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DuPont cuts ag profit hopes, citing farmers' corn-to-soy shift

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DuPont cautioned over the dent to agriculture prospects from US farmers' switch from corn to soybeans, and from reduced pest outbreaks in Brazil, as the chemicals conglomerate cut its forecasts for farm-sector takings.

The US-based group - the owner of the Pioneer seeds business, besides being the maker of products from solar cells to Kevlar protective cloth – said that "2015 is playing out to be one of the most competitive seasons in recent years" thanks to the dent to farm profits from lower crop prices.

Like Syngenta, a major rival in seed and agrichemicals, DuPont highlighted large inventories at North American dealers, implying less need to restock, and "lower insect pressure in Brazil", where crops last year came under sustained attack from the likes of earworm moth caterpillars.

'Continued shift to soybeans'

However, the group said that its "largest headwind" to sales volumes was a "further shift" by farmers from planting corn to sowing soybeans, which are cheaper to grow – an advantage in an environment marked by low crop prices.

Officials in the US, the top grower of both crops, are expecting a drop of 1.6m acres in domestic corn plantings this year, and a rise of 900,000 acres to a record 83.7m acres in soybean seedings - although many commentators are expecting a bigger shift.

This switch represents a setback to seed groups, with seed costs per acre of soybeans some 40% cheaper than those for corn, according to Purdue University estimates.

"We have seen growers in Brazil reduce corn plantings in the past summer and safrinha seasons and our North America seed order book confirms the continued shift to soybeans away from corn," DuPont said.

Guidance reduction

The group also highlighted the dent to its results from a rising dollar, which reduced the value in dollar terms, in which DuPont reports, of foreign takings.

Despite efforts to cut costs, and improve its product range, the group said that it now expected a drop in full-year agriculture sales in the "high single digits percent", compared with a previous forecast of a drop in the "low single digits percent".

Divisional operating profits in were forecast falling in the "low-to-mid-teens percent", compared with a previous estimate of a drop in the "high single digits percent".

Group-wide, DuPont, citing a bigger hit from the stronger dollar, said that earnings per share for this year looked like coming in at the "low end" of the range of $4.00-4.20 it has previously guided to.

Profits drop

For the January to March period, the group's agriculture division reported a 21% tumble to $1.14bn in agriculture profits, although it remained by far the biggest earner of DuPont's seven divisions.

Agriculture revenues, at $3.94bn, fell 10% year on year, as a rise in prices failed to offset dents from declining volumes and a stronger dollar.

Sales volumes dropped 5% year on year, reflecting "lower corn planted area [and] lower insecticide volumes in Latin America", DuPont said.

DuPont shares closed down 3.0% at $70.69 in New York.


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