and expand on this platform that we've now created with the acquisitions of Stoller and Symborg and the biologicals. Next, as Sam talks about other emerging technologies as well as frontier markets, whether it's the gene editing or whether it's the fuels, food for fuels, proteins, this gives us a significant, we think, opportunity beyond the numbers that we shared on Innovation Day that are built into our net peak trade revenue.
It's beyond that $24 billion Joel number. We think that all fits within the wheelhouse of Corteva, and it's also against the backdrop, and just to reinforce, we think one of the strongest pipelines in the industry and also one of the strongest R&D organizations, measured not only in terms of the quality of the pipeline, but also in terms of that ROI metrics that we shared on Investor Day. That really gives us the confidence for this and is supported by what we're doing in terms of managing our SG&A spend. Again, when you look at the P&L and sort of the math, if you will, or the calculus of what we see as attractive continued gross margin expansion in this business, that translating then to bottom line EBITDA continuing to support the R&D and the innovation engine.
If your cash flow conversion has been an issue, commercial talked about you being able to raise it for this year from 34%-36% in your last update. You had achieved, I think, 40%, 42% in some years before that on average. Dave, have you gone in and looking at it and maybe something you want to improve? Or tell me when you get back to 40%.
Sure
... how quickly it's gonna happen? Do you get to 50%?
Sure.
What can happen?
It's an excellent question. Obviously, 2022 was disruptive to our track record, as you know, on free cash flow conversion for the reasons we talked about earlier, where we had this really need to replenish particularly inventory on the Crop Protection side. We also had the impact of higher commodity costs and ingredient costs, inflation if you will, on both Crop and Seed, which affected inventory as well as receivables balances together with growth in the business. This year we'll actually see inventory in the, call it year to go from the end of the 1st quarter to the end of the year, we'll see inventory actually being a source of funds for us as we, you know, more normalize the working capital and inventory relationship to sales.
The set up for 2024 we think is gonna be continue to be positive. Joel, we think that's gonna be another year of improvement in terms of our cash flow conversion in 2025 as well. That's really kind of back to that 40%-50% we think in terms of conversion. By the way, to put that in perspective, we're using EBITDA here as the denominator. Free cash flow on the numerator, EBITDA on the denominator. If you used operating earnings, which some companies do to do that ratio, we'd be in the 62%-63% this year on the path to 75%-80%+ in the 2024-2025 timeframe.
September rolls around last year. You have a great Investor Day. You raise your targets for... You deliver 2025 targets when everybody thought stock goes down, right? Because everyone was so excited and now it's done. You've delivered. You don't actually deliver. It just has to say it on paper. No, I'm being funny. I mean, and then I think, you know, and ag stocks have been a bit difficult the last bunch of months, but, you know, Corteva's been kind of oscillating in a range. Have you guys thought about that when you talked with Chuck, like, "Hey, we delivered better than everybody thought.
Sure.
Now everyone's like, "Oh, it's done." Are there opportunities to do better than what you thought or what you think? Talk about that. What do you think you have to do to show investors that, you know, hey, we deserve that multiple? That we've been getting, and you should just roll it forward, and we should be a $70, $80, $90 stock down the road.
Sure. Well, part of it is just, you know, can you continue to deliver over time, right? Nothing substitutes for actual results. We all know that. It is against the, you know, the backdrop, as you said, of some of the rotation and, you know, kind of views in terms of the overall ag cycle. When you look at Corteva, a couple things. Number one, the raise that we've provided for 2023 in terms of guide is quite unusual, right?
Mm-hmm.
If you look at our practice, our practice wouldn't be to raise guide in the first quarter. I mean, the Crop isn't really in the ground in North America. There's a lot of uncertainty. The reality is, we feel very good about 2023, and thus, you know, the raise of the guide. It wasn't just the acquisitions, it was also the confidence that we have in the operational performance. We think the setup for 2024 is quite constructive. You know, what we see in terms of now commodity prices coming back to, call it, again, more normal levels, still above historic averages. I think that's actually healthy for the ag economy. Farmers are still in a solid position, good position. They're gonna plant the crop. They're gonna harvest the crop.
There is still, if you look at the stocks-to-use ratios, the setup for the overall ag cycle continues to be positive. We use what we call a price for value strategy. You know, we are not a commodity business in that sense. We're bringing real, yield advantaged products in our Seed and yield protection products in our Crop Protection. We've shifted our portfolio, and that shift will be nearly complete through the course of 2023, to really reduce/eliminate, mitigate any exposure to commodity related products, particularly on the Crop Protection side, which as I mentioned, 20% of the AIs we're getting out of. This is a business...
Coupled with Sam's pipeline and his innovation and what we're gonna be delivering in terms of traits, what that means to us in terms of controlling our own, if you will, technology and destiny. The royalty reduction, he mentioned $100 million this year, $250 million by 2025, and on a path to royalty neutrality. These are big numbers that are part of the forward plan and forward forecast for our company. I think it's delivering that and really demonstrating to investors that this is a business that can perform, quote, through the cycle, can deliver real value, that we're on path to these targets, and that we've got also real discipline in our capital allocation. I think the acquisitions are really gonna demonstrate that.
If you think about it cumulatively in terms of what we've done to return cash to shareholders, particularly in the form of share buyback, that's gonna continue to be a very important part of the story. I think all of that is part of what we've got to demonstrate, Joel, and continue to demonstrate to investors.
Thanks, Dave. Thanks, Sam.
That's great. Thank you.