The market for farm machinery continues to face economic headwinds, especially among row-crop producers, according to AGCO.
The Duluth, Ga.-based machinery company on Tuesday reported net annual sales of $7.5 billion in 2015, a 23.2% drop compared to the previous year.
“Crop production reached near-record levels for a third consecutive year, contributing to higher grain inventories in 2015 and putting additional pressure on global farm economics,” said Martin Richenhagen, AGCO’s chairman, president and CEO. “Lower farmer income weakened demand for farm equipment across the major markets. In North America, industry sales progressively declined throughout the year. Sales declines were most pronounced in the row crop sector, with significantly lower industry retail sales of high-horsepower tractors, combines and sprayers.”
In North America, AGCO’s 2015 tractor sales fell 13% year-over-year and combine sales slipped 28% year-over-year. The region represented $1.965 billion in net sales for the company in 2015.
AGCO encountered similar issues in South America, which contributed $949 million in net sales in 2015.
“Industry demand in South America deteriorated significantly throughout the year with fourth quarter industry unit retail tractor sales down 40% from the fourth quarter of 2014. In Brazil, demand was extremely low due to weakness in the general economy, funding interruptions in the government financing program and softness in the sugar sector.”
In South America, AGCO’s 2015 tractor sales declined 28% year-over-year and combine sales plunged 39% year-over-year.
One bright spot for the company: North American livestock producers. “Sales declines in sprayers, implements and combines were partially offset by growth in sales of protein production products,” which include feeders, watering systems, ventilation and heating equipment and more for poultry and hog farmers.
Overall, though, the outlook remains challenging—at least for now.
“We expect difficult global industry conditions to persist through 2016, with farmers delaying purchases and industry inventory levels being managed down,” Richenhagen said. “Despite the current market difficulties, our long-term view remains positive as increasing global demand for commodities driven by the growing world population, rising emerging market protein consumption and biofuel use, are expected to support elevated farm income and healthy conditions in our industry.”