ao link

News

Linked In
RSS
https://twitter.com/Agrimoney
http://www.newsnow.co.uk/h/Industry+Sectors/Agriculture

Poor income outlook 'decimates' US farm equipment sales

TwitterLinkedineCard

An influential survey warned of a poor outlook for US incomes “decimating” agricultural equipment sales, underlining the market headwinds revealed by Deere & Co – although the briefing was more upbeat on farmland values.

 

A farm equipment sales index compiled by Creighton University for major US growing states, from North Dakota to Kansas to Illinois, tumbled to 30.3 points for August, well below the 50.0 level which indicates a neutral market.

 

The reading – down 7.6 points from July, and the lowest but one for the past 18 months – extended to 72 months, or six full years, the unbroken run of contraction shown by Creighton research, which is quoted by commentators including US Department of Agriculture chief economist Dr Robert Johansson.

 

And the decline was blamed on farm profitability prospects weakened by trade wars.

 

‘Negatively affecting’

“The dismal economic outlook for farm income continues to decimate agriculture equipment sales” in the region covered, said Ernie Goss, the Creighton economics professor in charge of the survey, noting too a dent to the US rural economy overall.

 

“The trade war with China and the lack of passage of the USMCA” Nafta replacement trade deal, “are driving growth lower for areas… with close ties to agriculture”.

 

“Despite a $16bn federal government support package coming soon, a drop in farm income is negatively affecting” the rural economy.

 

‘Detrimental to farmer confidence’

The comments tally with reports from Deere & Co, the maker of John Deere machinery, on Friday as it reported weaker-than-expected result, and cut its full-year earnings guidance, against a backdrop of lowered expectations for the North American market this year.

 

“Ongoing market access issues have been detrimental to North American farmer confidence,” said Luke Chandler, the Deere chief economist, albeit noting the knock-on effect of “increased export opportunities emerged for farmers in other parts of the world, notably Brazil and Argentina”.

 

Josh Jepsen, the Deere head of investor relations, said that the first phase of its early order programme for sprayers for 2020 showed sales “down double digits”, reflecting China-Canada trade issues, besides in the US “the late spraying this season” forced by historic wetness.

 

‘Shot in the arm’

However, he also noted better-than-forecast demand for planters, notably larger and higher-tech units, better able to boost the opportunity provided by sowings windows.

 

“Anecdotally, we heard many examples of customers who were able to plant thousands of acres over a tight three-day window due solely to the use of our ExactEmerge planter,” Mr Jepsen said.

 

MFP has really been a shot in the arm for US farmers. When you think about the cash receipts, it

 

Mr Chandler also took an upbeat view over the US’s MFP farm support programme, saying that it “it has really been a shot in the arm for US farmers.

 

“It certainly helps given some of the issues that we’ve got with trade uncertainties and the impact that we’ve seen this week on commodity prices.”

 

Farmland prices

The Creighton survey, however, revealed some recovery in the US farmland market, with a reading for August up 0.7 points at 46.3 points.

 

While representing “the 69th straight month the index has remained below growth neutral 50.0”, this reading matched the highest in five years, and showing widespread improvement, with Nebraska the exception in showing a modest market slowdown.

 

The finding follows results of quarterly federal reserve surveys, which for the April-to-June quarter showed for the Kansas City district that values “were nearly unchanged from a year ago.

 

In the region, which also includes the likes of Kansas, Oklahoma and parts of Missouri, “the value of all types of farmland declined modestly in Nebraska and increased slightly in all other states except the mountain states”.

 

The Chicago Fed, covering a Corn Belt area stretching from Iowa through Illinois and Wisconsin to Indiana and Michigan, said that farmland values in the region had fallen year on year for the first time in nearly two years, but by a modest 1%.

 

“Iowa and Michigan had year-over-year dips in their farmland values, but Illinois, Indiana, and Wisconsin farmland values held steady.”

 

The bank added that “even with crop output expected to fall”, 83% of lenders is surveyed “projected no change in farmland values for the third quarter of 2019,” with 15% forecasting a decrease, anmd 2% an increase.

TwitterLinkedineCard
Related Stories

Evening markets: Grains suffer touch of late-week profit taking

The likes of corn and wheat trade lower in closing deals of a positive week. But the vegetable oil complex, and canola, stay strong

Soybeans vs corn deadlock breaks in battle for acres

There has been some movement at last in the new soybeans-versus-corn price ratio, seen as an influence on sowing area. Cotton stakes its claim too

Microsoft mogul makes a mint out of betting the farm

Prices of US farmland, of which Bill Gates is the biggest owner, are rising at their quickest since 2012

Weekly grain and oilseeds market view from Europe, April 16

UK wheat import needs to extend into early 2021-22... Cold European temperatures... "Rapeseed prices may be firm for a while"...
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

Our Brands: Comtell | Feedinfo | FGInsight

© Agrimoney.com 2021

Agrimoney.com and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of AgriBriefing Ltd
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069