DuPont Cuts Ag Profit Hopes Citing Farmer’s Corn-to-Soy Shift
DuPont, the U.S.-based owner of Pioneer, warns that 2015 will be highly financially competitive due to a shift by U.S. farmers from growing corn to soybeans, and as Brazil, where last year crops were continuously under attack from pests such as the earworm moth caterpillar, faces fewer pest outbreaks.
As commodity prices plummet, the group notes that the sizable shift of U.S. growers foregoing corn in favor of soybeans is its biggest challenge, as soybean seed costs 40% less than corn, according to Purdue University. U.S. officials forecast a drop in corn acreage this season of 1.6 million acres, and an increase of 900,000 acres in soybean acreage to bring the area planted to a record 83.7 million acres. However, many independent analysts expect an even larger shift. An additional challenge to the group is the strong dollar.
The company now expects a drop in full-year agricultural sales in the ‘high single digit percentage’ compared to a previous estimate of a decline in the ‘low single digit percentage’ despite its efforts to improve its product line and cut costs.
Although it is still DuPont’s highest earning division of its seven divisions, for the January through March period, the group’s agricultural division posted a decline in profits of 21% to $1.14 billion, and agricultural revenues fell 10% year on year, to $3.94 billion, despite an attempt at raising prices to offset the strong dollar and a 5% year on year drop in sales volumes.