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'Lower crop prices' to keep pressure on farm spending - Lindsay

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Lindsay Corporation reinforced ideas of continued farm machinery market softness, cautioning of the prospect of further "downward pressure" on crop prices - even as it unveiled better-than-expected results.

The US-based irrigators group, whose brands include Zimmatic, Growsmart and Skyharvester, said that its market "remains challenging" thanks to the dent to farm spending from weak crop prices.

"Lower commodity prices and farm income continue to restrain demand for our irrigation products," said Rick Parod, the Lindsay Corp chief executive.

And the soft market conditions looked set to continue, with Mr Parod cautioning that the forecast record US corn and soybean crops currently being harvested "will continue downward pressure on commodity prices.

"Accordingly, we are not expecting any meaningful improvement in the overall irrigation market in fiscal 2017," which started last month.

'Extended downturn'

The comments tally with other evidence of continued weakness in the US farm machinery market, with AgJunction, a maker of satellite-based equipment, last week unveiled a continued drive to cost costs in the face of "the extended downturn in the agriculture industry.

"General weakness within the agriculture markets... has continued," AgJunction said.

US sales of four-wheel drive tractors, used by arable growers, fell 32% by volume in the first nine months of the year, with combine volumes down by 24%, according to the Association of Equipment Manufacturers.

Meanwhile, a monthly survey of lenders by Creighton University came in with an index figure of 14.3 for September for US farm machinery sales, well below the 50.0 level which indicates a flat market.

"Weakness in farm income and low agricultural commodity prices continue to restrain the sale of agriculture equipment," said Ernie Goss, the Creighton economics professor in charge of the survey.

Back into the black

Nonetheless, Lindsay Corp unveiled a return to the black for the June-to-August period, reporting earnings of $7.81m compared with a $3.18m loss a year before.

Revenues rose by 7.6% to $132.9m, helped by a rise in US sales of irrigators, of which prices were held flat, although component prices were given a "modest" increase.

The return to the black was also helped by the non-recurrence of a bad debt charge, of $5m, which marred the year-before results.

The earnings, at the equivalent of $0.73 a share, were well ahead of the $0.41-a-share result that Wall Street had expected.

Lindsay Corp shares soared 8.3% to $75.06 in early deals in New York.

By Mike Verdin

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