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Deere Rocked By Bursting Of U.S. Farmland Bubble: Sales Miss, Profit Tumbles, Forecast Cut
The bursting of the farmland bubble should come as no surprise to regular readers: we covered it extensively over the past year in post such as "Another Bubble Pops: Price Of Farmland Suffers First Annual Decline Since 1986", "The Tragedy Of The American Farmer, Revealed In A Craiglist "For Sale" Post", and most recently "US Farmers In "Dire Straits": JPM Warns Of Imminent Liquidity Crunch"
For those strapped for time, here is the summary:
Moments ago said burst bubble came to roost when Deere reported EPS of $1.53 which beat expectations modestly, if down 35% from a year ago, yet which missed on the top-line with revenues coming in weak at $6.84bn, vs consensus expectations of $7.17bn. The one sentence summary: Deere revenues down 22%, profits down 39%.
Deere also cut 2015 net income from $1.9 billion to $1.8 billion, far below Wall Street's estimates of a $1.93 billion.
But the worst aspect of the just reported earnings was the commentary which confirmed that the bursting farmland bubble has finally trickled through to the income statement. To wit:
"John Deere's third-quarter results reflected the continuing impact of the downturn in the farm economy as well as lower demand for construction equipment," said Samuel R. Allen, chairman and chief executive officer.
* * *
Lower commodity prices and falling farm incomes are continuing to pressure demand for agricultural machinery, with the declines most pronounced in higher-horsepower models. Conditions are more positive in the U.S. livestock sector, supporting some improvement in the sales of smaller sizes of equipment. Based on these factors, industry sales for agricultural equipment in the U.S. and Canada are forecast to be down about 25 percent for 2015.
Full-year 2015 industry sales in the EU28 are forecast to be down about 10 percent, with the decline attributable to lower crop prices and farm incomes as well as pressure on the dairy sector. In South America, industry sales of tractors and combines are projected to be down 20 to 25 percent mainly as a result of economic uncertainty in Brazil and higher interest rates on government-sponsored financing. Asian sales are projected to be down moderately, with most of the decline in India and China. Industry sales in the Commonwealth of Independent States are expected to be down significantly due to economic pressures and tight credit conditions.
* * *
Company equipment sales are projected to decrease about 21 percent for fiscal 2015 and to be down about 24 percent for the fourth quarter compared with year-ago periods. Included in the forecast is a negative foreign-currency translation effect of about 4 percent for the full year and 5 percent for the fourth quarter. For fiscal 2015, net income attributable to Deere & Company is anticipated to be about $1.8 billion.
So in case you needed one more thing to worry about, just turn your attention to the US flyover states where the latest and greatest slow-motion tractor wreck is currently taking place.
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Awesome. Time to put a JD tractor in every driveway on EBT cards.
what we need are self-driving autonomous farmbots that plant and fertilize and harvest all by themselves.
and govt-owned farmland for the bots to operate on.
that way we can efficiently provide food for the populace, without the need for private for-profit farmers.
Ummm... We already do!
Breaking News: USPS postal carriers to start driving John Deeres.
They can deliver the mail and mow the weeds at the same time. Saves $ !!
It'll put Pedro and Juan out of business.
Here is SC, there is a slow-moving trainwreck occurring in the agricultural sector. I haven't seen it in the MSM, but what local real estate agents tell me is that the end of a set of .gov farm subsidies is driving this as much as real economic factors. We saw increasing inventories of pine (used in framing lumber) @ the sawmills 9 months ago. Apparently, incremental negatives have spread to row crops. The entire cotton industry has been heavily subsidized. If those subsidies go away, ag land across the Deep South is heading south, bigtime. Now Midwest farmland is a very different animal. If an acre goes for $1000 in SC, it can fetch $10,000 or more in Iowa. Much more fertile land there. Interesting that the negative impact is so widespread. I would have thought it would impact marginal farmland first/harder.
I'm in Iowa, it's the same here...just a different playing field but the game is the same. The entire ag system has been subsidized for so long that it has become akin to a junkie. Farmland prices around here are pretty insane. Their growth has been rapid...I'm affraid the ride down will equally as rapid...and thorough. Farming around here has become dominated by very large, almost corporate like, family farms. The smaller farmer will more than likely be crushed, further driving the move towards corporate commercial farming entities & interests.
Depends on who is in debt.
Right hand drive tractors ?
Maybe they should unlock their computers so the farmers can work on them without going to the dealer for everything. The farm by me switched to Case for everything. Not sure if they pull the same crap or not.
http://www.npr.org/sections/alltechconsidered/2015/08/17/432601480/diy-t...
Heh. Deer has a closed system and people are switching to Case? This news warms my apple-fan-boy hating heart. :-)
There are 5 farms near where I live, when I was in my teens everyone owned a JD, only 1 of the 5 still runs them, the rest all own Case. The one closest to me has at least 10 tractors
Deere commands a price premium of 10-25%, all else equal. 'Drive Green, pull Red' is a common slogan (and sight) throughout the ag community. Kubota tractors are gaining some share near me, but the real value point is Mahindra.
John Deere is effin' outrageous with this computer chip overarching control over the means of production and I sincerely hope that all farmers realize that this is a Crony Capitalist attack on their livelihoods that will force them into indentured servitude to the Banksters, and the cocksuckers at John Deere. Frankly, if I was a farmer I would be collecting old farm equipment and restoring it to avoid top down control over the means of production just as Karl Marx warned us about.
p.s. I posted that link here yesterday.
When those giant corporate farms start selling some of their land holdings, all bets are off.
that means food is now below cost of farming it, so eat up.
Not based upon what we pay at the grocery store. High prices abound. Of course we dollar cost average our grocery shopping so no worries. /s
cog, I guess you have not learned how to use the new self check out stations..you cannot believe the discounts steak for .25 cents if you use the right bar codes..food never been cheaper, just watch out for the old guy calling the cops..if that happens just yell "I can't breathe"
I'm just beginning to learn how to leverage my advancing age. I can't wait to holler "Help, I've fallen down and can't get up" and really mean it. ;-)
Hmm, I plan on making my own walker from walnut wood! Creep around in style!
Then in your sleep the Dr's voice comes across and says, don't worry, you'll be fine.
#steakpricesmatter
I call it the "Name your price tool".
I just went and double seasonally adjusted my grocery bill and all is well.
Touche. If it's good enough for our fearless leaders it's good enough for us pee- ons.
As a bonus the FDA has allowed the PPM of roundup to go from 340ppm to 3000ppm so all the farmers use it to kill off wheat,rey,barley etal and yes it is a lot more deadly but the time saved for not having to wait for the crop to dry , well they think it is worth it , fuck the consumer , thats what bg pharmer is for , now eat up .
Please cite your source. I'm curious as to what crop is expected to consist of .3% Roundup? I mix 2.75 gallons of Roundup to 275 gallons of water, which is a 1% solution in the sprayer. How much of this 1% solution is supposed to absorbed into the edible portion of a corn crop?
Beef prices are higher than they have ever been. But we are seeing the international banker's farming operation in action. They are going for their biggest harvest ever. They have their economic system working to perfection (and that "doesn't" mean to the benefit of all mankind ... it means to the benefit of themselves).
http://qz.com/442037/what-the-hell-has-happened-to-the-price-of-ground-b...
It's cyclical, but with more of a whip effect.
Feed prices go up - farmers dump cattle into market, and shrink herd to afford feed. Beef price drops
Feed price goes down - farmers work on replenishing cattle herds, holding cattle from market. Beef price rises
Cattle have a 9 month gestation period, and usually produce one calf, so it takes a long time to replenish herds -unlike pigs.
It's cyclical, but with more of a whip effect.
So you think it a totally natural cyclical effect? Is the period highly correlated with the gestation period?
Do bankers jacking interest rates and refusing loans have anything to do with the cycle? Do farmers with silage do better than those without?
History says bankers have much to do with boom bust cycles in farming. Especially if they get some help from the weather.
No, just that the waves of the cycle take a longer time to play out with beef compared to pork, or chicken. Ag cycles are affected by credit markets but have their own independent peaks, and troughs.
Farmers that play with their own cash, hedge their crops / livestock sales are the most resilient to market gyrations, and bankster tricks.
Crop cycle is yearly. This worries me the most. Farmers that can't borrow, can't plant. Most farmers absolutely need to borrow to plant. Any credit lock in that crucial time will fuck up the world severely.
Ag cycles are affected by credit markets but have their own independent peaks, and troughs.
You make my case. These aren't natural cycles. They're banker manipulated cycles ... the bankers' farming operation. With a properly managed MOE these cycles (ag or business) don't exist!
Most farmers absolutely need to borrow to plant. Any credit lock in that crucial time will fuck up the world severely.
It's a simple inventory control and insurance problem. With the gamed MOE we have operated under for our entire history, if you don't get large quick and manage your cash very very pragmatically, you get nailed. It doesn't have to be that way. With a properly manged MOE it would not be that way. You wouldn't have to get large to survive.
Tyler, if this keeps up through September, you will have a busy few weeks ahead.
Must be ready to put on more staff.
Bullish ZH.
Strong buy.. .er.... read.
The most Tylers working since Lehman!
It seems to be getting busier an the "contrarian" front.
What seems to be the logical outcome eventually will be. But it states that in the upper right corner.
This all goes back to 2008.
Bush should of given Deere GM’s truck division. Instead we have a mix of #shit companies.
There was too much animosity over color choice.
JD green or Cat yellow.
Most preferred HD orange and black.
Stop puttting Brawndo on thoses crops you idiocracys.
We are so FUCKED.
Do we make it to the end of the year without a total collapse?
No, I vote no.
Demise of the small farm for the corporate conglomerate farm as well as local governments jacking taxes on small farms forcing to sell.. Should have stepped up JD and made some noise instead of let your base die out. Reap what you sow.....
A lot of it was equipment dealers with new models with easy financing as well.
I still enjoy my '53 1/2 ton with three on the tree.
Makes it virtually unstealable unless you've got a flatbed.
True!
Ive got an old Japanese 1970's 3 cylinder diesel ( Yanmar ) which built a bunch of tractors for JD. Damn thing is a tank. Old gear seems so much more hearty than the new.
A real old timer story.
My Father in law driving his used Model T with all his worldly possessions, from Indiana to western PA, to take an Engineering job at the Westinghouse.
Paying $5.00 for a vehicle that took him 500 miles in November was a real luxury expense in the thirties.
We saw some of his work at the base of Hoover Dam, many years later, Transformer Division.
Wow...just fucking implode so I can get on with life in the new normal ....this train wreck fraud for years , just fucking crash already ,will I have a job or not , do Ineed to find a remote area like the Alaskan Bush people and get the fuck off grid or try to save my home...
Been debating the bankruptcy since the lugs are off the wheels of the bullshit..driving me nuts..
God bless my daughter
Hey, BI.
What do they call old dudes like us who have our livelihoods yanked away and our value undercut by illeagal motherfucking INVADERS, who steal into our country, only plan to stay as long as the work holds out, March in the streets with a foreign flag and are now completely invisible to the laws, regulations and taxes WE have to abide by?
What are we. Racists? Whiners? Dystopian? Myopic? Chop suey?
Redundant.
I know that you are a charter member, if not founder of our club.
On behalf of our local chapter, then, Welcome.
Chopped liver, that's what.
first CAT, now DEERE...
hmmm
no speculative bubble here...
say what, Dr. Copper?
silence is not a good sign, ha.
Well, obviously, the solution is to move manufacturing to Mexico.
The labor is cheaper. Americans require too much pay.
And of course, on the harvest side, we have special dreamer currently not documented, just here for the work, special people, who risked life and limb to trek to our shores to do the work we refuse to do.
Ah, ain't Merica Great!!
Edit: Press 1 for Espanola
I was born in Waterloo Iowa where John Deere makes the tractors and engines...when I was growing up in the 60s JD had 15,000 employees...but the UAW ran out all the other manufacturing companies with their high wages...and we had 125,000 in the city....now today JD has 4,000 employees..makes many more tractors...robots are now used big time...and Waterloos population is now 75,000....the UAW killed the city...this will hurt too as layoffs are soon to come....trickle down it does...
I grew up in Baltimore.
Where the 25,000 they went to work at Bethelem Steel have been replaced by 25,000 ( not a typo!) that go to work daily for NSA at Ft. Meade.
* Bethlehem Steel. Once the largest steel plant in the world. Defunct. They are, as we speak, scrapping and clearing the huge site. On one part of the newly cleared site is a new Fed Ex going up. Amazon put a facility on the site of the old GM plant. Now we are privileged to be taxed on our Amazon purchases.
Yup, although the air is cleaner, and the wives don't have to shake the ash out of the sheets when they come off the line, the loss of steel production, now coal will really impoverish every small town in the Northeast.
What are we going to make money on now? Healthcare?
The same can be said of the Quad Cities and their harvester works. Dead man walking. Maybe sell the logo to China. Of course you can't swing a cat without hitting a union hall. Which reminds me, I need to get busy on that idea about unionizing those robots. I mean with all the patently retarded groupthink flooding the country why the fuck not? They have rights too.
in Brantford, Ontario 90% of the population was employed by Massey Ferguson, and Cockshutt (later WFE) Those 2 plants both closed up in the early 80's, throwing Brantford into a crippling recession for 2 decades. The unions were ridiculous. We personally knew farmers that would farm all day, and go in to Massey's for the night shift and sleep in a big combine tire. They couldn't be fired.
The massive fed manipulation of RE has so many unintended consequences; seriously overpriced farm land is one of them.
The next bursting RE bubble will be colossal.
But, ..but,.. but,.. Ethanol is the future!
The f-ing joke is, it takes huge quantiles of water, fuel, land, fertilizer, etc., to make a gallon of ethanol.
You cannot prove to me, or make a case it is net neutral or positive to produce ethanol as a fuel. There is no way to input side doesn't massively outweigh the output side supposed benefits.
Any proclaimed benefit to the Enviroment or the economy is hidden upstream. Massive amounts of fresh water. Fuel. Petroleum based fertilizer. Energy and water during distillation .
This is a racket right up there with the biggest.
Al Gore is responsible for putting over the Gasohol clusterfuck and he recently admitted he knew it was bogus when he did it. But thought if he pushed it, he would get the farm vote in 2000. Didn't win him the election, and we are still paying billions every year for it.
Has he ever been involved in anything that wasn't a scam?
this will spread
oil can not be red. majors stacking.
grain futures not supporting input costs for proper margins
midwest weather will produce bumper crop.
moar for less
saving grace; fuel is cheap(relative)...
Working on a kiwi ginger purée for a Cajun rubbed grilled back swan breast recipe of mine
I was just going through the latest "Tractor House" publication which is 200 pages of color ads for used farm and construction equipment. There's a lot of equipment for sale out there priced lower than new models. I'm waiting for a small used 4WD with a front end loader for $5K or less. I'll even look at a New Holland at that price. Deere? Overpriced as usual and with the new engine management software, overly technical for a piece of damn farm equipment.
You know things are getting ridiculous when Cub Cadet (MTD) started advertising that their suburbanite garden tractors (not really tractors but riding mowers) now have BlueTooth.
http://farmprogress.com/story-cub-cadet-makes-first-lawn-tractor-bluetoo...
Where does one find that publication?
There are similar free publications around but I picked up my copy of Tractor House at my local Tractor Supply store. They have a website:
http://www.tractorhouse.com/Default.aspx
Thanks!
The new stuff is rediculous. Too many things to break, make with cheap components. They do not stand up well to heat and humidity. Sometime spare parts are backlrdered for weeks or more. They are slitting their own throats.
I avoid any product that uses "advanced engineering" as one of it's selling points.
Gold is up .... farmland is down .... time to buy that retreat .... with a pond .... for the "gold fish" ?
Any small ponds on said property are now the jurisdiction of the EPA.
http://www.thenewamerican.com/tech/environment/item/17164-tna-online-epa...
25%...LMFAO...Who are they kidding. I farm...and prices suck....There isn't a farmer anywhere that NEEDS to buy any new equipment for the forseeable future. Not just Deere, but ALL implement dealers lots are filled to the brim with late model combines, planters, tractors, tillage tools etc that they can't sell. Our local JD Dealer shop is empty...hardly any service work at all either. They were crying with joy when three raccoons went through my combine radiator and did $ 7K worth of damage. The dealership here is one of 6 owned by one company....while I was in for parts, I overheard a phone conversation between the Service Manager and his superior....and shit is just about to get real for alot of employees. Bend over stockholders, cause you're next. Most of the combines sitting on dealer lots have lost 40% of their value since last summer. Trade in valuation is WHOLESALE LESS 40%. That means that most farmers who are carrying equipment on their balance sheets need to shave at least half of the value from their Net Worth on equipment alone. They're underwater worse than the real estate fools.
I'm thinking the Day of Reckoning has arrived for many....except for anyone holding stocks.....they will be the last hole in the dike to give way before the tsunami hits the village. We're Screwed.....and the fuckers who orchestrated this will never have their day of judgement.
My paternal grandparents were Iowa farmers during the Great Depression. Pop later told me that lots of tractors and farm implements were repossessed by the dealers during that time. He said that the dealers' lots were full and a man with the money could buy all the equipment he could use at very favorable prices. Problem was that most of the farmers were in debt and had no free cash that they dared let go.
History may repeat.
Some of those gool ol boys never bought another piece of equipment again.
I have a John Deere tractor already, It's a 1967 vintage 4020. It does what I need, and it's fairly cheap and easy to repair. Not like the new bullshit that is completely computer controlled and you have to take it to the dealer to let the computer know you changed the oil.
I'm on a roll.
The solution here is a Cash-for- Not - Green farm equipment.
Or just mandate new environmental laws that prohibit using powered farm equipment that is not Tier3.55 Carb Certified ( I made that up) under penalty of severe fines or execution by an armed squad of EPA commandos in an up armored ( Tier 3.55 Certified, built by Boeing ( they are diversifying) ) Humvee Civilian Variant.
This is easy. Everyone wins.
Wonderful summation of American Government SOP. Really, just brilliant.
Touche~
The more complex systems become, the more frequent are the the failures. Ask any farmer what he thinks of his computer operated tractor, planter or combine, when it repeatedly faiks and freezes out in the field on a planting day or on a harvest day. Or freezes up on the road in transit. The solution is a mobile phone. Farmers all have them, and then there is the waiting till a techie arrives to connect with his laptop. Mabe he will be able to get the equipment moving again. When it has to get done, analog is the solution.
So after 25 years of ridiculous growth we get a 3% drop and it's portrayed as a bubble bursting?
Gimme a break - profits are down because farmers (even those mega corps) are holding off buying new equipment. Correlation doesn't equal causation people.
You seem to be forgetting that farms today run on massive amounts of leveraged debt. And like Wall St., they too have no room to absorb this loss.
Obama signed the removal of country of origin labeling - so now the catfish / shimp from Vietnam with antibiotics and fed garbage can be sold side by side with produce from places with rules
same issue ith tomatoes / beef / corn / --- the land is cheap elsewhere and the transportation inexpensive to final markets
with subsidies gone - especially for ethanol - the land price will fall out big time - look at Russia - endless farm land - getting back into dairy / farming etc due to response to US sanctions - the dutch, french and hungarian farmers are all going bankrupt
Obama and TPP will kill the USA - last final blow
When things were good..all the farmers bought new stuff..but it lasts for 30 years.....they dont need to buy a new combine every three years....they are good for a long time....but I bet the guy that bought my 140 acres at $12,000 an acre wish he didnt....it was $3,000 and acre just a few years earlier...trickle down
take some time and read about what farmers can do now..it is all computer controlled..the seeding..fertilizer application...and the harvesting...they can track what acre of land needs more fertilizer or less by the yields...pretty amazing stuff for a dumb farmer as most people think they are...but they are not...they are very smart people...
I used to work with an older guy who offered some sage advice every once in a while. One day we were talking about farming and farmers. He said " Everybody thinks farmers are dumb. Everyone thinks farmers are stupid. Just go try to fuck one on a deal sometime." Never forgot that.
Monoculture crop production is a dead-end. These absolutely huge pieces of equipment will become irrelevant in a more sustainable and sane agriculture process. I would expect Kubota to buy deere in the next 15 years given the current trajectory.
Caterpillar owns Kubota. They just don't brag about it.
What does it matter to you whether or not some imaginary farmer is smart or not? What is this a competition?
I hope they dont start charging for Pheasant hunting....that would hurt...
Down 21% in 2015. Now THAT is a downturn, not the 1 or 2% that Wall Street normally claims as the horrors of all horrors.
Perhaps the commodity prices are part of the "grand-scheme" to break the rest of the smaller farmers to allow the large conglomerates to further grab these very important assets for pennies on the dollar. Notice the recent talk of "water" being a commodity; yet no water is created nor destroyed, we have the same amount as we always have. However; there are a few who are "given or buying" water-rights across the country and the globe. The few who WILL control the food and water will control life and death in this world; this is Satanic as is so much of our lives and surroundings. Unfortunate for those not reconciled to the Lord; who ultimately controls all things created.
Si.
People are still not seeing the big picture and what is important and what is noise.
To understand it you have to take all of the pieces and reassemble them without the narrative and see what makes sense.
Actions are the only things that count in the assessment ... but ultimately it is your soul that matters, not your temporary so-called physical representation.
Water is a commodity. It takes money to take it from the source to the faucet. Rain does not magically concentrate in your shower.
And in arid regions it takes significantly more money and technology to provide the water.
But hey, wheat is also all natural, comes off the earth all naturally, it should be free.
Part of this is market share loss due lower quality equipment than expected from Deere... Got nothing but green on the ranch but that may start to change if they don't get their act together.
Case-IH has been smashing Deere around here in combine sales for the last 5 years or so.
I live in a rural area. Most of the guys either have new stuff, or are getting close to retiring and won't buy it, or are retireing early because they know they'll never recoup the costs.
As far as farmland goes......when auctioneers are showing up in limos with gold plated gavels to sell fucking flood plain land............you can bet your ass it isn't gona last.
Yep, nothing like the good ole days of stacking hay bails. Now you can' afford to hire anyone, not to mention no one will do it for the amount of money you can pay, and watching a $500,000 tractor with a $100,000 bailer to an entire field in a couple hours.
Also, profit down 40% and STILL beats expectations? Expectations of what? Failure?
All those fat ass Americans need to do is :EAT MORE.
Problem solved
How much does a farmland price drop have to do with oil prices being down? Ethanal isn't as attractive at $40 per barrel.
Ethanol was never attractive, it contains 60% of the energy contained in gasoline. Government decree is the source of the demand.