Low commodity prices and reduced U.S. farm income are forcing farmers to trim their spending. And that has farm equipment manufacturers also evaluating their output.
Bloomberg estimates that Deere & Company’s third quarter adjusted profit is expected to drop 38 percent from a year earlier to 94 cents a share. The company’s shares have also taken an 18 percent decrease over the past year.
Inventories of farm tractors have declined some since reaching a 16-year high in April. But stockpiles are still at record season highs, according to the Association of Equipment Manufacturers. As farmers continue to buy more used equipment, the surplus doesn’t show any signs of going away soon.
Deere will have a prolonged rough market to navigate, according to Karen Ubelhart, an analyst at Bloomberg Intelligence in New York.
Deere & Co. says it plans to slow production of many of its farm equipment products until the agricultural economy rebounds, according to USAgNet.
Creditors are also turning away loan equipment applicants due to harsh credit conditions, making it more difficult for farmers to purchase new equipment.
Meanwhile, auctions are on the rise and drawing in more participants for used farm equipment, according to Bloomberg.
Matt Maring, owner of an auction operation in Minnesota, says his auctions and online simulcasts are attracting bidders from around the world. More farmers are saving thousands from buying a used tractor for $50,000 that would normally cost more than $100,000 new from Deere, Maring noted.
Greg Peterson, founder of MachineryPete.com says he has seen a 20 percent increase in search traffic for low-horsepower machinery on his website. Sell times at auctions are getting longer due to an increase in the number of bidders and trying to avoid escalating prices, Peterson said.
He says even dealers are showing up at auctions to take advantage of good deals and resale at a profit.