Farm equipment maker Deere's dealers hit hard by trade war

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Farm equipment maker Deere's dealers hit hard by trade war

Dealers of Deere & Co’s (DE.N) tractors, planters and combines are struggling with dropping sales as farmers have put off equipment purchases in the wake of the yearlong China-U.S. trade standoff, reports Reuters.

China announced this week that it had stopped buying U.S. agricultural products.

National officials also announced the country might impose additional tariffs on farm shipments from the U.S.

With this in mind, Dave Schmidt, a dealer at a Wisconsin-based Deere & Co's, braced for another blow to his business.

Schmidt says sales at his dealership declined by as much as 15% in the first half of the year. He also comments there was a general decrease in the demand for large equipment.

He is not alone. Half a dozen dealers of Deere’s agriculture equipment across the Midwest shared similar accounts in interviews with Reuters.

One of those dealers, in Geneseo, Illinois, said sales at his dealership were down 50% so far this year from the same period last year.

Adding to the worry, dealers are also encountering an increase in payment delays.

“When you get into a slowdown, it takes a while for demand to build back up,” Schmidt said. “These things don’t change on a dime.”

This is a worrying sign for Deere, which gets nearly 60% of its sales from the U.S. and Canada.

The Illinois-based company is expected to report lower sales at its agriculture & turf segment when it reports its third-quarter earnings on Aug. 16.

The segment, which accounts for the bulk of the company’s sales, is expected to report quarterly sales of US$6.24 billion, compared with US$6.29 billion a year ago, according to Refinitiv IBES’ average analyst estimate.

Deere already slashed its full-year profit and sales outlook in May; it blamed the U.S. trade war with China for weak demand for its farm machines, according to Reuters.

“We are not expecting demand for planting equipment to come back up this year,” Schmidt said. “We might see more repair and upgrading of the existing equipment.”

Deere has downgraded the estimates for U.S. principal crop cash receipts this year, an important indicator for equipment demand, citing China’s retaliatory tariffs on American imports, which have slashed exports earnings of American farmers.

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