Corteva, Inc. (CTVA) Earnings Call Transcript & Summary

Good afternoon, everyone. My name is PJ Juvekar. And next up, we have Cortiva, the ag company with seeds and crop chemicals, which was spun out of DowDuPont last year. And from Cortiva, we have CEO, Jim Collins, and from Investor Relations, Megan Britt.

Good afternoon, P.J., and good afternoon to everyone. Can you hear me okay?

Yes, we can hear you. I know you have some slides and a few comments. So please go ahead. We can hear you fine.

That's great. Well, good day to everyone, especially everyone that's joining here in this virtual environment. It's always a pleasure, P.J., to be here at the Basic Materials Conference, and we appreciate your hosting this session here today. Before we start, just a quick reminder on Slides 2 and 3, expectations for the future. Given today, our forward-looking statements and aren't guarantees of future performance. Certain risks, including those outlined in our SEC filings, could cause our actual results to differ materially. Reconciliations of our non-GAAP measures mentioned today to GAAP may be found on our website as well. So let's start on Chart 4. Throughout 2020, I believe our team has demonstrated some incredible resilience in the face of the challenging conditions. And this global pandemic has created a really dynamic operating environment, in which we are working aggressively to keep our employees and our customers safe and to keep our supply chains very resilient, and to keep our growth commitments on track. On our recent earnings call, we reported organic net sales growth in both segments and across all regions year-to-date. The organic sales were up 6% year-to-date, with volume and price growth in both seed and crop protection, demonstrating our team's focused execution and ability to extract value in the marketplace for our innovation despite the challenging marketing environment. On operating EBITDA, we delivered a 5% improvement year-to-date, led by our Seed segment. And our full year guidance, expect to be slightly down to flat year-over-year. Currency headwinds are expected to lower our operating EBITDA results by about $400 million for the full year. So when you consider this 20% earnings headwind from currency expected for the full year, we are seeing tremendous momentum in our underlying price and volume aspects of the business. And those underlying growth rates are in line with our midterm targets. So as I consider our path ahead, and we talked a lot about this, P.J., we have the products, we have the route to market and the manufacturing strategy in place to deliver our future. We also have the productivity mindset to really transform our cost structure to create a meaningful margin expansion view of the business. So I'm really confident in our ability to deliver on those midterm commitments that we've talked so much about in the past. So let's turn to Slide 5. As part of our strategy update, back in August, we highlighted our expectation to create over $400 million in incremental operating EBITDA from the Enlist E3 system at its peak. Now this estimate includes the benefits from eliminating the trade royalty expense that we have today in our business, scaling the royalty income from actually out-licensing our technology to others, and growing our share of that post emergent herbicide market with the Enlist chemistry. Those are sprays on soybean acres that we just don't get today. So we believe that the Enlist E3 system offers growers just a superior weed management system, and we're seeing exceptionally strong demand in the marketplace for the technology as our order book launched this past September. As a result, our seed production teams have collaborated closely with seed producers to ensure that we're going to maximize our supply for 2021. And you'll remember, as we highlighted as part of our third quarter earnings, we believe we could have as much as 40% of our lineup of our units in the Enlist E3 next year. And that's up from a previous estimate earlier in the year of about 35%. So you can tell, we're going to continue to push the front edge on how much of that seed we can make available. So Enlist is a real showcase aspect of our business in 2020, but going forward in '21. So turning to Slide 6, we also recently launched the Brevant retail brand in the U.S. for the 2021 season. And we're also seeing strong demand for this new brand. In the U.S., our teams are working with our channel partners to ensure a successful start to the season, and our discussions with retailers continue to be exceptionally positive, reinforced by some very strong field trial performance of the Brevant product class and retailers' test plots. So these are test plots that they set out, and we provided genetics and why these new products held up really, really well. So I'm confident that we have the right products, and the right team in place to execute a win in this new space for us. And I believe we could increase our position over time to about 20% market share in this retail channel. And this would represent an incremental earnings opportunity for the business of more than $200 million over the next several years. So another really important aspect of our strategy that is in execution mode right now. So let's go to Slide 7, for another important aspect is our portfolio of new products, and how we think about the trajectory that these technologies are enabling. The innovation that Brevant is launching into these end markets is enabling us to bring novel solutions with differentiated and new modes of actions that are formulated to really address the pressing challenges that we see all around the world. Collectively, our portfolio of new products is enabling sales and margin expansion in our chemistry business. Through the end of the third quarter, new crop protection product launches helped drive a 6% organic growth in Europe, Middle East and Africa, a 12% organic growth in Asia Pacific, and a 15% growth in Latin America. As we continue this momentum through the end of the year, fourth quarter, with strong demand for Enlist herbicides now in North America, we expect to deliver organic growth of 7% to 8% for our Crop Protection business for the full year. As these products ramp, they are expected to remain a critical driver of above-market growth we've targeted over the midterm. We expect new Crop Protection product sales of approximately $1.3 billion in 2021, an approximate $300 million improvement over our 2020 expectations. So our Crop Protection product pipeline is industry-leading and a critical source of the competitive advantage that we've talked about for Corteva. And this is highlighted on Chart 8. At the center of our innovation efforts is our process, rigor and solid innovation governance. Our approach assures that from the earliest stages onward, we are rigorously testing products with regulatory compliance and sustainability front of mind. And we have a customer engagement engine on the ground to generate demand and adoption in the region that ensures that these products are used effectively and safely. As a result, we continue to not only bring new modes of action to the market, but also we are innovating for durability of solutions and improved regulatory or environmental profiles. The solutions on this chart are a proof point that -- a proof point of that, and they build our embedded sustainable chemistry advantage. Corteva is a leader today in small molecule natural products. We have more green chemistry recognition awards than any of our other ag peers, which speaks strongly to the success of the process rigor around these types of chemistries that I mentioned. This advantage is a critical part of the continued acceleration of our Crop Protection portfolio transformation. In 2018, approximately 20% our Crop Protection sales came from sustainable chemistries, and we expect to grow that to approximately 30% of our total crop protection sales by 2023. So turning to Slide 9, as we look forward, we have a tremendous runway in terms of the cost advantages and cost savings opportunities for Corteva. With roughly $1 billion in remaining cost savings to be realized by 2024, I'm confident we have actionable initiatives in place to deliver on those targeted savings. Take Crop Protection, for example. Since closing the merger in 2017, we have worked aggressively to streamline the cost structure and improve the underlying productivity of our Crop Protection manufacturing organization, with the reduction of 9 plant sites, with approximately 25% of roles -- rolled at the time of the merger. Collectively, as a result of these efforts, we're on track to achieve the cost synergies and additional productivity that we have targeted. For the company, we've talked about a total combined savings of $250 million in 2021, and our Crop Protection manufacturing actions represent about $150 million of that amount. So turning to Slide 10. Since spin, we have deployed more than $1 billion in capital targeted at driving shareholder value. These calculated high-return investments were critical as we spun as a public company. With those investments well underway, we can shift our focus and accelerate our return to capital to shareholders. Through the end of November, we have completed approximately $230 million of share repurchases under the $1 billion program and expect to complete the program by the end of 2021. And that's 6 months ahead of our previous commitment. So in closing, P.J., as we execute on a strong finish to 2020, and we look ahead to 2021, we remain both focused and flexible, focused on the path that we've laid out, confidently executing on the plans that I spoke about here today, at the same time, we are prepared for any eventuality as we continue to navigate these volatile external landscapes. We will stay flexible as we monitor these dynamics and, importantly, as we continue to deliver. We have the right strategy in place. Our balance sheet and liquidity position are solid, and we have the right team and the right levers in place to deliver this next stage of growth. With that, P.J., why don't we take some questions.

So Jim, I'm going to ask you some questions. And then just for the reminder for the audience that if you have any questions that come up, please e-mail them to me. There's a link on the website, and I'll read them out. So Jim, thank you for that quick overview. You talked about Enlist E3 to be 30% of overall acres and 40% of your portfolio. How much market share do you think you can gain through Enlist? So it's not just replacing existing but also gaining share. And a similar question on Qrome Corn, which has been quite successful, what market share gains can you -- do you expect from these 2 products?

Great. So thanks, P.J., for the question. Enlist, obviously, is a strong centerpiece, as I mentioned earlier, to our growth plans for 2021. And you can start by taking a quick look back at '20. We had expected about 10% of our lineup would be converted to Enlist, and we landed at 17%. So we're getting the strong signals from growers that this system has some real advantages. It's very simple to use. It solves some critical weed control issues that are out there. And as we continue to convert over to Corteva Genetics with the A series background, we're going to continue to bring strong yield performance as well. So I expect it to be able to double that penetration in our units into '21, and that was going to put us around 35%. As I mentioned in my comments, I think we're going to be closer to 40%. And we're at a critical point right now where we're characterizing all of the seeds that we have produced that is stored and waiting to be conditioned. And so we'll be updating as we get into the early part of the year, just how much seed we're actually going to have available because I think the demand -- we know from our order book, the demand is outstripping our ability to supply it. So from a market share perspective, as we have projected a peak for this product, for now, we've just sort of assumed that it's essentially -- we're converting our share in the marketplace. And that, overall, with other collaborators and other folks out there selling Enlist, conservatively, we think it could be 50% of the overall market. Is there upside in that number? I believe so. I think once growers get this technology in their hands, and they realize just how simple it is to use and just how effective it is and how it works so well with the chemistry and the genetics and the trade altogether, I believe there's upside there. So I think this is a stay-tuned story, and you can feel the energy that's coming from the feedback for all of our customers. One final point around the numbers for Enlist. We guided to the fact that at that peak that we're describing, there's about $400 million worth of -- what the earnings opportunity for us in there. And included in that is this idea of trade -- backing out of some of those trades. It's about $250 million of total royalty avoidance in there, and we pick up another $70-or-so million of in-licensing earnings by licensing that trade. And then we pick up the gross margin and the balance of that for the herbicide business. So there's upside probably in there in and pricing that we really haven't counted on. And I think there could be some upside in overall market share, as you mentioned. On Qrome, we're, again, very excited about Qrome. It was in about 20% or so of our lineup this year. And I would expect that Qrome would go to maybe more like 25% of the lineup. This is an important triple. We are now penetrating markets where we never had the ability to have triples in before. So it provides a good new solution in Corteva genetics and that pioneer genetics that growers just haven't had. Where could that go? It could be as high as 30% to 35% at final peak for us, not every acre out there needs to triple. And I've always been really, really proud of our team for not positioning products where they're not needed. It's kind of that right product, right acre type of an approach. So hopefully, that answers your...

Yes. I have a basic fundamental question. I mean you've seen the farmer profitability go up through some government payments, through higher commodity pricing. When the downturn started in farmer profitability or farm economics, one of the things they had done, and I remember when Monsanto was a public company and DuPont was or when you were, grows down shifted into lower, cheaper seeds and we went from like 8 stack to triple stack to double stack. You think the reverse could potentially happen when if farmers have more money, they can up shift in their purchasing?

I think it's a good question. I think what's happened as some of those genetics have come down, I think farmers realize that some of the positioning of those products, they don't need that -- those genetics on those acres. So part of it's been in education. And as I said before, I've been really proud of our team by not positioning technology where it wasn't needed. So farmers know that they're getting the right product for the right acre, and they're paying a fair price for the value that, that product is delivering. And so we'll see. Are there opportunities for a grower to invest more in the crop because maybe they're more financially stable? I would agree with that. In some cases, it's maybe a better bag of seed that has some drought tolerance traits on there. Maybe it's a more expensive seed treatment opportunity that provides better pest control below ground. Maybe it is a more robust crop protection set of products where they get out early and they do a better job of weed control, maybe even some fungicide applications to do more in the plant health area. And then, clearly, there's important fall applications that can happen that we see in tough times, maybe growers pull back on those things like your fall nitrogen, nitrogen fixing and even some fall applied herbicides to help control weeds over the winter that really help you get started early. So we're seeing a little more of that where growers, typically, are -- they're investing maybe a little more to get 2021 off to a great start.

Great. And you talked about the puts and takes of royalty expenses. As you ramp up Enlist, you will pay less on extend. As you put more A series into Enlist, you'll save money on Stine germplasm, and then you out-license your product or in-licensing fees. But at the same time, you have fixed payments to Monsanto in terms of your royalties. So when do we see that inflection point from higher royalty income or less royalty expense, I should say?

Well, you're starting to see it now as we expense against COGS based on the assets that we have on the book as we begin to bring that down. So as our units start to decline, you saw a little bit of it in '20, but a lot more of it in '21 and '22. The fixed minimum payments that you're talking about, those will end in 2023. So we're essentially complete with all of that. And then -- but remember, one is more of a cash outflow issue and the other is more of an income statement issue as we recognize an expense against those royalties.

That is correct. And I think that's what sometimes investors miss, is the cash flow versus the income statement impact. You launch Brevant already in 10 different countries. Can you explain me the channel strategy there? I think Monsanto was a dominant player in retail, and you guys were smaller, particularly Dow. I mean based on your experience on what has happened outside the U.S., how much share can you gain? And is there any upside to that? You mentioned 20%?

Yes, great. I think the first part of that question -- and the answer is an important one. Folks think Brevant is a brand-new first time out-the-door product. It is in the U.S., but in 10 other countries around the world, we've sold about 6 million units of Brevant out there. It's already one of the largest seed brands. And the reason Brevant worked so well in those markets, because we were new in those. We were just introducing our pioneer direct route-to-market in, say, places like Eastern Europe. And there was a need for another alternate route -- another product to go into an alternate route, and that was the more retail-oriented markets. And Brevant fit nicely. So we did the work. We did our homework. We had Corteva germplasm. We segmented those markets. Pioneer will always be the lead -- the most elite products that we'll put in the market. But the products that don't make the cut for the Pioneer brand, that second-tier down maybe, they're already better than everything else out there in the market. So we'll select from that pool and go with the Brevant brand. So it's done very well in Brazil, Argentina. So we've learned some really valuable lessons about how to segment those markets. So you go into the U.S. now, and you realize our long-term, very cherished advantage route-to-market has been that direct route with that Pioneer brand. We've got 90 years of experience selling into that, very high service. It's a high-priced market, high-value and it's a very loyal market. We work with a lot of growers who've been with us for a long time and good penetration in that market. When we get on a farm, we get a lot of that farm. But we're pretty stable in there. So from a growth perspective, we had to start looking to other routes. So from the very first day of the merger, I was very excited about the Mycogen brand and an opportunity to take Corteva germplasm and leverage the Dow retail sales route because all the other seed companies in the U.S. really work through that retail brand. And so due to some past history with the Mycogen brand, that there were some things still associated with it. But growers in the U.S. have been out on the web, and they had been seeing excitement about Brevant. So we started to get questions, why don't you launch Brevant in the U.S. in retail. And so the team sat down, looked through it, decided to make the switch. So this year, we switched out Mycogen for Brevant and launched it in our seed lineup in that September offering. And we have done field trials out there that summer. Retailers launched field trials because many of them were excited about it, and the feedback started coming in immediately. These products are really performing. So our order book has filled up. It's been great. So we're going to immediately swap out the 4%-or-so share that we had with the Mycogen brand. And then in '21, could we grow that by another 20%, 25%, probably get maybe just north of 5-or-so percent in that route? And so then, now it's how do we get this thing rolling? Our sales team is excited. So we've got a dedicated retail team. We sell all our chemistry through that channel, so the collaboration with retailers has been really, really strong. And so I'm expecting that as we peak this thing out, we won't get 100% of that sliver. But we think 20% is a realistic target for that team to shoot for, so 20% market share of that retail segment. So we'll keep you posted on the progress, but we're off to a very exciting start. And it's been well -- it's been just well-executed in the market.

Great. This year, you had strong organic growth, but the shining star was Latin America. You got some decent growth in Asia as well. Can you just talk about what are the key drivers in Latin America?

Well, so I guess, one of the first key drivers for us, you're seeing that, at the end of second quarter, I had a lot of questions about our Crop Protection business in Latin America, that it looked pretty anemic. And I kept saying, watch this space because the market in 2019 happens very early, and it just was kind of uncharacteristically early. So we expected 2020 would be a more normal flow, and it sure did. It showed up in third quarter. So third quarter 2020, Latin America was up some 30% total Corteva. And a big piece of that was 43% improvement driven by our Crop Protection business. So the first driver of that growth is Crop Protection. We've got a fantastic fungicide, [ Visaria ] that goes on Asian soybean rust. It is the gold standard. We have new product coming here in the next round, right in behind it that takes all the best at Corteva and takes it to another level. So that will drive growth going forward. And then I just think the way this team is executing market share gains in chemistry and seed is starting to show. And then the final driver of growth in Latin America will certainly be our presence in that safrinha market. It's a small market country-wise, size-wise, but it's a huge market for us from a market share perspective. And we really have custom-tailored technology to really play well in that segment. Sometimes, we run into some issues with the planting dates on the soybean crop and whether that's safrinha market can kind of get sandwiched or closed on us. But this year, it looks like it's set up to go really well. So we're already shipping seed in the business here in the fourth quarter. And so those results, you'll start to see that momentum. And then we see more revenue in the first quarter as well as that season really gets going into January, early February. So those are the big drivers.

Right. And Green Chemistry has been hallmark for you guys. Spinosins are at the top of that list. You're growing that capacity because these are more green, more environmentally friendly, less toxic. Is that where the trend is? And similar to that, I know we can go through a list of your insecticides and herbicides, there are lots of brand names like Isoclast and Pyraxalt, and in herbicides, you got Arylex, Rinskor. So besides Spinosin, and you can make a comment on Spinosin, what other either herbicide, fungicides that stand out to you? And what is sort of unique about them that farmers should switch to these from their existing ones?

Right. Yes. I mean, you started with the rock star with Spinosin. Clearly, it has been a leader in our portfolio for Green Chemistry awards. It's manufactured through natural processes, and it's qualified for use on a variety of crops, including organic crops. So it is one of the very few products that has a certification for organic. So that's how much the regulators think about that chemistry. But another one that I look at, that I'm really excited about was Arylex. Arylex was custom-designed based on the strictest regulatory standards in the world, and those are usually the European standards. And it's a herbicide for weed. And the environmental profile of that product was so exciting to European regulators. It went through the regulatory process faster than any product I can remember in recent history. So when you do your homework, and you get the design right, you're rewarded for that. And so that's the way I look at our stewardship principles, and the way we design our products with this environmental sustainability mantra in mind. We do it from the very beginning. It's not the last thing we think about. The other one I would mention is Isoclast, our new insecticide. It is designed with pollinators in mind. With all of the issues and concerns out there, we went out -- we set out to design a product that would be very pollinator friendly and that's being widely recognized for folks around the world as we use it to help swap out that chemistry. So a final product that I'll just mention is Pyraxalt. And it has a very, very positive profile. But 1 of the things Pyraxalt does is it solves a problem that nobody else has been able to solve. And that's the control of a particularly tough pest in rice in Asia. And so we've worked hard with Asian rice producers, actually teach them how to produce rice differently. And when you combine Pyraxalt with some other products in our fungicide and herbicide portfolio like Rinskor, you mentioned, and then you add to that hybrid rice seed, we're really revolutionizing the yield that you can get out of rice in Asia, and that's about sustainability because that's about feeding the population. And we're going to need more productivity solutions like that as we go forward.

How do you price these products relative to adjusting products? And is your profitability in Asia versus Latin America versus, let's say, North America, kind of similar in these products?

Yes, it's amazing. With some of the new chemistry, some of our highest prices and largest margins are in some of those markets. And we have a fantastic process. Because we are so customer-centric, we design our product trialing profiles to really involve the customers. I've been to Asia a number of times when we were allowed to travel. And we actually built rice schools across rice paddies, across places like Indonesia, Philippines, Thailand. And we'll invite 50 or 100 of the local rice growers to come through the demonstration schools. And these schools start with the choice of the hybrids and the kind of yield differential that you can get. We do side-by-side trials on different types of chemistries. And we do some basic economics of saying, "Look, you are applying 10 shots of this type of product to control this pest. And in our case, you can use one dose of this product." Now yes, it's more expensive, but in the total economics of 10 x 1, you actually come out ahead. So we do all that very hands on, show them all of that. And at the very end, there's a yield trial where we'll actually harvest rice. And right on a little stage, we will collect the grains off of those rice stocks. And very visually, growers will take one look at their conventional system, and they'll see the pile over the new way and the pile is twice as big on the same area. It's a very visual way. And then we show them the products and off they go. So you got to show them, you got to teach them, but you'll get rewarded with the business because they know you have their best interest in mind.

Great. And one question I have on Latin America, I know you're trying to reduce volatility, and you have a new currency hedging program in place that company did not have -- you didn't have much income statement hedging either before or right after spinning out of Dow DuPont. Can you walk me through the changes you've made in your hedging program? And how confident are you in the new program?

Right. This is another change for us as we spun. You'll remember, both businesses were parts of large corporations who had corporate leverage treasury departments, who had control of the company's hedging strategies, and particularly, they had some guidance around hedging. So as a Business President inside Dupont, I didn't get to set our hedging strategy, the company did. So when you're a commodity chemical company or a polymers company, you're selling something every single day. And so you have this opportunity to manage the ups and downs in currency. But if you're an ag company, you only have one shot per year to make your sale, that bag of seed or that crop protection. And then you got to come back around the next year in that same window. So currency matters on that 1 day. And what was happening was, we were setting a plan or a guidance based on an assumption around currency, but by the time that day arrived to sell it, currency had moved. And when it moved, it created volatility. Now, every other currency in the world wasn't really an issue because they don't move much. They move gradually, but the Brazilian real is the most volatile. So 80-plus percent of our currency risk was related to our Crop Protection chemistry business being sold into Brazil because we were very centrally located from a manufacturing asset in the U.S. and all that chemistry went in to Brazil. So the moment we spun, our finance team and Treasury Department built a hedging capability. We started the process of putting hedges in place that would allow us to have certainty in our guidance. So when we guide, we want to have 75%, 80% of that revenue hedged so that you can count on that guide. And even if currency goes crazy, those hedges will protect us on the downside. But we've also designed them that if currency turns on us, maybe for the first time in forever, if the currencies do turn and come back, those hedges are designed to allow us to catch the benefit of that return as well. So we still can't change the year-over-year and that's where pricing comes in, being very aggressive in the market to try to cover that year-over-year. But once we set a plan and guide to a number, those hedges are designed to -- for -- to give confidence that, that guidance is sound and either the currencies go haywire in the same year, we're going to deliver based on that. So pricing, hedging instruments, then we're doing 2 other things, just getting started. One is a bartering program to help growers actually pay for their inputs with soybeans, which are dollar denominated. Other companies have done that in the past. We never really built that capability, and we'll work with a number of the large grain companies. I don't want to be in the grain trading business. So we'll work with them to very quickly offload those commodities to dollar contracts. And then the final thing, I mentioned this manufacturing centricity in the U.S. But one thing we can do is move formulation and packaging to be very local, where we can ship the bulk technical, the most concentrated part of the molecule, ship it to, for instance, Brazil. And then these facilities are very relatively simple to build. They're like bottling and packaging lines that you would find. And so we can dilute the product, we could formulate it, we can put it in packaging, and we can buy all of those inputs locally, which will also give us a natural hedge for part of that business as well. So I think a very well thought through process. The only error in its implementation was COVID on March 15 that sets all of these currencies off the rails by 30%. So I wish I had been a little bit faster on some of those hedges, we would have been in even better shape. But lessons learned, and we're in the process of already setting our hedges for '21, so that we'll be well in place by the start of the year.

Can you talk about your digital strategy? And clearly, digital purchases have gone up. And how is Cortiva positioned for both seed and crop protection on digital side relative to your competitors?

Right. So right about the day before the merger was actually completed, we made an acquisition of a company out in California called Granular. And this acquisition was based on a belief that we had that growers were in need of digital tools to help them with their decision-making. Now Pioneer had already put in place a set of digital tools that we called Encirca to help farmers be better farmers, right, agronomic tools, things like soil fertility and population density and the right kind of fertilizer usage. And the agronomics is absolutely sound. There's nobody else better in the world than a Pioneer agronomist out there giving agronomic advice. And so we digitized the thought process that they would go through, added drone capability to that aerial plant population county. So the good news was the agronomy was great. And that really is the main competition versus others that were out there. Most others are also developing agronomic systems. The bad thing about it was, pioneer wasn't that great of a software developer. So the electronics of it, the user interfaces of it was pretty clunky. And we got a lot of feedback about that. The flip side is Granular had been born and developed by an individual who believed that farmers needed better financial tools, that, at the end of the day, there was a lot of data and information that were pouring in, but there was no way to organize it and answer the question, "Of all of my acres, which one is the most profitable and why?" And so the Granular tool helped really showcase that. And once they knew what acre, then they could look and understand, "Okay, what do I need to change?" So they were fantastic programmers, but there was still a lot about agriculture that they were learning. So now you put these two things together, and now you've got the best agronomist married up with some of the best software developers, and that creates Granular Insights, which is a tool that does exactly that. It says, "Okay, where did I make my most money? It was here? Well, why? Okay, here are the agronomic decisions I made that drove that. Well, what if I change those?" You make agronomic changes, and you can see whether you make more money or not. So it gave -- it gives farmers now a really integrated way to manage the profitability of their operation. And sometimes they pay more dollars for a bag of seed, but they don't know whether they actually got more off of that acre. We can prove that to them now. Where does that migrate to? Well, down the road, if we start thinking about carbon, which is now being talked about a lot, farmers are going to need a way to certify that they've done the things that are required as part of that program. So I'm excited that the whole Granular approach could play. Today, we're working with growers in an ever-increasing way. We're about -- I'm going to say, 10 million engaged acres with that platform. And those acres are different types of acres, right? There are others who will claim larger acreage numbers. But the word engaged is important. These are growers that are online, using the tool, making decisions based on it. So we've got plans to kind of increase that closer to more like 30 million acres here over the short term. And all the pieces are in place to make that happen. So I'm excited about the work the digital team is doing, and it's really well integrated now with our Seed and Crop Protection platform. A final product I'll mention is a product called LANDVisor. We just launched it in the range and pasture market. And this is a way to use satellite imagery to look down on a really large ranch. These are thousands of acres, and they can find the areas on that ranch that are in most need of a herbicide to control some of the nastiest weeds. So growers can't afford to spray the whole ranch. But, boy, if we can direct them where that need really is, then they save a ton of money, they get fantastic weed control, and we pick up sprays that we otherwise would not get. So these ranchers are pretty excited about LANDVisor, and we are able to generate revenue from that service as well.

That's great. That's an interesting product for sure. I'm going to get -- take some questions. I got 2 questions here from the audience. The first question is, can you talk through your current understanding of potential recourse to Corteva stemming from PFAS liabilities?

Yes. Great. So obviously, the PFAS, the answer to PFAS always starts with making sure folks understand that the connection that the DuPont company had is really with 1 product, PFOA. There are a lot of other PFAS chemicals that out there that are attached to a lot of other products and a lot of other companies. We're really only talking about 1 of those. So at the time of the Chemours spin, Chemours maintain the indemnity, associated with any remediation and liabilities with that. And there are some processes in place to assure that, that continues. With that said, are there opportunities to have conversations between DuPont and Corteva and Chemours and establish some more certainty around exactly what that means? Absolutely. I can tell you that, that dialogue is being added, and we're involved in that as well. Our interests are very well aligned with DuPont's interest here going forward. And I'm optimistic that we will reach a little more of a definitive agreement on what the umbrella for that really looks like.

Okay. The next question is, are you actively working with Starboard to come to an understanding of what they are trying to achieve?

Look, we don't comment specifically on any conversations that we have with any specific investor. I can tell you that some of the comments that have been made, we agree with their belief that the company had been undervalued. I've been saying it for months that the momentum that we're carrying, what we have going on in the background, I thought should have been recognized more publicly, and you can see now we're getting some good recognition for that. Second, certainly, the type of earnings potential that this business has is evident. You can see that. I talked about those margin enhancement opportunities in my opening comments, both in Seed and Crop Protection. I think the big question here are the time lines. I think in understanding the time lines in agriculture, these are long-cycle businesses. So just making sure we have a realistic view of when and how we can deliver on those things. But I'm excited that folks see the business the same way I do and are excited about the growth potential of Corteva.

Okay. And the third question I have here is, can you talk about your long-term targets as it relates to balance sheet, cash and leverage? How much cash you need and what leverage are you targeting?

Right. So we worked really hard on our balance sheet, especially during this crisis, we're real happy to have that kind of as A minus, A category rating because it allowed us to borrow money even in some of those -- even though the dip was short-lived, we lend a lot of money to growers. So having access to that cash for our revolver and our lending is really important. So that said, our first commitment is, obviously, to maintain the quality of that balance sheet. Second, we need the resources to fund the growth of the company, whether it's R&D and -- or our capital needs. And I think we've got those well in hand, and we've got good visibility of what those look like. We will certainly continue to look at ways to make sure we're returning cash to shareholders and -- through our dividend policy, but also through share buybacks, and you've seen us. We've accelerated the current buyback that we have in place, and the Board continues to look at the timing and the opportunities to do further buybacks. So that healthy balance sheet and the cash flows that come from that earnings performance, that is very visible for our business here over the next few years, gives us some real opportunities. The final thing, right now, they're pretty small opportunities, but we're always on the lookout for good M&A type of activities. Maybe a few bolt-ons here and there. I've always been very excited about the vegetable seed industry. I think the leverage with our Crop Protection business in fruits and vegetables would be really interesting. I think a few bolt-ons in the digital space might make sense as we think about some of the downstream markets that farmers deal with, being able to do that more digitally could be helpful. And then you mentioned green chemistry earlier. There's a set of chemistries that are more biologically based, biological, microbial types. And there aren't a lot of big players out there that are available, but there are a ton of start-ups that are working on different products. And whether either through licensing or through some small acquisitions, they can go do what they do best, and that's invent. And we can go to what we do best, and that's be the route and the connection to the customer in the marketplace. So those are the main focal points. Balance sheet is very healthy. We've managed it really well through this crisis. And I think, as we close out the year, folks will be really excited to kind of see what we look like at the end of a pure first full year of operation around our balance sheet.

That's great. That's a good way to end. I think we're almost out of time. Jim, really appreciate your time here, and your insights and your knowledge of the company. So we really appreciate it. Thank you so much.

Great, P.J., thanks for the opportunity and for everybody who joined, thank you for your support of Corteva and your interest. We're excited about where we are today, but even more excited about where we're headed to. Thanks.