Good morning and welcome to John Deere & Company Third Quarter Earnings Conference Call. Your lines have been placed on a listen-only until the question-and-answer session of today’s conference. I would now like to turn over the call to Mr. Josh Jepsen, Director Investor Relations. Thank you. You may begin.

Hello. Also on the call today are Raj Kalathur, our Chief Financial Officer; John May, President of Agricultural Solutions and Chief Information Officer; Ryan Campbell, Vice President and Corporate Controller; and Brent Norwood, Manager, Investor Communications. Today, we will take a closer look at Deere’s third quarter earnings, then spend some time talking about our markets and our current outlooks for fiscal 2018. After that, we will respond to your questions. Please note slides are available to complement this call. They can be accessed on our website at www.johndeere.com/earnings. First, a reminder, this call is being broadcast live on the Internet and recorded for future transmission and use by Deere & Company. Any other use, recording or transmission of any portion of this copyrighted broadcast without the expressed written consent of Deere is strictly prohibited. Participants in the call, including the Q&A session, agree that their likeness and remarks in all media maybe stored and used as part of the earnings call. This call includes forward-looking comments concerning the company’s plans and projections for the future that are subject to important risks and uncertainties. Additional information concerning factors that could cause actual results to differ materially is contained in the company’s most recent Form 8-K and periodic reports filed with the Securities and Exchange Commission. This call may also include financial measures that are not in conformance with accounting principles generally accepted in the United States of America, GAAP. Additional information concerning these measures including reconciliations to comparable GAAP measures is included in the release and posted on our website at www.johndeere.com/earnings under Quarterly Earnings & Events. Brent?

John Deere had another solid quarter with contributions from both our equipment operations and financial services group. The higher reported earnings were a result of favorable market conditions and a positive response to our innovative and advanced product lineup. In agricultural markets, replacement demand continues to drive sales activity for large equipment, while construction equipment sales benefited from increased investment in oil and gas, housing and global transportation. Now, let’s take a closer look at our third quarter results beginning on Slide 3. Net sales and revenue were up 32% to $10.3 billion. Net income attributable to Deere & Company was $910 million or $2.78 per diluted share. The results for the quarter included a favorable net adjustment to provisional income taxes of $62 million. Excluding this item, adjusted net income was $849 million. On Slide 4, total worldwide equipment operations net sales were up 36% to $9.286 billion. Currency translation was negative by 1 point. Price realization in the quarter was positive by 1 point. The impact of Wirtgen was 17 points. Turning to a review of our individual businesses, starting with agriculture and turf on Slide 5. Net sales were up 18% in the quarter-over-quarter comparison primarily driven by higher shipment volumes, price realization and lower warranty expenses. Operating profit was $806 million, up 16% from the same quarter last year or 35% when excluding the impact from the sale of SiteOne. Operating margins for the quarter were 12.8%. Before we review the industry sales outlook, let’s look at the fundamentals affecting the ag business. On Slide 6, corn stocks-to-use ratio is expected to decline in response to increasing global demand and drought conditions experienced during the first crop in Argentina, which lowered the country’s corn production by roughly 25%. Conversely, soybean stocks-to-use ratio is forecast to build…

Thank you, Brent. Our 2018 ag and turf industry outlooks are summarized on Slide 10. Industry sales in the U.S. and Canada are forecast to be up approximately 10% for the year. For 2018, results have been largely driven by replacement demand as customers cite the need to update their aged fleets and show a strong preference for greater productivity enabled to the latest technology. Even as trade issues have weighed on farmer sentiment more recently, we have still seen replacement demand reflected in the Phase 1 results of our 2019 planter and sprayer early order programs, which both ended slightly higher than last year’s Phase 1 results. And while it’s still too early to draw from firm conclusions regarding overall 2019 ag demand, it is noteworthy to highlight the early order programs, higher take rates of advanced precision features, which clearly demonstrates the economic benefits of our solutions and supports the growth of our precision ag strategy. With sentiment likely to remain fluid over the coming months, farmers continued to show a strong willingness to invest in technology that improves both productivity and economic outcomes. Moving on to the EU 28, industry outlook is forecast to be between 5% and 10% in 2018, up from previous guidance of approximately 5%. In South America, industry sales of tractors and combines are projected to be flat to up 5% for the year. This is primarily driven by solid industry fundamentals in Brazil, which is offset by weakness in Argentina as a result of drought conditions experienced in the first half of the year. Shifting to Asia, industry sales are expected to be relatively unchanged from 2017 though India continues to deliver strong results in the region. Lastly, industry retail sales of turf and utility equipment in the U.S. and Canada are…

Now, let’s focus on construction and forestry on Slide 15. Net sales for the quarter, up $2.99 billion, were up 100% compared with last year driven by strong demand for construction and forestry equipment as well as well as by the acquisition of Wirtgen, which contributed 77% of the positive improvement. Third quarter operating profit was $281 million benefiting from higher shipment volumes, Wirtgen acquisition and lower warranty expense partially offset by higher production cost and higher sales incentive expenses. C&F operating margins were 9.4% for the quarter, but 10.5% excluding Wirtgen. Moving to Slide 16, the economic environment for the construction, forestry and road-building industries look strong and continue to support increased demand for new and used equipment. For the year, U.S. GDP is forecast to grow at about 3%, which is above the 20-year average. Correspondingly, U.S. housing demand remains solid with housing starts expected to be about 1.3 million units for 2018 as inventories of new and existing homes available-for-sale remain at 36-year lows. Residential construction continues to serve as an important indicator for earthmoving equipment sales and current housing demand levels suggest continued growth in the segment. Additionally, construction investment in the U.S. is forecast to grow 3.8% for the year led largely by increased activity in oil and gas. With oil prices now forecast to average about $67 a barrel for the year, backlogs for many oilfield contractors are extending through 2019, which is supported for further equipment demand. Lastly, global transportation investment this year is forecast to grow about 6% driving increased demand for road construction equipment, such as milling machines, rollers and asphalt pavers, which are all important product lines for Wirtgen. These positive economic indicators are reflected in a strong order book, which is now extending well into 2019. Moving to the…

Before we respond to your questions, let me share a few thoughts on the third quarter and our expectations for the rest of the year. First, it’s important to note the continued demand for ag equipment even as the industry faces uncertainty around trade. While farmer sentiment remains dynamic in this environment, it is critical to remember that we are still in a replacement market and farmers have shown continued willingness to invest in technologies that enhance operational efficiencies and produce tangible economic results. This has been evident in the initial results from our early order programs, which produced high take rates for our advanced precision features. While it’s still too early to form a complete outlook for 2019, we believe the continued ag equipment demand affirms both our significant investment in precision ag and our overall current strategy. Second, the solid levels of demand we are experiencing across our two equipment divisions have produced excellent cash flow generation year-to-date. As a result, we contributed 1 billion towards our pension during the third quarter in order to take advantage of last year’s higher corporate tax rate. Additionally, we announced a 15% increase to our quarterly dividend to $0.69 per share on May 30 in order to build towards our desired dividend payout ratio that targets 25% to 35% of mid-cycle earnings. In last week, during the quarter we repurchased $400 million worth of shares. These actions reflect confidence in our ability to deliver results even in fluctuating market conditions. Lastly, as global agricultural markets navigate uncertainty, the underlying fundamentals and tailwinds to our business model remain unchanged. Global demand for grains continues to grow consistently even as trade flow patterns readjust to accommodate various policy changes. Overall, we are encouraged by the outlook for the rest of 2018 and the early interest for our latest technology to come in model year ‘19 and we will continue to work on delivering strong results for the remainder of this year and beyond.

Thanks, Raj. Now, we are ready to begin the Q&A portion of the call. The operator will instruct you on the polling procedure. In consideration of others and our hope to allow more of you to participate, please limit yourself to one question. If you have additional questions, we ask that you rejoin the queue. As a reminder, John May will be with us and available for questions. Angela?

Thank you. We will now begin our question-and-answer session. [Operator Instructions] Our first question comes from Jerry Revich with Goldman Sachs. Your line is open.

Yes, hi. Good morning, everyone.

Good morning.

John, I am wondering if you could talk about for the major equipment categories, what are the take crates that you folks saw for advanced technology, precision technology over the course of this past year and based on the results that you alluded to in your prepared remarks, what do you expect the take rates to look like as we enter ‘19?

So, first of all, I think a way to think about the take rates, Jerry is there is three areas where you are going to see this technology within our equipment. Number one, it’s included in our base cost of our machine and those would be things such as touch screen displays that have significant amount of software that optimize the vehicle’s performance based on sensor data and feedback that the machine is getting. We also see take rates and monetization on premium options and in your report you listed a couple of those one would be Combine Advisor or active yield. These are premium options that our customers make the choice to add to their equipment. And then the third area, where we see take rates across agricultural precision ag is in subscriptions required to fine-tune the machines if you will. And an example of that would be higher fidelity guidance systems for example moving to in our RTK based systems. Overall, across the all areas of technology we have seen strong adoption. Maybe let me give you a couple of facts I think you will find interesting. If you look at AutoTrack alone and you compare AutoTrack in 2013 which was the peak year for the production of agricultural equipment. To 2018, in 2018 we sold more AutoTrack systems than we did in 2013. If you look over the last 3 years and you look at each individual region, all four regions across the globe, every year we see an increase in the overall take rate and adoption of the technologies. So that makes us really excited that number one, the customers are seeing the benefit and greater productivity, improving the cross cost structure of their business, ultimately making them more profitable and that the technology is going to continue to have significant value to their business going forward. So we are excited for what we are seeing in take rates. I can tell you in the last few years it’s been more significant than we have seen in the past.

I am sorry just – yes, please.

Maybe just an expense, this is Ryan. ExactEmerge is our most productive, most advanced row units. And the take rates from an ‘18 to ‘19 perspective they are up 50%. So just to give you a kind of an order of magnitude of what we are seeing based on the technology and the high productivity that we are delivering and a lot of our crop care machines.

Okay, perfect. Thanks.

Next question comes from Andy Casey with Wells Fargo Securities. Your line is open.

Good morning and thanks. I wanted to get an update on cost headwinds, I am trying to assess if these more or less temporary and if I take the full year guidance back into the implied Q4 gross margin, it kind of looks like you are expecting somewhere around 26% if I am doing the math right and that will be a bigger year-to-year improvement than you have really seen in each of the first three quarters and a sequential step-up, I am just wondering what are you seeing that could be driving that, is that better productivity or are you seeing kind of the cost curve is flat now?

Andy, I think when we look at if you are looking about ag and turf for example on the materials side, we do see that impact in 4Q. 4Q from a year-over-year perspective would actually be kind of the higher impact as we think about those costs coming in. We have talked about the way our contracts are lagging, so you do see that impact in 4Q. I think importantly when you think about the full year our ag and turf margins have stayed the same in light of the fact that we have seen higher material as well as an FX headwind in the quarter.

Okay. And with the pricing actions that you are doing in the ongoing productivity, would you expect the gap between price-cost to narrow as you go into fiscal ‘19 or maybe neutral or positive?

Yes. As you think about our commentary from last quarter, we would remain the same. The price actions we are taking from year ‘19, we expect to offset that material inflation that we have seen in ‘18 and ‘19. So that remains unchanged, so we feel confident in that. Thank you.

Thanks.

Next question.

Our next question comes from Jamie Cook with Credit Suisse. Your line is open.

Hi, good morning, I am sorry just a little more color on the order book, in construction it seems like you have a fair level of – very good visibility relative to what’s normal, so if you can give color there as well as any more color that you could give on the ag side in terms of visibility versus where we sat last year, so if you could start there. And then Raj just another question, obviously the cash flow is strong, you are buying back stock last quarter and this quarter, the stock has come down significantly, as we think to ‘19 given your balance sheet should we think as repurchase is another lever for you guys to grow earnings? Thank you.

Which one do you want us to answer?

All of them.

Jamie, I will start on the order book, so on the construction side, as Brent noted we continue to see order book extend. We are well into 2019. That’s really driven by what we are seeing from customer demand, contractors with backlog that are extending. So I will say good visibility there more than we would traditionally have as we think about 2019. I think for the most part we would be working into – through Q1 of ‘19. As you think about the ag side, the early order program John mentioned some, we are seeing that first phase. Even when you think about the timing of that first phase of the EOP that began in June, it ended in mid-July, so we tend to see more activity at the end of those phases even in the uncertainty that we saw that first phase ended up slightly higher. So, I think we feel good about the continued replacement demand that we are seeing drive that technology adoption, come through the business. I think as you think about tractor order book, tractors year-on-year were slightly ahead of where we were a year ago at this time on a higher production schedule. So, that would be positive as well.

And Jamie, on the cash use, our priorities have not changed and we are generating strong cash flows and expect to generate strong cash flows throughout the cycle as we have demonstrated in the past and again mid A rating is the most important investments for growth. And as John explained to see there actually delivering very good results and we will continue to have that as our second priority. And dividends, we have always said 25% to 35% of mid-cycle earnings. What I will add there is we have more room for growth and opportunity growing our dividends and when we see it appropriate that might be an opportunity there. And on share repurchases, as you know, we always think about the long-term minded investors and adding value to them when we repurchased shares. We have also set – we think our intrinsic values are much higher, so given the current share prices, you should expect us to be buying back some shares.

Great. Thank you. I will get back in queue.

Next question?

Our next question comes from Adam Uhlman with Cleveland Research. Your line is open.

Hi, good morning everyone. I was wondering if we could expand on what’s happening over in Europe you raised your full year sales outlook, there is lot of crosscurrents with dairy pricing and wheat pricing. I guess, what’s your view on how calendar – the second half of 2018 plays out? And then is there any inventory positioning that you are doing with emission standard changes, if you could talk through that as well? Thanks.

Adam, when you think about Europe, I think what we have seen there is this year, we have seen dairy margins, livestock margins have held in for the long-term average, which have been supportive. I think on the arable side, we have also seen improvements in margins. This year, you are starting to see some impacts from the drought. I’d say it’s very regional though. And where we have seen places that have not been impacted by the drought tend to be places that are stronger important markets for Deere. So I think that’s been impactful for us as we think about our fiscal year. I think that is a difference when you think about fiscal versus calendar year with some of the things that have occurred with registrations in our fiscal year, but not the calendar year. We have also seen strong wheat prices that are benefited European farmers as well that are helping to offset some of the downside that you have seen in say places that are affected by the drought.

As far as the inventory goes, I mean I think overall when we think about managing our inventories, particularly field inventories on a global basis, I think we feel good about where we are at in North America large ag inventories, we continue to manage well producing in line with retail demand. So, I think no major shift or difference there small ag as we have talked about, we have strategically built a little bit of inventory to ensure that we have got the inventory in the field, because of the buying patterns of those customers. And I’d say really rest of world I don’t think there is any significant change in terms of our view of inventory as we think about each individual to your product line or market.

Alright, thanks. We will go to next question.

Our next question comes from Steven Fisher with UBS. Your line is now open.

Thanks. Good morning. Just focusing on the cost a little bit more, just other than the cost of goods sold impact, wondering if we should be thinking about other cost as net headwinds or tailwinds next year. R&D, you mentioned 21%, I think 9% organically, is that going to abate and what about other SG&A costs and incentive comp?

Yes. I think when you think about R&D, R&D is one that we tend to look at as more of a strategic investment in the business and somewhere where we take a lot of pride and the ability to continue to invest strategically in R&D, even throughout the downturn and today in technology. And as John mentioned we are seeing the benefit of that in the adoption of technologies. So I think that’s an area that we continued to invest in and probably not significant changes. SA&G, some of the things with deal costs, some of those sorts of things will roll off as you think about Wirtgen. And I think SA&G when you take out the acquisition side, we are flat on an organic basis on sales that are up high teens. So I think that’s an area where we have leveraged and as we have taken costs out we have been able to adjust there.

And incentive comp, I mean should we be thinking that as a reset as a tailwind for next year at this point?

Yes. I mean this year I would this year we are up slightly. It’s about $75 million higher year-over-year. As our goals have shifted and change, it really depends on where we come in, so I would expect a significant amount of difference there.

Okay. Thank you.

Next question.

Our next question comes from Rob Wertheimer with Melius Research. Your line is open.

Hi, you touched on it briefly, but a question on receivables and inventories which were up I think in both divisions not a ton, but for the second quarter in a row, so is there anything I don’t know operationally different than you thought to work in and maybe just generally what’s caused bump up?

Thanks Rob. Yes. I think the Wirtgen is when you look at the total change is a big piece of that. I think that’s just their business. They own their retail in a large part of the world and working through kind of the forecast there. So I think that’s the large portion of that. I think if you look at our forecast this quarter compared to last quarter, up slightly on ag and up slightly on C&F. C&F side really in line with what we are seeing on higher sales and as I mentioned earlier the order book extending into 2019. The other piece would be as you think about on the ag side is small ag is where we are seeing some of that increase. And on inventory that’s a business that is really driven more on overall GDP growth. We are continuing to see strong demand there. So I would say that’s the major driver there.

Perfect. And the dealer inventory on the 100 plus, was up a little bit, is that kind of 105 like the fixed areas or is that anything else going on?

I would say that’s really kind of across those different categories as we talked about 100 plus is a really wide category from large utility tractors through 8000, but I think we will – as we have shifted a little bit of our seasonality this year as we talked about some of the ramp-up issues and supply constraints we have got more production in the second half of the year on large ag. So we do expect that we are – maybe a little bit atypical from normal seasonality and that we will produce and sell through that in the latter half of the year.

Great. Thank you.

We will move on to the next question.

Our next question comes from Mike Shlisky with Seaport Global. Your line is open.

Good morning, I wanted to maybe ask more questions on the Wirtgen here, can you give us a sense as to what the organic growth outlook is there, has it changed from earlier in the year, if you could also share I know it’s early about has Wirtgen gotten any share gains in the U.S. so far as we are starting – a few quarters ago?

Mike, when we look at Wirtgen, their business is performing as we expected, if not better as we talked about, we have seen actually margins have has stepped up over the last couple of quarters. The revenue guide was really just impacted by FX. And when we look at the order backlog there, it continues to be really strong. So as we look to their continued growth, I think we have noted in our slides we think that global kind of road building, transportation sector is up about 6% year-over-year and up higher little single – low double-digits, excuse me in some of the key emerging markets. So I think that’s continuing to perform as we would have hoped.

And as far as the share gains are concerned, if you have gotten anything so far this year you think?

Yes. We don’t have a lot of additional detail or comments there I think performing as we would continue to hope and expect.

Thanks, Josh.

Thanks Mike. We will go to the next question.

Our next question comes from Seth Weber with RBC Capital Markets. Your line is open.

Hey, good morning guys. Wanted to go back to a couple of prior questions, I think Andy and Steve just asking about costs and thinking about the margins, it looks like your implied incremental margin on ag and turf is kind of a mid 30% range for this fourth quarter, but Josh you said that this is kind of the high point for the cost headwind. So I mean does that – are you comfortable with us thinking about incrementals next year in ag and turf should be better than that sort of mid 30% range? Thanks.

Seth, when we think about the fourth quarter, I think as we talked about there is FX headwind and you got some of the material and freight headwinds in the quarter. So that is particularly impactful in the quarter. I think as you think about going forward, obviously, we don’t have a forecast for 2019 yet, but we will have the price that comes in that impacts the cost inflation that we have seen. And as we have discussed, we expect that offsets the inflation material that we have seen in ‘18 and ‘19. So that will be impactful and beneficial too to our margins. I mean, if you look at our margins today full year, up just below 25% – around say 23% if you excluded the material freight impact, you would be at that about 35%.

And this is Ryan. Fourth quarter, just to clarify correcting for foreign exchange, we are right in that mid 20s range, which is consistent with what we have had for the full year.

Okay. So, it’s not that kind of low to mid 30s, it’s because FX was kind of skewing that number, is what you are saying, Ryan?

Yes. Some of the things that Josh talked about with respect to material obviously are hitting us. We have got the R&D step up that we have talked about. So the implied number is in the teens if you adjust for FX, you get to the mid-20s, which is consistent with what we have been saying. And then as Josh said the pricing actions that we have announced entering the marketplace should give us comfort and give everybody comfort that we feel good about going into next years from an incremental margin perspective.

Okay. We will follow-up offline. Thanks, guys. Appreciate it.

Thanks. Next question?

Our next question comes from Ann Duignan with JPMorgan. Your line is open.

Hi, good morning.

Good morning.

I wanted to ask a question about your lower warranty cost in the quarter. And I would like you to square that with your discussion of your telematics and technology at predictive maintenance enabled to help farmers reduce their warranty costs and how do you square both of those with the fact that we are now in a replacement cycle where farmers are feeling the need to replace their equipment, because they are afraid of having a high warranty cost, their equipment is coming out of warranty? Do you just like square all those pieces together first with the lower warranty, lower expense, lower accruals versus farmers replacing, because of their fear of higher warranty costs? Thank you.

I think there has been a lot of focus on warranty and making sure we are continuing to get products to customers and they are having a good experience to us and we are reducing the cost of warranty and as you noted rightly, the reducing downtime which is particularly concerning. As it relates to our offerings, I will let John talk a little bit more about it, but certainly the – what we are doing on a predictive maintenance perspective does help in reducing warranty, because you are taking care of issues before they pop up, but I will let John maybe expand a little bit on that.

Yes, thanks for the question, Ann. If you take a look at the fact that we have 130,000 large ag, large production machines that are in the field today that we are connected to and they are streaming data to us as they are in the field. We have the ability based on the data we receive and a set of advanced algorithms to predict failures before they happen, communicate the potential of a failure to the customer and to the dealer. And then within minutes, the dealer could be on the phone with the customer, with the solution that’s part of that expert alert. Just to put it in perspective for you, if you look last year we just launched the technology. We had machines streaming in over 11,000 alerts that they were predicting before machine had actually failed, that has a big impact on quality and a big impact on uptime for our customers.

Thank you.

So you think that will lengthen the lifecycle of the equipment and lengthen the replacement cycle?

Yes. And we will take that offline. Thank you. Next question.

Our next question comes from Joe O’Dea with Vertical Research Partners. Your line is open. Joe O’Dea: Hi, good morning. Just wanted to ask on the construction pricing side of things, I mean it sound like on ag in terms of the price increases we really won’t see take effect until next year, which I think makes sense given a full order book for this year. Anyway, on construction I think you are implementing some price increases middle of the year in response to some of the cost inflation, but when do we start to see that flow through the P&L just given the size of the order book and strength that you have on that side as well?

Thanks Joe. This is a good question. I mean I think on the construction side we have continued to see a pretty competitive market. As you pointed out and we talked about last quarter, we were planning some price actions – price realization actions in the second half of the year. We actually put those into effect as a discount reduction that took effect July 1. And we did see the benefit of that in July. So our expectation is we continue to see that benefit in the fourth quarter. And then as we started to think about model year ‘19, we will continue to look at – be market based, what’s going on, but also cognizant to the fact that you have got your material prices and other things moving up. Joe O’Dea: Got it. Thank you.

Thanks. Next question.

Our next question comes from Steve Volkmann with Jefferies. Your line is open.

Great. Thanks guys and good morning. I just had kind of big picture question, I guess we can all sort of try to figure out the tariffs and all that other stuff, but given that we are sort of starting our replacement cycle here, would you expect absent things like tariffs and major changes in farm income, etcetera, would – do you think ag sales would be up more next year or sort of the similar amount or maybe less, I am just trying to get a sense of what you think the replacement demand is?

Yes, that’s fair. I mean I think what we are seeing is the replacement demand is continuing. I think over this some of these months we are seeing some of the sentiment obviously be weighed upon with some of the trade concerns, but continuing to see that demand for equipment. And really I think what’s important is not just a new buyer looking for updated tech, the latest technology and productivity, but is working down through that trade ladder. So whether it’s the second third or fourth buyer, they are upgrading technology as well. And I think that’s really important in terms of what we are seeing. I think when step back and look at the fundamentals, really from where we are quarter ago, they haven’t necessarily changed in terms of cash receipts are relatively flat to where we were and demand for grains globally continues to grow and drive where we are at.

Hey Steve, this is Raj. Let me add a few more comments to what Josh said. The situation right now is dynamic for the farmers and this can change. But as we see it right now the farm economic conditions between ‘19 you think about the crop fundamentals would actually strengthen for double crops like corn, wheat, cotton which outweigh soy situation, okay. And as result we forecast like total cash receipts a leading indicator for our large ag sales. For 2019 to be higher than for 2018, that would say absent all of these other noises that the demand will be up. Given the anticipated commodity prices and input costs, we would anticipate metric tons per acre for major crop farmers, large ag customers to be higher in 2019 than 2018. Now, for an illicit of Midwestern farm, say half corn, have beans, half land rented we see the economics is indicating metric tons per acre to be stronger, perhaps some even up to 20% above this year. Now, this would be the highest metric tons per acre that farmers would love seeing over the past 5 years or so. And on the cost side you were to say remember some of this cost is too high if conditions were more in equilibrium, okay? And if something changes, there is an opportunity for the cost to come back down and that can be beneficial, now it may go up if few things show up, but so overall the point being made is that the farm economics picture for next year may actually be stronger than realized because of improving commodity market fundamentals worldwide with little change in farm costs. Uncertainty surrounding the trailer market availability conditions may have distracted from the North American farm economics today. So thank you.

Okay, great. Can I get just a quick follow-up, Raj, if we had something similar than let’s call it….

We will take it offline.

Yes, we will follow-up offline, Steve. Thank you. Next question.

Our next question comes from Ross Gilardi with Bank of America. Your line is open.

Yes, good morning guys. I just wanted to ask a bit, how these high take rates for some of these advanced features influence both revenue growth and drop-through margins, I mean could it actually add a couple of 100 basis points of growth into next year? And I would think the drop-through on some of these advanced features is a lot higher than it would be for the equipment itself, could you comment on that? And then just any thoughts on this $12 billion farmer subsidy, how it would work and any sense of how much of that would potentially be going towards equipment?

Thanks Ross. I think to maybe start with the latter on the $12 billion of farm aid. I think have you been viewed positively as a short-term solution but doesn’t really address the bigger issue, which is getting a long-term resolution to some of the trade concerns. I think there is still a fair bit of uncertainty in terms of how that program will work in the three different components. You have got the market facilitation that’s the big piece, expect it to try to cover some of the impact of trade, particularly on soybeans, which is I think assumed to be the vast majority of those dollars and then the food purchase as well as trade promotion. So I think there is still a lot of questions, my understanding is I think later into August and early September, there will be much more clarity around how those programs come together and how those payments will transact, but I’d say right now, I don’t know that those are necessarily being factored in due to the calculus for farmers today. As you think about your question on kind of the technology take rates and what does that mean to margins, I think as we talked about, we are very, very encouraged by what we are seeing in terms of take rate growth as we talked about 50% higher on ExactEmerge, ExactApply 10% higher, some of those Combine Advisor active yields were nearly double our expectations this past year. So that adoption combined with the growth in engaged acres and some of these other pieces I think are promising. As we think about margins, we have not dialed in exactly what this means from a margin perspective or carve that out, but we do feel like it will contribute is and will contribute to margin growth in the future. Today, obviously, there is lot of investment going along with lot of these features, but we think there is economic value to be unlocked with our customers and that we will be able to share in that.

Yes, I think this is John May. The only thing I would add is I think if you look at from a customer’s perspective and you look at the fact that when they acquire these technologies, the payback from their perspective is less than a year and there has been some recent reports out there that would show that in some cases the payback is within months, which generates strong productivity, strong profitability for our customers, which has a big benefit to our customers.

Yes. I think it’s I mean a way to think about it. These are offerings that are margin improving for us and significantly margin improving for our customers.

Thanks very much.

Alright. Well, we are at the top of the hour. So, we appreciate everyone’s participation and we will be available and do callbacks. So we will talk to everyone soon. Thank you very much. Have a good weekend.

Thank you for your participation in today’s conference. Please disconnect at this time.