The slow down in tractor sales is now starting to bite deep, with John Deere declaring that it is not only underproducing tractors, but has also made lay offs among its staff at its North American plants, with more redundancies to come.
In the company’s latest earnings call, president of the Worldwide Agriculture & Turf Division; Production and Precision Ag, Americas and Australia, Deere & Co, Cory J. Reed, said:
“This is probably best exemplified by our decision to underproduce large tractor retail demand in North America in the back half of the year.
“We ended 2023 with really low levels of large tractor inventory, but we think it’s prudent to drive those levels even lower as we close out our 2024.
“The key here, is that by staying ahead of demand changes, we’re giving ourselves the optionality to react most efficiently to whichever way the market moves in the next year.”
According to various reports published in the United States, the lay-offs involve between 700 and 1,000 staff at Waterloo, Des Moins and Illonois.
No direct mention of these were made in the earnings call, although there was much emphasis placed on cost control measures.
Waterloo, in Iowa, is the company’s major production facility manufacturing some of the Deere’s largest tractors. These include the 7, 8 and 9 series models, along with engines and drive trains.
Glum outlook from John Deere
This action is being taken as the company reviews its outlook for the rest of the year, with sales now forecast to be down between 15% and 25%, depending on segment and region.
John Deere has taken on board the issue of primary crop margins being forecast to drop further, with stocks being higher than average thanks to several years of good growing conditions and record yields globally.
It also points out that used inventories are high, and high interest rates are discouraging farmers from investing in new machinery at present.
However, management boards of large American corporations are not known for their pessimism.
While 2024 may be looking a little rough, it is believed an elevated fleet age, stable land values and strong farmer balance sheets will restore sales to a more agreeable level.
New products for 2025
Two further points of interest that arose in the question and answer session were that the company is planning a large product launch for 2025, which will involve new tractors and combines.
The second is that over the last 10 years, the number of 300hp+ tractors in dealers yards has increased from 30% to 70%, with a slight reduction in the number of units.
The higher power demand from implements such as seed drills, will, the company feels, ensure a healthy demand for large used tractors.