All the major machinery manufacturers, including John Deere, have presented their results for the first quarter of 2022 and given some idea of how they expect the rest of the year to shape up.
John Deere, who work on a fiscal year that runs ahead of the calendar, was the first out of the traps with its first quarter (Q1) earnings-call back in February.
A good year for John Deere sales
As the largest manufacturer of agricultural equipment, the statements and opinions of Deere & Company are not to be dismissed lightly, and they are pleased with results so far.
Overall, there is not quite the air of optimism looking into the future as there was in the tail end of 2021. Supply problems still linger and there is the faint suggestion that farmers may not be quite so enthused when it comes to signing big cheques.
Within its production and Precision Ag business, Deere & Co. reported net sales of $3.356 billion, a 9% increase over the same quarter last year.
This was primarily due to the firm prices being obtained and a greater number of units being sold.
Full price
Although not confirmed by the company, it would suggest that customers were willing to purchase at the list price with no discounts being offered to move stock.
Unfortunately, it does not indicate what part the inclusion of optional extras may have played in increasing the overall value of sales, although price realisation was up by eight points.
Despite these glad tidings the operating profit was down to 9% from 21% last year. The industrial dispute of last autumn played a large part in this, along with higher material and shipping costs.
European enthusiasm
In Europe, Deere forecast a 5% increase as the healthy price of wheat reinforces confidence in the tillage segment, leading, it believes, to strong levels of investment.
The company also sees dairy prices remain resilient, but with the latest GDT price index recording an 8.5% decrease this month that particular forecast may need to be revisited.
The vision of company executives may also be thrown into question when they note that stock farmers see a "modest pressure on margins from rising input costs" this year.
Recent figures from the Department of Agriculture, Food and the Marine (DAFM) indicating that fertiliser sales were down by as much as 50% in February, might suggest that farmers themselves are not being quite so modest in their reaction to the increase in prices.
Rocky road ahead for John Deere?
How all this will pan out over the year, and whether the reluctance to spend on basic requirements will be reflected in a sharp decline in machinery investment, remains to be seen. The omens are not good.
In summing up his hopes for this season Brent Norwood, manager of Investor Communications, said: "We expect the industry will continue to face supply-based constraints resulting in demand outstripping production for the year. At this time, our order book extends through the duration of fiscal year 2022."
As the executive charged with promoting the company to shareholders, he naturally takes a bright view of the future. Yet events on the ground have an awkward habit of undermining forecasts that seemed irrefutable only weeks ago.
Quite what the rest of the year holds for agriculture is, as always, a matter for the crystal ball. We can only hope that Deere's optimism is well founded, rather than have our industry suffer another 'interesting' period.
The next earnings call is scheduled for Friday, May 20. From talk in the trade there is every chance that the smiles of the company directors will be a little forced as they lay out the results.
