John Deere released their first quarter fiscal 2014 years yesterday and profits were up slightly from the year before. As part of the conference call, they highlighted that US farm receipts are expected to remain high, however, based on their graph in slide # 6, they do show US farm receipts over $400 billion in both 2012 and 2013, with an expected drop to about $375 billion this year. Direct governmental payments as a percentage of gross farm revenues are expected to be extremely low compared to historical levels.
Livestock margins are expected to stabilize near historically high levels (slide # 8). Slide #9 shows that the Commonwealth of Independent States (Russia, Kazakhstan and Belarus) had a late fall planting putting the 2014 winter wheat crop at risk and credit availability is being impacted by continuing restrictions, increased collateral requirements and reduction in interest rates subsidies. China continues to be supportive of agriculture. India had a very favorable 2013 monsoon season which should result in good 2014 crops.
Brazil's crop mix expects to be 54% grains, 17% sugarcane and 29% other crops (slide #10). Their expectations for 2014 Ag equipment sales is US/Canada down 5-10%, EU down 5%, South America down 5-10%, CIS countries down slightly and Asia Ag up slightly (slide #13).
Expectations for average corn and bean prices up slightly, wheat down 20 cents a bushel and cotton the same (slide #35).
Their breakdown of total farm revenues is (slide 38):
- Crops $192 billion
- Livestock $174 billion
- Government payments $11 billion
- Total $377 billion
Finally, they expect net farm income to drop from the $130+ billion range to about $110 billion.
In an article in the Wall Street Journal, they reported that John Deere expects Section 179 to be in the $250,000 range for 2014 and 50% bonus depreciation to be reinstated. However, as we have already mentioned several times, they do not expect the final law to be in place until late in the year which will be too late for most farmers to both order and place in service new equipment for 2014.
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