Agco has joined the growing band of agricultural companies cutting financial forecasts, warning that farm cutbacks, tight credit and the strong dollar would cut earnings by at least 39% this year.

The agricultural equipment maker, warning of "significantly lower" profits in the April-to-June quarter, slashed its earnings forecast for 2009 from a range of $3.00-3.25 a share forecast in February to $2.00-$2.50 a share.

Revenues would come in at $6.7bn-7.0bn, down from an earlier forecast of $7.5bn-7.8bn.

The revision prepares Agco investors for a cut of up to 51% in annual earnings, with revenues set to fall by up to 20% to potentially their lowest since 2006.

It also follows hard on the heels of profits warnings from Bunge, the soybean giant, and fertilizer group PotashCorp.

'Demand weakening'

Agco blamed the reductions on diminished agricultural incomes and "increased farmer conservatism" in North America, with drought curbing South American demand for new machinery and tight credit hurting sales in Europe, the group's biggest market.

"Demand for agricultural equipment is weakening in all the major world markets as the global economic turmoil and constrained credit markets begin to impact our industry," Martin Richenhagen, the Agco chairman and chief executive, said.

"We have seen a general softening in demand for our products and our order trends have weakened."

The group said it was taking "aggressive" action to cut costs and cap production in line with demand.

'Credit challenged'

The comments came as Agco, the owner of the Massey Ferguson, Challenger and Fendt brands, unveiled an 11.6% fall to $1.58bn in sales for the January-to-March period despite an improvement in its home market, which returned to the black. The North America unit reported a $5.2m operating profit on sales up 7.0% at $393.3m.

However, European profits fell 21% to $77.7m on sales off 7.6% at $1.45bn. South American profits slumped 84% to $5.4m.

"The global recession has hurt farmer sentiment and prompted them to be more cautious about their equipment investment decisions," Mr Richenhagen said.

"In the first quarter, the credit-challenged markets of Eastern Europe and Russia experienced significant declines, while industry demand continues to erode in South America where dry weather conditions and credit availability are factors."

Agco shares stood $0.49 lower at $23.76 in lunchtime deals in New York.