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Machinery Executives Share Insights

December 30, 2009
By: Sara Schafer, Farm Journal Media Business and Crops Editor

Margy Fischer, Farm Journal Machinery Editor

Anytime you step back and look through someone else's eyes, you learn something new. To capture a view from the top of the agricultural machinery business, Farm Journal arranged exclusive interviews with several company leaders. Although manufacturers have been affected by the depressed general economy, the ag sector has been spared from the brunt of the situation.

"Agriculture has a different opportunity today than many other industries,” says Doug DeVries, John Deere senior vice president, Global Marketing Services, Agriculture and Turf Division. "The fundamentals are as strong as ever—there are more people, people are eating better and there are new uses for ag products, such as biofuels.”

The long-term outlook is positive, but this past year didn't keep pace with the fever-pitch market of 2008.

"2008 was an outlier, not a benchmark,” says Steve Koep, AGCO vice president of sales, North America. "Machinery demand went from full throttle to near stop. And given the global economic problems, there's no safe zone to shift production to, although South America is making a recovery.”

Typically, when North American markets are slow, another part of the world is doing fairly well—which prompts manufacturers to transfer volume to those areas. With most markets weak, manufacturers sought out any strength in geographic areas and moved inventory.

Across the industry, cancelled machinery orders bound for overseas markets (primarily Russia and Eastern Europe) found their way back to the U.S. "We took a look at dealer inventories early in 2009, and we slowed production very quickly. We decided we were going to conserve our distribution channel at all costs and move inventory to locations where they were selling equipment,” says John Stevenson, New Holland vice president of sales and marketing for North America. He says machines in all categories were moved from coast to coast.

In response to market fluctuations, companies downshifted production to varying degrees across product lines. High-horsepower tractors, four-wheel-drive tractors, self-propelled sprayers and combines were able to maintain positive sales numbers while

decreasing volume production.

"The row-crop market is holding strong,” Stevenson says. "On the flip side, midsized tractors and hay tools have been really hit. Dairies are culling herds and small dairies are closing their business. Beef prices are down.”

Some in the industry think the worst is behind us.

"When you look at the livestock and dairy industries, this has been one of the bigger depressed times that we've seen,” says Jim Walker, vice president of Case IH North American agricultural business. "Strengthening global demand, a weak dollar, subsidized dairy products and the recovery in the general economy are bringing those back in line to reinstate those market drivers. I think they've seen the bottom.”

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