Trade wars meet bad weather, American agricultural machinery companies are "very hurt
The lack of export trade is one of the important reasons for the damage of farmers’ interests. Under the influence of the increase in tariffs, the income of American farmers has dropped significantly. In 2018, China imported 16.64 million tons of soybeans from the United States, a decrease of 49.4% over the previous year, accounting for 18.9% of all imported soybeans, a decline of 15.5 percentage points year-on-year.
Xinhua News Agency quoted the president of the American Soybean Association as saying that US soybean growers have lost the largest export market. Ye Xingqing, director of the Rural Economic Research Department of the Development Research Center of the State Council, said that US agricultural net income fell by 12% last year.
On the other hand, the continued wet weather has delayed the cultivation of agricultural products in a considerable part of the United States. According to the latest data from the US Department of Agriculture, as of May 19, the cultivation rate of corn in 18 key states in the United States is only 49%, far below the average of 80% of 2014-2018; the soybean planting rate is only 19%, which is not as good as The average of the past five years is 47%.
The planting plan is seriously lagging behind, and the demand for agricultural machinery and equipment is further waning. According to data released by the US Department of Commerce, in the first quarter of this year, the purchase of agricultural equipment in the United States decreased by 900 million US dollars, the largest decline in three years.
On May 17, the US agricultural machinery manufacturer John Deere said that in view of the shrinking market demand, it will adjust inventory and reduce production scale in the second half of the year. The reduction in production is mainly concentrated in large-scale agricultural equipment, and shipments of related products are expected to decline by about 20% year-on-year.
John Deere’s first-quarter earnings report showed that the company’s net income for the quarter was $1.13 billion, down 6% from the same period last year. The company also lowered its earnings forecast and expects sales to grow by 5% in FY 2019, up from 7%.
CNH Industrail N.V., the UK's agricultural machinery company, expects the additional cost of tariffs to be between $50 million and $100 million. Case New Holland Industries is the second largest producer of agricultural machinery in the United States, second only to John Deere.
"I want to make it clear that the US government is doing a discussion on tariffs, really, really did not help American farmers." Kasin Holland industrial CEO Hubertus M. Muhlhauser in the first quarter of May 8 earnings call Said above.
Since May 6, the stock prices of key agricultural machinery companies in the United States have generally fallen. John Deere's share price fell 16.8%, Case New Holland fell 18.4%, and AGCO fell 11.5%.
On May 23, the US Department of Agriculture announced that it would provide US farmers with up to $16 billion in aid programs to compensate for the losses they suffered in trade disputes. Last year, the US government also introduced a $12 billion agricultural subsidy program.
The CEO of Case New Holland Industry told the Wall Street Journal that once the supply chain of another country is transferred, the United States cannot guarantee that it will re-engage the former buyers in the future. “Brazil will retain its own customers and they will cultivate more land.”
The United States is one of the largest agricultural machinery markets in North America, and the country's large land is almost 100% mechanized. Some multinational agricultural machinery companies have begun to explore other markets, and India, Brazil and Germany are increasing subsidies for agricultural mechanization, with Brazil's demand growth particularly prominent.
"Our business in Brazil is growing... Brazilian farmers are robbing American farmers of their jobs, which is not in the interest of them (American farmers), but it is a hedge against our business." Case New Holland Industrial CEO previously said