DuPont's Rebounding Agriculture Sales Signal End for Farm Rout

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DuPont Co. lifted the outlook for its agriculture business, forecasting a profit for the first time in three years in a sign that the worst for the beleaguered farm industry may be coming to an end.

Full-year earnings in agriculture, DuPont’s largest unit, may rise by a percentage in the low-single digits, the Wilmington, Delaware-based company said Tuesday in a presentation detailing first-quarter results. That’s an improvement from a January forecast for no change and follows two consecutive years of decline.

“I don’t see the ag market necessarily saying it’s improving," Chief Executive Officer Ed Breen said in a phone interview Tuesday. “Has it bottomed? That’s probably an accurate statement.”

DuPont and rivals such as Monsanto Co., the world’s largest seed company, and Syngenta AG, the biggest pesticide maker, have posted years of lower earnings and shed workers as tumbling prices for commodities such as corn and soybeans constrain farmers’ spending. Crop futures have rebounded this month as unfavorable weather in South America threatened harvests, reviving supply concerns and adding to speculation that the farm markets are turning a corner.

DuPont agreed in December to merge with Dow Chemical Co., a deal that should close by November, Breen said in the interview. That will be followed by a split into three stand-alone companies, including what would be the world’s No. 1 producer of farm products.

Fog Lifting

While DuPont executives told analysts on a conference call Tuesday that the dour outlook for agriculture hasn’t changed, first-quarter results show the fog is lifting. Sales volumes fell 1 percent in the period, compared with a 5 percent drop a year earlier and a 7 percent slump two years earlier. Average prices climbed 2 percent on sales of new corn and sunflower seeds. The first quarter is traditionally the biggest agriculture sales period as farmers in North America and Europe prepare for planting.

“Ag seem to be turning a corner,” Hassan Ahmed, a New York-based analyst at Alembic Global Advisors, said by phone Tuesday. “Any sign of life could be construed as we have troughed out.”

Even international currencies are cooperating. A stronger dollar eroded agriculture sales by 5 percent in the quarter, less than the company had forecast, and compares with an 8 percent drop a year earlier. Excluding currency, operating earnings would have increased 4 percent, DuPont said.

To be sure, pesticides remain weak for DuPont, with sales tumbling 18 percent in the quarter amid lower demand for insecticides in Brazil and the decision to close a Texas factory following a deadly accident.

Still, “green shoots” indicate the worst may be over, Ahmed said.

DuPont’s seed sales climbed 1 percent in the quarter, and the company forecast increased sales volumes of corn seed and pesticides in the second quarter that will contribute to unchanged earnings from a year earlier. A U.S. Department of Agriculture report last month said American farmers plan to sow 93.6 million acres of corn, the third most since 1944 and a 6.4 percent increase from last year.

Breen said he’s curious whether DuPont Pioneer, the company’s seed unit, gained market share in the newly expanding corn market.

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