Profit at tractor-maker Deere’s agriculture business sank over the past three months as U.S. farmers delayed purchases after losing access to overseas markets during President Trump’s trade war.
The Moline, Illinois-based company, which halved its sales-growth forecast for the division three months ago, said its income plummeted 24% to $612 million in the quarter through July. The decline 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.
Beijing halted all purchases of U.S. crops this month after Trump announced duties of 10% on some $300 billion in Chinese imports not covered under previous tariffs. While the White House later delayed some of the levies, growers have been reluctant to invest in new tractors and front-end loaders when they’re unsure where they can sell their harvests.
“Concerns about export-market access, near-term demand for commodities such as soybeans, and overall crop conditions, have caused many farmers to postpone major equipment purchases,” CEO Samuel R. Allen said in a statement.
While business owners and lawmakers alike have warned the tariffs are undermining U.S. growth, the White House has stood by its strategy. Trump has promised negotiations with China will ultimately yield a trade deal that curbs the country’s appropriation of trade secrets from American companies doing business there and further opens its sprawling markets.
In the meantime, the administration authorized $12 billion in assistance to farmers last year and $16 billion this year. While growers are grateful for the help, the American Farm Bureau Federation pointed out that exports to China fell $1.3 billion in the first half of 2019 alone, and the country’s cutoff of U.S. crops would wipe out what amounted to a $9.1 billion market in 2018.
That’s a “body blow to thousands of farmers and ranchers who are already struggling to get by,” said Zippy Duvall, the organization’s president and a third-generation farmer from Georgia. “In the last 18 months alone, farm and ranch families have deal with plunging commodity prices, awful weather and tariffs higher than we have seen in decades.
Growers describe 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.
The resulting uncertainty is overshadowing the entire sector, said Allen, the Deere CEO.
Companywide, Deere’s profit fell 1% to $899 million, or $2.81 a share, in its third quarter as growth in the lending and construction units compensated for some of the decline in agriculture. Revenue dropped 3% to $10 billion.
