Analyst Sees Improved Prospects for Farm-Machinery Manufacturers Ahead

Bloomberg writers Lydia Mulvany and Arie Shapira reported yesterday that, “Deere & Co., the world’s largest farm-machinery manufacturer, was upgraded by a Wells Fargo & Co. analyst who said the industry’s demand cycle will reach a bottom in the next year to 18 months.”

Yesterday’s article explained that, “Moline, Illinois-based Deere may already be seeing improved demand in Brazil, parts of Europe, Ukraine, Russia and India, [Wells Fargo analyst Andrew Casey] said. The company will also see better returns than competitors over the next 10 years due to reductions in structural costs, and its initiatives in agricultural technology.

“‘Demand appears to be flattening as dealer pricing drops’ in the U.S. and Canada, Casey wrote.

“Such a recovery would bring much-needed relief to Deere, which has cut production amid a recession in the agricultural economy. When the company reports earnings next month, it’s expected to post a third consecutive year of falling revenue and net income.”

The Bloomberg article added that, “The main culprit for lower farmer spending is the glut of grain and soybeans, which has driven down crop prices. In such an environment, growers haven’t been as willing to purchase new Deere tractors, which can cost hundreds of thousands of dollars. Instead, they have continued to rely on existing equipment, or turned to cheaper used tractors and combines.”

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