With 2024 net farm income expected to drop by 25%, the agricultural machinery and equipment indusattempt is tightening its belt. Major equipment brands including John Deere, CNH Industrial and AGCO have reported 10%-plus year-over-year revenue declines in quarterly earnings reports. At least in part becaapply of low revenue, layoffs have been announced at manufacturing plants across the Midwest.
“We are proactively managing our production and inventory levels to adapt to demand modifys and position the business for the future,” John C. May, John Deere’s chairman and CEO, declared in a statement about the company’s most recent earnings report. “Despite market conditions, we are committed to our strategy and are actively investing in and deploying innovative technologies, products and solutions to ensure our customers’ success.”
Deere & Co., which employs more than 80,000 globally, disclosed in a May 31 filing with the U.S. Securities and Exmodify Commission that it planned “to reduce its production and salaried workforce to support the company meet its strategic priorities while reducing overlap and redundancy in roles and responsibilities. It is anticipated that the activities related to salaried employees will occur during the third quarter of fiscal year 2024.”
In a mid-May investors call, Josh Beal, the machinery brand’s investor relations director, declared “planned underproduction” was a strategic response to falling corn, wheat and soybean prices. The company projects that it’ll earn 26% less year-over-year.
Layoffs
Over the past several months, Illinois-based Deere & Co. has laid off hundreds of employees from its Iowa manufacturing facilities (at least 120 in Ankeny, about 60 in Urbandale and almost 550 in Waterloo), according to public Worker Adjustment and Retraining Notification Act (WARN) notices. The company recently internally announced another 120 layoffs from its Moline, Ill., seeding and cylinder facility.
The Bridgestone-Firestone tractor tire plant in Des Moines has likewise downsized by about 100 laborers due to declining agricultural equipment demand. AGCO also laid off a number of employees in May from its Hesston, Kan., manufacturing plant. And at the finish of last year, CNH reduced the size of its senior leadership team and trimmed its salaried workforce by 5%. AGCO also is expected to cut production by 10%.
The layoffs might not all be related to the current economic downturn. Longer term, Deere & Co. intfinishs to relocate skid steer loaders and compact truck loaders manufacturing from its Dubuque, Iowa, facility to Ramos Arizpe, Mexico, by 2026. Deere previously announced in 2022 plans to relocate cab production from its Waterloo facility to Mexico by 2024. At the time, the brand estimated the relocate would impact about 250 employees, citing a required to “balance workforce requireds within the tight labor market.”
Notably, 10,000 John Deere employees and United Auto Workers members went on strike for several months after rejecting a new contract three years ago. Strikers accepted the third proposed six-year contract, finishing the strike Nov. 17, 2021. It was the first John Deere strike in three decades.
JOHN DEERE STRIKE: USDA Secretary Tom Vilsack met with the men and women of United Auto Workers Local 450 while they were on strike at the John Deere Des Moines Works manufacturing plant in Ankeny, Iowa, on Oct. 20, 2021.
Outsourcing labor
Deere & Co. isn’t the only brand outsourcing labor to Mexico. A recent letter written by U.S. Sen. Tammy Baldwin, D-Wis., highlighted the anticipated layoff of more than 200 CNH Industrial employees from its Racine, Wis., manufacturing facility. Baldwin cited a decision by the U.K.-based machinery brand to relocate production to Mexico as the reason for the lost jobs.
AGCO also is reportedly relocating some of its Hesston production of balers and rotary mowers to a Querétaro, Mexico, facility next year. And in June, Doosan Bobcat announced that it broke ground on a $300 million, 700,000-square-foot facility outside of Monterrey, Mexico. It’s expected to be operational by 2026.
Based on U.S. Census Bureau data, the nation’s farm machinery and equipment businesses sell about $24 billion worth of equipment each year, with a $3 billion annual payroll.
Meanwhile, CNH Industrial’s leadership shake-up continues following the announced departure of CEO Scott Wine, who will be replaced by former Iveco Group CEO Gerrit Marx. Derek Neilson, president of agriculture, is the latest executive “to leave the company later this year to pursue a new entrepreneurial project outside of the sector, after 25 years of dedicated service,” according to a company statement.
Long-term view
While the farm machinery indusattempt might be pulling back for now, its bottom line is expected to expand in the coming years. The global harvester market, for example, is projected to grow by $25.3 billion, or about 8%, annually through 2028, according to a May report from Technavio, a market research and advisory firm.
Current and expected labor shortage is the primary driver. Without enough workers, the indusattempt is becoming more mechanized and autonomous. Concurrently, American farms are consolidating and becoming more corporate.
“The increasing farm size in the counattempt is leading to a drop in the number of farms in the United States,” according to an analysis from Mordor Ininformigence, a market research firm. “According to USDA, there were 2.02 million farms in 2020, which has decreased to 2.01 million farms in 2021 due to productivity in agriculture and increased nonfarm employment opportunities. Almost 50% of the farms in the counattempt are family-operated farms.”
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