Deere & Co. reduces production in some of its core plants in North America, with increased trade pressures and harsh weather conditions that harm farmers' incomes and reduce demand for equipment.
Moline Deere based on Friday cut its forecast for profit for the whole year. The farm equipment manufacturer reported $ 1.13 billion in revenue for the second quarter, or $ 3.52 per share. This is less than $ 1.21 billion, or $ 3.67 per share, reported in the same quarter last year.
The revised forecast is another indicator that farmers, and in particular those from the Midwest, suffer from the trade battles of the Trump administration. On Friday, the president tried to ease the fears of escalating trade confrontations by canceling industrial metal tariffs with Mexico and Canada and pledging another package of aid to farmers affected by tariffs.
Deere says it lowers its forecast because farmers do not buy as much equipment. Farmers are worried about the fall in harvest prices, international trade disputes and extreme weather events that have slowed down planting, including here in Iowa.
Deer profits are lower than Wall Street's expectations, causing stocks to fall by more than 7 percent in afternoon trading.
"The continuing fears of access to export markets, short-term demand for goods such as soybeans and a slow-growing planting season in most of North America cause farmers to become much more cautious when making large purchases," said the chairman and chief Executive Director Samuel Allen. report.
On Friday morning talks with analysts, Josh Jepsen, director of investor relations, said in response to market dynamics, Deere has reduced production in its agricultural business to levels below retail sales. Production will be lower in some of its major plants in North America for the remainder of the year.
He said that the changes mainly affect the production of large agricultural machinery, with its main plants supplying about 20% less than the previous year.
At the local level, Deere produces great farm equipment, such as harvesters and tractors, at its factories in East Moline and Waterloo.
Deere spokesman Ken Ken says the company does not specify where production cuts are being made but only plans to cut market demand in the second half of the year.
"Productive changes can be made without changing the size of the workforce," said Golden. "We have not announced any change in the workforce."
Deere cut its profit forecast to $ 3.3bn for the year, compared to a previous estimate of about $ 3.6bn. He also lowered his expectations for revenue growth by 7% and is now expecting a 5% growth.
Jpson said that in reporting the lower forecast and the decision to cut production, Deere will not enter into a trade agreement in the second half of the year.
"As a result, we are declining production in an attempt to calibrate our terrain where we want to end the year by 2020," he said. "20% … this is just an example of our big factories, which is not a large division, but a production unit, which is the size we see in some of our larger facilities."
The redundancies come when the US and China are imposing billions of dollars of import levies, affecting to a large extent soybean farmers, as about 60% of US soybeans are shipped to China.
Soybean prices fell to a 10-year low this week.
Deere is not the only big farmer affected by the war. Caterpillar stocks are also traded lower this year.
Jepsens said the reduction in output was the first step in responding to the uncertain market.
In the second quarter, worldwide revenue grew by 6 percent to $ 11.34 billion, from $ 10.72 billion in the same period last year.
In the second quarter of 2006, Deere achieved improved sales in construction and forestry. Sales rose 11% to 2.99 billion dollars due to higher volumes and prices of shipments.
Despite the lower forecast for the year, Ryan Campbell, Chief Financial Officer, said the company expects a "full, gradual recovery," as challenges – including trade pressures, harsh weather conditions, and lower demand for equipment – are diminishing.
"Although we have cut the forecast for the net profit for the year, the $ 3.3 billion predicted for the year will continue to be the second largest in our e-mail history." We believe that more consumers of agricultural machinery pause when buying due to short-term uncertainties. We continue to believe that long-term factors remain intact to drive higher sales. "
Associated Press contributed to this report.