Monsanto 1Q17 Earnings Call Notes

10x as much VC investment in Ag as 5 years ago

“Our desire to expand the strong innovation core also stems from the myriads of game changing opportunities that we see in the horizon. We are very clearly entering a new era in agriculture. Hundreds of new entrants invested more than $4.5 billion of venture capital in agriculture in 2015, which is more than 10x the investment from just 5 short years ago. More players than ever are seeking to provide new technologies to growers to enhance productivity, both profitably and sustainably”

Brett Begemann

Growth in planted corn acres in Brazil and Arg

“n the first quarter, we saw greater than 25% increase in planted corn acres in Argentina and more than a 10% increase in corn acres planted in Brazil. This was accompanied by double-digit price increases and corn germplasm and local currency in both countries.”

Able to take price to offset some currency losses

” the change in the currency relationship created part of the opportunity to reach for some of the pricing improvements around double-digits. And by all means even double-digit did not bring back everything that we lost from the past with the currencies. So there is potential opportunity as we continue to look to the future there. At the same time what I think just are more important is the continued performance of our products down there. Intacta continues to do incredibly well.”

Pierre Courduroux

Strength in Southern Hemisphere business

” ongoing results came in better than the prior year on the strength of our Southern Hemisphere business. Our soybean gross profit is up by approximately 50% in the first quarter with 6 points of gross margin improvements, led by Intacta penetration and currency benefits. Corn gross profit grew by more than 30% due primarily to double-digit price mix lift in local currency in both Brazil and Argentina and from strong growth in acres planned in both countries.”

Robb Fraley

Should see gene edited products com into the market place by the middle of the next decade

“Sure, thanks. And it’s great question, PJ. So, may be just a little bit of background on the gene editing commentary. So, I think first of all as you recognize there is a variety of gene editing tools. There is protein base. There is nucleic acid base. And just in the last few weeks, there has been a couple of publications on two brand new gene editing systems that have been discovered. In any case, what these tools allow you to do is to go in and precisely change basically any base pair or any gene in the crop. And so there are very powerful tool for making precise changes. I think the other thing that’s important to highlight is you still need a world class breeding engine, a testing network in order to identify and evaluate the best combinations and those gene-editing traits are going to be introduced into corn and soybean and cotton stacked with the biotech traits that are defining the marketplace today. So, we see them very complementary to the breeding and trait engines that we have developed. And I think they will allow us to further accelerate that rate of gain. And I think the fact that we have now concluded licensing agreements with some of the major players and innovative technologies puts us in a great position to take advantage of these products. I mean some of the first gene editing products and some of the smaller crops are working their way through the regulatory system. As I indicated in my comments, we are now fully utilizing these tools and certainly by the beginning or middle of the next decade we will see these gene-editing products work their way into the marketplace. Really an exciting technology and I think we have created a strong position moving forward into the space.”

AGCO 3Q16 Earnings Call Notes

AGCO (AGCO) Q3 2016 Results

Martin Richenhagen

Sabilization in Brazil and more supportive gov policies in Arg

“Market conditions in South America have been difficult during the first nine months of 2016. More recently demand is starting to stabilize in Brazil where solid farm fundamentals are beginning to overcome previous weakness caused by political and economic challenges. More supportive government policies in Argentina have also contributed to higher sales in that market.”

Andrew H. Beck

Farm income will be down again in 2016

“In the United States, the USDA estimates that farm income will be down again in 2016, and as a result, our North American industry forecast calls for a decline of 10% to 15% from 2015 levels, with a more significant decline in higher horsepower equipment.”

Need to raise prices to offset steel price increases

“Well, we’re still working those price increases and probably not ready to give any numbers at this point, but for sure we’ve talked with our marketing teams about monitoring the steel price increases, and understanding that we need to make sure our pricing offsets that completely next year. So that’ll be our intent, but we don’t have firm numbers to give you yet, Jerry.”

Have seen a pullback in demand for storage and conditioning equipment

“Well, I think what we’re seeing in that market right now is certainly a pullback in demand in the grain storage equipment. That usually everyone is focusing just on the silos, but a lot of that business is also in the conditioning, drying equipment, also the conveyance equipment as well. So there are multiple aspects to that. What we’re seeing is a pullback – a significant pullback in the conditioning equipment because the harvest have been quite easy and the grain has been relatively dry. So the hours on the equipment don’t require any replacement this year. We’re also seeing a pullback in commercial activity as some of the big processors are pulling back on CapEx right now.”

Monsanto 4Q16 Earnings Call Notes

Monsanto’s (MON) CEO, Hugh Grant on Q4 2016 Results

Bayer is the right decision for our shareholders

“We unanimously determined that our combination with Bayer represents the most compelling value for our shareowners with the most certainty through the old cash consideration. So with this agreement as the backdrop, our two priorities going forward are as follows. First, delivering on the 2017 operational plan and key business milestones and second, executing on the necessary steps to close the deal which is targeted for the end of calendar year 2017.”

Productivity necessary to meet growing world demand

“This deal was struck because the overarching needs to deliver innovation to growers continues as demand continues to climb. I know that that may seem incongruent especially when corn is below $4 a bushel and soybeans are below $10. However the most recent WASDE report demonstrates that the demand trend remains both in tact and robust. In fact as seen on Slide 8, the trend line is more than $1 billion bushels of growth a year for corn and greater than 500 million bushels of growth a year for soybeans, which is consistent with the historical growth trends. Meeting that demand over the next decade would require a two-fold increase in the rate of yield growth for corn and a four-fold increase for soybeans. Innovation quite simply is the best way to increase productivity to meet this projected demand.”

Thereis little overlap between Monsanto and Bayer

“Yes, Don, thanks for your question this morning. I’d go back to my opening remarks. The unique thing about this transaction is there is very little overlap. So you are bringing together a seed business and a crop protection business and I think we can bring these two businesses together with much better insight for the grower by using digital agriculture.”

High capacity for innovation in improving decision quality on the farm

“So, as you look innovation, I think, number one, the needs never been great, or number two, I think the capacity to accelerate innovation particularly in the area of digital agriculture and particularly in the area of precision agriculture we are developing software and where we are using literally harvested data to improve decision quality on farm.”

Brett Begemann

Plant population growing a bit

“But if you look right now, this coming year or the near-term has been shaping up. If you look at the year we just finished in 2016 and the year we are going into in 2017, you can clearly see the trend continuing across corn particularly in North America where planting populations are increasing a bit and it’s exactly what Hugh was describing. That’s part of how you drive yield as increasing of plants in the field.”

AGCO 2Q16 Earnings Call Notes

AGCO (AGCO) Martin H. Richenhagen on Q2 2016 Results

Chided the IR guy for mispronouncing his name

“Thank you, Greg, and I hope that one day you learn how to pronounce my last name properly. It’s not Riken-hagen, it’s Rishen-hagen.”

Continued decline in industry sales

“The outlook of healthy global crop production, especially in commodity prices, and estimates call for 2016 farm income to be at or below 2015 levels. In North America, relatively young machinery fleet and dealers’ efforts to reduce inventory levels have contributed to a continued decline in our industry sales through the first half of the year. Weaker demand from the row crop sector resulted in significantly lower industry retail sales of high horsepower tractors, combine harvesters and sprayers.”

More supportive policies have finally contributed to higher sales in that market

“Regional industry demand declined most significantly in South America during the first half of 2016. In Brazil, political and economic uncertainty is curtailing investment in farm equipment. More supportive government policies in Argentina have contributed to higher sales in that market finally.”

Record harvest and low corn prices have different dynamic effects

” I think it’s a mixed picture, so that means there are certainly farmers who will be in a record harvest. And so, even with lower corn or crop prices, they still will be very, very profitable. And then on the other hand, there are farmers who benefit from it. Everybody who has then (29:57) chicken, pigs and so on, of course enjoys lower commodity prices. So therefore, it’s a very, very difficult picture, and very interesting to understand. But overall, what we know is that farm income is very important. I think that farmers in America still have money and still want to invest, but maybe not on the record level we saw maybe between 2010 and 2013.”

British will likely try to replace European subsidies with British subsidies

“And then I think that, in the UK, in order to avoid any major problems with Brexit, the government wants to – I met the Secretary of Agriculture of England, who is actually – no, I shouldn’t make that comment in public – but I think they will try to basically replace European subsidies by British subsidies. That’s at least the plan. So I don’t think that we will see a huge upswing next year in Europe, but I also don’t see a big downswing either.”

DuPont 1Q16 Earnings Call Notes

DuPont’s (DD) CEO Ed Breen on Q1 2016 Results

Ag a source of strength

“Much of the quarter’s strength was due to Ag. Solid execution in Ag, our largest segment enabled a strong start to the North American corn season. I’m also very pleased with our results in this Safrinha season as we delivered strong volume growth. ”

Nicholas C. Fanandakis

Ag fundamentals have not changed

“In agriculture, the fundamentals have not changed since the outlook we provided in January. Net farm income is declining and season crop protection suppliers have abundant of inventory globally. Economists are currently forecasting lower global industrial production in key markets including the U.S., Central and Eastern Europe and China. China’s economic slowdown continues particularly with its industrial, real estate and financial sectors impacting the Asia-Pacific region.”

James C. Collins

A little early to talk about market share in corn. 30% planted but seeing volume increases

“It’s still early in the season to talk about full-year, we still have a lot to go and when I think about corn share now again, a little early to call share. Agree with you, no doubt we’re seeing volume increases in North America consistent with that USDA report on the 94 essentially million acres. We’re seeing volume growth based on our new technology and our teams are going to stay really focused. But like I said, it’s way too early to talk about seed share. As of today, we’re about 30% planted in North America. That is elevated. Normally we would be about 16% for this time of the year and again you saw some of that volume increase flow through in our first quarter, but we will see how things shake out around share for the full-year.”

If the weather is perfect and we get the 94m acres planted that are expected, it would continue to put pressure on prices

“Historically tough, planted acres doesn’t always equate to yield, we could still see some issues to summer especially during pollination where we know we can really take the top off of yield on any of those crops. So kind of like you, we’re in a wait and see mode, if the weather is perfect and we get 94 million acres, you are right we’ll continue to see commodity prices at that low end of – I would say what I’m calling the new normal range of that 320 to 420 kind of operating range. And that will continue to put stress on that farm income and keep farmers really focused on how do they get the most productivity off of everyone of their acres.”

AGCO 4Q15 Earnings Call Notes

AGCO (AGCO) Martin H. Richenhagen on Q4 2015 Results

Most projecting another decline projected for farm income in 2016

“Excellent harvests across all major regions put pressure on commodity prices and the USDA estimates, that U.S. farm income will be down significantly in 2015, with most experts projecting another decline in 2016. This softer farm economics have reduced demand for agricultural machinery, especially for larger models.”

More work remains to reduce inventory levels

“The industry made progress in reducing inventory levels, but more work remains especially with large horsepower tractors and combines. Forecasts are pointing to reduced farm income in 2016, and we are expecting lower demand.”

You could call it catastrophe in Brazil

“sales in South America were extremely weak, resulting from political uncertainty, or you could call it catastrophe and a depressed general economy in Brazil”

There are some manufacturers who have a major inventory problem

“Well, it depends very much on the manufacturer, so there are some who really have a major problem. I don’t want to mention name here, we talk about AGCO. When it comes to smaller tractors, I think this might also be an issue for the guys who basically didn’t plan properly, mainly companies from Asia.”

The government in Brazil is in really bad shape

“We try to lobby, politicians right now don’t listen, so the government in Brazil is in very bad shape. They don’t know what they are doing, they don’t have a strategy, they are corrupt, and this damaging not only our business but business in general.”

We’re hopeful that the new President in Argentina comes in with a more pro business strategy

“one is the election in Argentina where we are very hopeful that the new President with whom we will meet soon comes in with a much more business oriented strategy for farmers. That means that we lobbied many years with Kirchner on basically reducing the export duties. And I think we have chances that this will be done, which would of course help Argentinean farmers a lot.”

Venezuela is close to complete bankruptcy

“there is one other bad exception with this Venezuela, I think Venezuela is close to complete bankruptcy, the political system doesn’t work at all, you can’t travel there without being killed. So that’s really, really a very, very difficult market.”

Europe seems to have bottomed out

“I would like to make a general observation. To me, it looks like as if Europe somewhat is close to have bottomed out. And Europe seems to be, in general, a little bit more stable than the other markets.”

Monsanto FY 1Q16 Earnings Call Notes

http://seekingalpha.com/insight/earnings-center/article/3794576-monsanto-companys-mon-ceo-hugh-grant-on-q1-2016-results-earnings-call-transcript?part=single

Monsanto Company’s (MON) CEO Hugh Grant on Q1 2016 Results – Earnings Call Transcript

Start with the topic of industry consolidation

“I’d like to start the talk today with a topic of industry consolidation right at the beginning. First, we have an incredible standalone growth plan backed by our commitment to innovation and the industry’s broadest, deepest and most important pipeline. Second, we expect industry consolidation to continue and it should given the opportunities for significant synergies and value creation and R&D across the industry.”

Two of our largest competitors are combining

“Yes, two of our largest competitors recently announced that they’re combining but they’re also two of our largest technology licensees and we expect that to continue given the opportunities of our unparallel pipeline.”

Currency headwinds have gotten worse thanks to actions in Argentina

“the headwinds from currency and commodity prices that we outline at the start of this fiscal year have not yet abated, and in fact currency has become a much stronger headwind with the recent events in Argentina. We are pleased to see the early decisive approach of the new President and we believe that his actions, particularly the lifting of export taxes in grain will create longer-term benefits for agriculture for which we’re well positioned to participate. However, the approximate 35% to 40% devaluation of the Argentine peso is expected to create an estimated $0.20 to $0.25 charge in Q2”

Industry challenges mean that integration with Syngenta would be even bigger boost

“A lot has changed in the industry since last spring. The industry has gotten tougher and I would say we expected some of that. The operating environment has become tougher as well. And I think because of that, there’s a greater need now than there was last spring to be able to quantify what that opportunity would look like and quantify what that integrated platform would look like. So, engagement becomes more important now than it did before with Syngenta and we haven’t seen much progress on that front.”

Dow Dupont will change things

“I can’t really speculate. They are big. I think this makes them the biggest in the world, but as Rob said they are also a customer. So we will continue our licensing efforts with them. There’s clearly going to be a disruption how you bring two entities of this size together but I think that’s really more for them to comment on than us.”

Maintain innovation pipeline in tough times

“We’ve talked since last spring we’ve talked about continuing to focus on our core and as the industry as a sector goes through a tough time, you need to double down on that. We’re managing our costs but at the same time we’re not shorting on innovation. And I think we are more successful in that innovation drive than anyone else in the space, so I kind of like the cards that we hold. But I think there’s going to continue to be consolidation in this space when you see what’s happening with commodity prices today.”

Brett D. Begemann

Pierre Courduroux

Dr. Robert T. Fraley

Deere FY 3Q15 Earnings Call Notes

Net revenue down 20%

“Net sales and revenues were down 20% to $7.594 billion. Net income attributable to Deere & Company was $512 million. EPS was $1.53 in the quarter.”

Expect farm cash receipts down 7% y/y

“Given the record crop harvest of 2014 and consequently the lower commodity prices we’re seeing today, our 2015 forecast calls for cash receipts to be down about 7%.”

Expect down further in 2016

“Looking ahead to next year, based on our expectation of above trend yield – above trend-line yields for 2015 and declining livestock prices, our very early forecast calls for total cash receipts to be down slightly in 2016.”

Unfavorable growing conditions could force prices higher

” global grain stocks-to-use ratios remain at somewhat sensitive levels, even after the abundant harvests of the past two years. Global grain and oilseed demand remains strong, while supplies are now fully adequate. Even so, unfavorable growing conditions in any key region of the world as well as unknown impacts from any geopolitical tensions could disrupt trade, lower production, reduce stocks-to-use ratio, and result in prices quickly moving higher.”

Decrease forecast in China

“In China, the government’s continued investment in equipment subsidies and mechanizations are supportive of agriculture. However, the economic slowdown and lower commodity prices have led to a decrease in forecast industry sales.”

Weak monsoons hurting India, ruble hurting Russia

“Turning to India, positive consumer and investors segment are encouraging economic growth. While the government continues to support agriculture, two consecutive below normal monsoon seasons are hurting the farm sector. In the CIS, continued deterioration of economic growth and further tightening of credit continue to weigh on equipment sales. Notably, western equipment manufacturers are being heavily affected by the weak Russian currency and geopolitical uncertainties.”

Brazil hurt by rising interest rates and economic uncertainty

“farmer confidence is lower as a result of these rising interest rates, economic uncertainty and political concerns, all of which are leading to lower equipment sales. Still, long term fundamentals for the Ag business in Brazil are solid.”

Seeing slowdown in order books in construction segment

“In spite of these encouraging economic indicators and positive dealer and customer sentiment, we are seeing weakening in our order books. Some contributing factors to the slowdown in demand are the conditions in the energy sector and energy producing regions, wet weather that slowed construction activities this spring and summer, the decline in rental utilization rates and sluggish economic growth outside the United States.”

Probably going to see further decrease in sales next year

“at this point given that outlook in cash receipts, given what we’re seeing and in the very early stages of our early order programs it is likely that you would see some reduction, further reduction in large Ag sales retail sales next year.”

El Nino usually good for US growing conditions

“Keep in mind as we go into 2016, we did have some favorable weather conditions, El Nino actually strengthened through the summer. And that certainly bodes well normally for U.S. market or growing areas. But keep in mind that can have some more negative and dry impact on other parts of the world.”

Construction segment actually not bad outside of energy

when you think about C&F, there is little bit of dichotomy because you talk to our contractors, our dealers, the sentiment is generally – fairly positive especially outside of those energy impacted areas. The underlying fundamentals that we would normally point to are actually fairly positive year-over-year. We’re just seeing softness in orders.”

Rental companies shifting equipment out of energy dependent areas

“There is commentary about some of the independent rental companies for example shifting inventory out of those areas that are more energy dependent into the rest of the country.”

Monsanto FY 3Q15 Earnings Call Notes

Challenges facing the world’s food supply continue to evolve

“The challenges facing the world’s food supply continue to evolve. The growing population along with our volatile and changing climate place ever increasing burdens on global food production”

That’s why we want to own Syngenta

“Combining the strengths of Monsanto and Syngenta would accelerate the development of new innovations, increase our scale and reach and provide a broader spectrum of products for growers around the world and it would use data science to offer a more insightful, precise approach to agriculture.”

Today we reach 400 of 3.5B acres of arable land

“Today, our foundation and our core crops reaches 400 million of the world’s 3.5 billion acres of arable land.”

It’s been a tough year but our relationship with farmers is great

“There is no doubt it has been a tough year with the macro pressures facing global agriculture, namely our retreat and corn acres, currency and pressured commodity prices. That said, I’ve not seen our relationships with our farmer customers, our portfolio, our position in the market or our pipeline stronger than I see them right now.”

US corn acres will be 88-89m

“With the line of sight from our third quarter, where we’ve seen a good uptick in the U.S. end season ordering, we now believe corn acres will be in the of 88 million to 89 million acres.”

Soybean acres 85m

“with the additional clarity we have from the spring planting progress, we expect U.S. soybean acres closer to 85 million versus earlier estimates of 87 million acres and the combination of shipments in our order book continues to indicate our share is growing with farmers continuing to choose Roundup Ready 2 Yield as the product of choice across our branded and licensed footprint.”

Climate pro on 45% of corn and soybean acres in the US

“To date, we’ve enrolled more than 75 million acres on the Climate Platform, which is roughly 45% of the total planted corn and soybean acres in the U.S. and with the current usage trends from those who use the platform weekly, we are tracking nicely towards our active used target of 45 million acres.’

Shrunk the share count by 55m shares since last year

“we successfully completed our 6 billion accelerated share buyback program this quarter and our share count now stands at 469 million shares outstanding, a reduction of more than 55 million shares since we initiated our new capital allocation strategy just a year ago.’

We can’t get syngenta to talk to us

“call me traditional, but I always think that business gets done when people meet, when they sit down across the table and try and work out a solution and we’ve been singularly unsuccessful in getting Syngenta to sit down and talk. We’ve seen the videos where they talk to themselves, but I’d love to be able to engage in a conversation.”

Climate Pro helps farmers analyze data

“If you look at the early days of the Climate Pro, which were the paid acres this year, I’d say it was driven by the nitrogen model which gave farmers, lots of insights particularly in some areas this year that were kindly difficult with the early planning season and lots of rain et cetera in some areas so that played very well.”

“And then the shift which was just as exciting as how much interest there was in the Field Health Advisor this year which was the other big app that we had available on that paid system this year and that one really gets that worked. He was describing as thinking about field help in the field help and farmers make the decisions in raising the crop through the rest of the year and its really impressive to see the interest from farmers that it confirms again the farmer’s understand intuitively. They have this variability in the field and they believe that it can be addressed and they’re willing to work with us to figure out how to do that”

John Deere 1Q15 Earnings Call Notes

Pleased with results in light of weak conditions

our view, the results were impressive in light of the weak conditions plaguing the global agricultural sector.

Strong dollar weighed on results

Another item, weighing on our results, was the strong U.S. dollar. It continued to put pressure on reported sales made outside of the United States and is expected to continue doing so for the rest of the year.

Revenue down 18%

Net sales and revenues were down 18% to $8.171 billion. Net income attributable to Deere & Company was $690 million. This includes a $38 million after-tax gain associated with the previously-announced sale of our crop insurance business. EPS was $2.03 in the quarter.

Crop receipts down 23% but livestock receipts should pad the decline

U.S. farm cash receipts, which in spite of softer commodity prices, remain near historically-high levels, thanks to help from record livestock receipts. As a result, our 2014 forecast calls for cash receipts of about $418 billion, up about 1% from 2013, and the highest level ever recorded. Given the record crop harvest of 2014 and consequently, the lower commodity prices we’re seeing today, our 2015 forecast calls for cash receipts to be down about 6%. Of note, crop receipts for 2015 are forecast to be about 23% lower than 2012’s record.

Grain inventories are still not robust

global grain stock-to-use ratios remain at somewhat sensitive levels, even after the abundant harvest of the past two years. Global grain and oilseed demand remains strong, while supplies are now fully adequate

Brail confidence is low

farmer confidence in Brazil is lower as a result of economic uncertainty and political concerns in the country, leading to lower equipment purchases.

We think a lot of inventory has come out

Yeah, so as you look at dealer inventory, certainly, we took – last year, again as a reminder, we pulled a lot of inventory out, as Susan pointed out in the opening comments, we’re down pretty significantly year-over-year as we ended the quarter this year with receivables and inventory, we’re down almost $2 billion year-over-year for Ag and turf. And certainly there’s a lot of conversation about used equipment levels as well. And we would tell you, as you look at large Ag in total, certainly, we feel – I mean we’re always concerned about used equipment. If you asked us are we more concerned today than we were three months ago or six months ago, the answer would be no.

We are underproducing, allowing inventories to balance

we have under-produced year-to-date and we would continue, especially as we go into the back half of the year, we’ll be under-producing the retail environment and continuing to bring those field inventories down

the state of the crop markets is year to year, dependent on weather

That’s a great – a tough question at this point. And actually I think if you look at the U.S. and Canada markets, for example, and I think it really implies the overall commodity market in general, if you talk to our Chief Economist, he would tell you we’re really in kind of a year-to-year type of mode right now. And as frustrating as it may be for people to hear, it really is about what happens this summer with the current crop that’s in the ground. If you’re going to assume another year of better than average weather, where yields are above trend yield, then certainly it’s going to be a challenging argument to make that 2016 would certainly improve really anywhere around the globe.

Less than ideal weather would have an effect on prices

If you look back at what would the implications be of trend yields or a little less than ideal weather or average weather and you see below trend yield, then that story changes pretty dramatically because we would argue that you’re not – while you certainly have ample supply of commodities and you’re seeing that reflected in commodity prices, there isn’t a glut of commodities either.

Our inventories are low

as you look at inventory as a percent of sales, about half of where our competition was. We would continue to say on large Ag equipment that our inventory levels are, as a percent of sales, about half of what the rest of the industry would be. But certainly, that puts pressure because those inventories need to come down, and so you do see some pricing pressure.

AEM data

when you look at the AEM data, it gets clouded because you have our 6000 Series tractors in those numbers, you have some of our 5000 Series tractors in those numbers. And certainly those are tied much more closely to the livestock industry.

This is the worst downturn in Ag equipment in 25 years

we’re facing, as you know, the deepest downturn in North American large Ag equipment industry in 25 yearly

How they would react if there is another good harvest

certainly, we would continue to look at from a cash perspective. Our CapEx would be one area we’d continue to look at, although we did pull that down quite a bit. You continue to look at options with SA&G and R&D. We talked about, when C&F went through their super-trough in 2009; when you get into levels that you didn’t anticipate you tend to also find levers that you didn’t necessarily anticipate. And depending on the perspective, we kept R&D pretty flat year-over-year in our outlook, and so that would be something you would continue to look at.

Unless there’s better than average weather it’s hard to see commodity prices improving

as we look at the outlook for next year, unless you’re going to argue for better than average weather, it’s hard to argue that you’re going to see a significant drop in commodity prices given the strength in demand that we continue to see on commodities.