Ag Equipment Sales Seen Hit By US Farmers' Crop Choices
30 Março 2009 - 5:32PM
Dow Jones News
U.S. farmers' crop choices this year are likely to reduce demand
for new farm equipment, according to industry experts and
financiers.
Tuesday's U.S. Department of Agriculture report on spring
planting intentions is expected to show an increase in soybean
acres this year over corn.
Soybeans don't require the nitrogen fertilizer needed to grow
corn, thereby reducing farmers' production expenses and putting
less wear and tear on their tractors.
"Farmers are going to be backing off the big purchases they've
been making," said Charles Yengst, president of consultants Charles
Yengst & Associates.
"They can easily get along for another year or two" with the
equipment they are already using, he said.
Sales of tractors and combines in the U.S. this year are
expected to fall by 5% to 15% from 2008, according to industry
estimates, ending the record rise in revenue and profits
experienced by machinery makers Deere & Co. (DE), CNH Global
N.V. (CNH) and Agco Corp. (AG).
The anticipated pullback mirrors the expected decline in cash
receipts from farming this year and farmers' efforts to avoid
exposure to additional debt.
The USDA expects cash receipts to fall about 9% from 2008 to
$295 billion, largely because of lower commodity prices.
The price of corn, which climbed last year on demand from
overseas markets and the ethanol industry, is down 50% from its
record peak last summer. But at almost $4 per bushel, corn is still
above its 10-year average price and nearly double the lows of a few
years ago.
The steep price drop has taken farmers out of the mood for
buying new equipment, industry observers said. The credit crunch in
the broader economy is providing an additional disincentive.
"There's a fear of financing new equipment," said Heiko Ihle, an
analyst at Gabelli & Co. "These are not people who live
leveraged lives. The average farmer is extremely conservative."
By all accounts though, farmers' continue to have adequate
access to credit, and their debt-to-asset ratios are the lowest in
40 years.
"The general consensus is that we are seeing less demand [for
credit] in the first quarter [compared to 2008]," said John Ryan,
president and chief executive of Rabo AgriFinance, a U.S. arm of
the Dutch Rabobank.
The strong financial condition of U.S. farmers isn't shared by
farmers elsewhere in the world, however.
Currency issues, reduced access to credit and smaller crop
yields because of drought are weighing on equipment sales in South
America and Europe, where Agco and CNH hold large shares in the
equipment market.
-By Bob Tita, Dow Jones Newswires; 312-750-4129;
robert.tita@dowjones.com