American farmers grappling with low crop prices and the loss of Chinese markets due to President Trump’s trade struggle with Beijing are likely to purchase $464 million less in tractors and harvesters from Deere & Co. this year than the manufacturer predicted.
The Moline, Ill.-based maker of John Deere tractors, which expected agriculture equipment sales to grow 4% this year to $24.1 billion, said Friday they will probably climb just 2%. The shift illustrates the growing damage from U.S. duties on Chinese imports and retaliation from President Xi Jinping, whom Trump is attempting to pressure into a trade agreement.
While businesses and lawmakers alike have warned the tariffs, which include 25% duties on $250 billion of Chinese goods so far, risk undermining U.S. growth, the White House has stood by its strategy. Growers, meanwhile, have begun describing the current agricultural economy as the worst since the 1980s, an era when farm foreclosures touched record highs amid soaring interest rates, dwindling crop prices, and an embargo on crop sales to the Soviet Union ordered by former President Jimmy Carter.
“In addition to persistent uncertainty around global trade and market access, farmers are also contending with weather-related planning delays and uncertain near-term demand prospects,” Chief Financial Officer Ryan Campbell told investors on an earnings call. “The resulting decline in commodity prices has taken a toll on farmer sentiment, and correspondingly, our large agriculture sales forecast has come down.”
Farmers place much of the blame on Trump’s tariffs, some of which were doubled this month, and Beijing’s levies on goods from American states that supported the president.
[Also read: Agriculture Secretary Perdue vows aid to farmers as China tariffs increase]
“The stakes have never been higher than they are right now,” Matt Huie, who grows cotton, corn, and livestock in Beeville, Texas, told a panel of the House Agriculture Committee earlier this month. “I didn’t live through the ’80s. I did live through the ’90s, that was when I started farming. It was miserable, but I was so young I didn’t know better.”
The value of U.S. crop shipments to China tumbled 25% to $16.3 billion in the year through Sept. 30, 2018, and may dip to $9 billion by the end of this September, according to the Congressional Research Service. Exports of about $12 billion worth of soybeans to China, where they are used in animal feed, essentially halted after the tariffs.
For Deere’s customers, “further trade progress is becoming increasingly important to the near-term sentiment,” Campbell told investors. Companywide, profit fell 6% to $1.13 billion, or $3.52 a share, in the three months through April, Deere said. That trailed the $3.62 average estimate from analysts surveyed by FactSet.
