Skip to main content
EVENT TRACKER
Keep track of rescheduled, canceled industry events with our COVID-affected event tracker - Powered by Snap Finance
Close
Sister Publication Links
  • Rubber & Plastics News
  • European Rubber Journal
tb-logo
Subscribe
  • Login
  • Register
  • Subscribe
  • News
    • OPINION
    • CORONAVIRUS
    • AUTO INDUSTRY
    • BUSINESS/FINANCIAL
    • COMMERCIAL TIRE
    • FACTORY FIXES
    • GOVERNMENT & LAW
    • INTERNATIONAL
    • MOTOR SPORTS
    • NEW PRODUCTS
    • RETAIL TIRES
    • SERVICE ZONE
    • SEMA/AAPEX
    • SMALL BUSINESS
    • TIRE MAKERS
    • SPONSORED CONTENT
    • New round of Paycheck Protection Program funding opens
      Vaccine may usher sense of normalcy
      Cover-up: More retailers requiring face masks to curb COVID
      USW alleges COVID-19 violations at Kumho plant
    • Stengel promoted to president of NAPA parent Genuine Parts Co.
      Former auto exec Tyrone Jordan joins Cooper board of directors
      Bridgestone crafts virtual city to showcase sustainable-mobility initiatives
      Ford, Hyundai earn 2021 top North American vehicle honors
    • New round of Paycheck Protection Program funding opens
      H&H broadens precure OTR business with Continuum mold acquisition
      Apollo to raise prices of Vredestein brand, effective March 1
      Taiwan tire makers propose settlement of import duties case
    • Gary Price to head Love's Truck Care operations
      TA opens 6th Oregon location, bringing 50 jobs to area
      Love's opens Speedco shops in Ariz., Calif., Ga.
      TIA adds more Spanish language training
    • New round of Paycheck Protection Program funding opens
      Taiwan tire makers propose settlement of import duties case
      Wireless auto data debate continues
      World rubber demand in 2021 to recover to 2019 levels — IRSG
    • Point S Canada adds 61 stores to network in 2020
      New round of Paycheck Protection Program funding opens
      Ferentino Tyre opens Sri Lanka plant; eyes exports to U.S., Europe
      Sailun to expand Vietnam plant capacity over three years
    • TGI secures Cosmo-brand naming rights at Fla. race track
      Firestone Grand Prix of St. Petersburg postponed until April
      MotoGP extends Dunlop race tire contract through 2023
      Revived Yokohama Drivers Cup to feature Ferrari, Porsche models
    • Kumho launches commercial LT, performance tire lines
      The new One: Nokian unveils all-season passenger tire
      Ford, Hyundai earn 2021 top North American vehicle honors
      BKT expanding its ATV/UTV lineup with Sierra Max Pro radials
    • Point S Canada adds 61 stores to network in 2020
      J.D. Power survey: Quick greeting key to customer satisfaction
      Apollo to raise prices of Vredestein brand, effective March 1
      Marko Ibrahim promoted to president, Bridgestone Retail Operations
    • Point S Canada adds 61 stores to network in 2020
      J.D. Power survey: Quick greeting key to customer satisfaction
      ASE opens registration for upcoming certification testing
      Bolt On, Global Payments aim for easier text payments for auto repairs
    • Denver's Brian Sump named AAPEX Shop Owner of the Year
      DUB, TIS Wheels founder Myles Kovacs is SEMA Person of the Year
      AAPEX: Using social media to promote your business
      AAPEX: Road trips trending, commuting on the wane
    • Vaccine may usher sense of normalcy
      2020 Review: PPP loans give boost to small businesses
      Latest COVID relief bill includes $325B in small-business support
      AAPEX: Do more cars in the shop mean more profit?
    • Apollo to raise prices of Vredestein brand, effective March 1
      Taiwan tire makers propose settlement of import duties case
      Kumho launches commercial LT, performance tire lines
      Michelin completes rigid dump-truck tire lineup
    • Sponsored By Yokohama Tire Company
      7 questions to ask consumers when they need tires for a crossover SUV
      Sponsored By Yokohama Tire Company
      Stocking Tires for Crossover SUVs
  • SHOP FLOOR
    • BALANCING
    • DEMOUNTING
    • SAFETY
    • TIRE REPAIR
    • TPMS
    • TRAINING
    • VEHICLE LIFTING
    • WHEEL TORQUE
    • Video: Balancing Tire
      Choosing the right balancing equipment
      Safety tips for wheel balancing
      An introduction to wheel balancing
    • Video: Demounting
      Demounting Equipment
      Making rims ready for a tight seal
      Tire changer types, tips and trends
    • Video: Safety
      Making friends with OSHA
      Ergonomics on the shop floor
      Customers
    • Video: Tire Repair
      Tire repair: Shining a light on visual inspections
      Staying safe when repairing a tire
      Essential tools, materials and equipment for tire repair
    • Video: TMPS Service
      Decoding sensor data for TPMS diagnosis
      Replacement TPMS sensor overview
      The life-saving work of TPMS
    • Video: Training
      Advantages of apprentice program partnerships
      Options and resources for CE tech training
      Internship ideas to attract tech talent
    • Video:Vehicle Lifting
      All types of lifts for all types of work
      Tips and recommendations for lifting safety
      The gravity of proper lift points
    • Video: Wheel Torque
      Using torque sticks to speed service times
      The danger of too much, too little torque
      The importance of torque specifications
  • Multimedia
    • VIDEOS
    • PHOTOS
    • PODCASTS
  • Events
    • ASK THE EXPERT
    • LIVESTREAMS
    • WEBINARS
    • SEMA LIVESTREAMS
  • Data
    • DATA STORE
  • Resources
    • DIRECTORY
    • CLASSIFIEDS
  • ADVERTISE
  • DIGITAL EDITION
MENU
Breadcrumb
  1. Home
  2. News
February 08, 2016 01:00 AM

ANALYSIS: Nothing limps like a Deere

Crain News Service
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print

    By Micah Maidenberg, Crain News Service

    CHICAGO (Feb. 4, 2016) — Adam Watson, a third-generation farmer whose family raises corn and soybeans 20 minutes south of Champaign, Ill., hasn't purchased a new piece of John Deere machinery in about a decade.

    If he needs something, he shops the pre-owned market instead. Falling prices for his crops are why he's turned frugal, and why he's likely to stay that way.

    “If it's used, compared to a tractor that's brand new and there's a $30,000 differential in price and it does the same job, that's $30,000 in my pocket,” said Mr. Watson, 36, who notes that tax planning plays a big part in equipment investments.

    For Deere & Co. Inc., it's a short path from farmers whose incomes have been crushed by plunging commodity prices to lower sales, smaller profits and rounds of layoffs. Thousands of workers have been let go over the past two years as demand for new tractors that can cost $500,000 and other big green machines has dried up. With the world economy slowing and no floor in sight for crop prices, the world's biggest ag equipment maker is staring at a harsh 2016 and perhaps 2017 and 2018, too.

    “Deere has revenue headwinds in front of it,” said Michael Shlisky, an analyst at Seaport Global. “The big challenge for them is can they cut costs to keep them at a reasonable margin rate.”

    The Moline, Ill.-based company has 1,650 manufacturing workers on “indefinite layoff” in Illinois, Iowa and Kansas, or 17 percent of its unionized U.S. factory workforce. This month it announced another 500 workers in Illinois will be out of work until the summer. “Everybody's always nervous when it's a down economy,” said Rico Diaz, president of United Auto Workers (UAW) Local 865, which represents employees at Deere's factory in East Moline that produces combines.

    Deere is grappling with a problem it can't control, one that's hitting competitors and many other industrial companies right now: the down cycle in commodity prices its key customers depend upon.

    American farmers received $3.60 in November for a bushel of corn, down 53 percent from the peak in August 2012, according to the U.S. Department of Agriculture (USDA). The price of soybeans fell 46 percent over the same period to $8.68 a bushel, while wheat brought farmers $4.86 per bushel, a 40 percent decline. (November is the latest month for which the USDA has farm income data.)

    “It's been hard to market grain above the cost of production,” said Jeff Fisher, 54, who grows corn, soybeans and a few other crops on 1,500 acres in Tolono, outside of Urbana-Champaign.

    Net income for U.S. farmers was forecast by the USDA to total $55.87 billion in 2015, 55 percent less than 2013's peak of $123.29 billion.

    “The agricultural economy is clearly in a recession; the comparable time to right now is in the late 1990s,” said Larry De Maria, a William Blair analyst in New York. “We're not in a period like in the 1980s, which was not a recession but more of a depression. We're not in that period just yet. It's possible we could get there.”

    In previous downturns at home, Deere could rely on emerging economies for growth. But Brazil — a major crop producer and market for its equipment — is in a recession, as has been Russia. China, a key consumer market for farmers here, is grappling with a slowing economy and a weakened currency. The strong dollar also hits U.S. exports. Ethanol production, which buoyed farmers, is slowing. Deere's construction and forestry sales during its last fiscal year slumped 9.4 percent to $5.96 billion.

    For its 2015 fiscal year, which ended in October, Deere reported that sales dropped 20 percent to $28.86 billion. Net income plunged 39 percent to $1.94 billion.

    Sales will slide another 7 percent in the current fiscal year, while profits will fall another 28 percent to about $1.40 billion, according to company projections. Deere's stock price closed at $74.61 on Jan. 22, down 23 percent from its 52-week high of $97.33 on July 16.

    Company spokesman Ken Golden points out in an email that despite “significant weakness” in the global agricultural sector and a slowdown in construction, Deere's sales and income were the sixth highest in its 179-year history. “While the near-term outlook appears difficult, Deere focuses on the long term,” he said.

    “We are in a strong position to carry out our growth plans and attract new customers. The world has a growing need for increasing its food supply as well as continuing development of its infrastructure.”

    It's a good thing Deere is looking beyond the short term. There's plenty of used Deere machinery for sale right now in North America, according to analysts and dealers. “Demand for new machines and some of the late-model used (machinery) is taking a hit,” said Gary Reynolds, president of Reynolds Farm Equipment, a Deere dealer based in Atlanta, Ind. “We expect our new sales to be down about 35 percent from out peak in 2014.”

    Mr. Fisher said he'd like to replace a combine and a planter with new or used ones. But he said he's unlikely to go shopping anytime soon. And until he and other U.S. farmers finally do return to their dealers, Deere's woes will continue.

    This story appeared on the website of Crain's Chicago Business magazine, a sister publication of Tire Business.

    Letter
    to the
    Editor

    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Tire Business would love to hear from you. Email your letter to Editor Don Detore at [email protected].

    SIGN UP FOR NEWSLETTERS
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    Newsletter Center

    Staying current is easy with Tire Business delivered straight to your inbox.

    SUBSCRIBE TODAY

    Subscribe to Tire Business

    SUBSCRIBE
    Connect with Us
    • Facebook
    • LinkedIn
    • Twitter
    • RSS

    Our Mission

    Tire Business is an award-winning publication dedicated to providing the latest news, data and insights into the tire and automotive service industries.

    tb-logo
    Reader Services
    • Contact Us
    • About Us
    • Site Map
    • Industry Sites
    • Order Reprints
    • Customer Service: 877-320-1716
    Partner Sites
    • Rubber & Plastics News
    • European Rubber Journal
    • Automotive News
    • Plastics News
    • Plastics News China
    • Urethanes Technology
    RESOURCES
    • Advertise
    • Privacy Policy
    • Privacy Request
    • Terms of Service
    • Media Guide
    • Editorial Calendar
    • Classified Rates
    • List Rental
    • Digital Edition
    • Careers
    • Ad Choices Ad Choices
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • News
      • OPINION
      • CORONAVIRUS
      • AUTO INDUSTRY
      • BUSINESS/FINANCIAL
      • COMMERCIAL TIRE
      • FACTORY FIXES
      • GOVERNMENT & LAW
      • INTERNATIONAL
      • MOTOR SPORTS
      • NEW PRODUCTS
      • RETAIL TIRES
      • SERVICE ZONE
      • SEMA/AAPEX
      • SMALL BUSINESS
      • TIRE MAKERS
      • SPONSORED CONTENT
    • SHOP FLOOR
      • BALANCING
      • DEMOUNTING
      • SAFETY
      • TIRE REPAIR
      • TPMS
      • TRAINING
      • VEHICLE LIFTING
      • WHEEL TORQUE
    • Multimedia
      • VIDEOS
      • PHOTOS
      • PODCASTS
    • Events
      • ASK THE EXPERT
      • LIVESTREAMS
      • WEBINARS
      • SEMA LIVESTREAMS
    • Data
      • DATA STORE
    • Resources
      • DIRECTORY
      • CLASSIFIEDS
    • ADVERTISE
    • DIGITAL EDITION