On The Record: April 4, 2014
Canadian Deere Dealers
Feel the Push for Purity
In today's newscast we discuss John Deere's push for purity with its Canadian dealers, Ingersoll Tillage Group's acquisition of Bellota and Lindsay Corp.'s second quarter financial results. In addition, Howard Dahl, president and CEO of Amity Technology shares his perspective on the Ukraine situation after a recent visit.
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In today’s episode we look at: dealer purity once again pops up, this time from John Deere; Ingersoll Tillage Group closes its acquisition of Bellota; Lindsay has a rough 2nd quarter; Howard Dahl of Amity Technology shares his experience in Ukraine; and the switch from corn acres to soybean acres.
I’m Kim Schmidt, managing editor. Welcome to On the Record.
Canadian Deere Dealers Feel the Push for Purity
Last month we reported how Case IH is pressuring its dealers to remove as many as seven shortlines from their lots.
John Deere is officially joining in the brand purity push with a memo distributed earlier this week. On April 1, John Deere dealers in Canada received a memo laying down strict guidelines on brand purity.
In the memo, Deere states:
“It is John Deere Canada ULC’s position that if a dealer carries another major product line or engages in another major business activity, either of which will likely detract from dealer’s representation of John Deere Products, the dealer shall separate, in a manner acceptable to John Deere, the product lines or business activities.”
The memo concluded by stating that a failure to comply with the requirements could negatively affect the John Deere brand and may result in termination of the Dealer Agreement.
John Schmieser, CEO of the Canada West Equipment Dealers Association, told On the Record that his dealer members are highly concerned, as provincial laws clearly outline a dealer cannot be penalized or cancelled for carrying a competitive brand.
Kim Rominger, CEO of the Ohio-Michigan Equipment Dealers Association and the Mid-American Equipment Retailers Association says nothing like the Canadian memo has turned up among his members.
We spoke with a John Deere dealer with who received the memo. He believes the memo was aimed at dealers who are carrying planters and air seeders from competing manufacturers. He said Deere doesn’t offer a full line of this equipment and Canadian dealers are responding to customer demand and have taken on competitive lines to fill the gap.
Another theory he floated was Deere is trying to stop dealers from taking on JCB.
We’ll continue following this story and bring you up dates as they become available.
Ingersoll Completes Acquisition of Bellota
Four months after making its intentions public, Ingersoll Tillage Group announced on March 25 that it closed its acquisition of CPE, a manufacturer of ground engaging products which are marketed under the Bellota brand name.
We spoke with Roger Murdock, vice president of sales and marketing for Ingersoll Tillage Group. He says the acquisition, which included 4 production plants, allows the company to put key manufacturing facilities around the world to better serve the global market.
n addition, Bellota adds more aftermarket opportunities for the company, as Ingersoll’s primary focus has been on the OEM market.
“When you combine the two companies we’re probably going to cover 90-95% if not close to 100% of all the customer opportunities that there are globally.”
The acquisition adds approximately 1,200 employees and 2 manufacturing facilities in Europe, one in Brazil and one in India.
Current Ingersoll Tillage Group exec Steve Garrette will be the CEO/president of the combined company, but each brand and company will operate separately.
The company did not disclose the financial details of the acquisition.
Lindsay Corp. Q2 Revenues Drop
Lindsay Corp. saw total irrigation revenues decline 16%, with domestic revenues falling by 21% while international revenues were down 5%.
The company expects U.S. irrigation equipment revenues to remain below last year’s level for the remainder of the fiscal year.
Lindsay president and CEO Rick Parod believes the most significant impact to this sales trend has been declining crop prices, but added that the elimination of the enhanced Section 179 depreciation benefit may also be contributing to this decline.
C. Schon Williams, analyst with BB&T says, “management’s tone for irrigation in 2014 remains dour, as weak commodity prices will likely continue for the near-term.” He says the recent instability in the Ukraine and Russia, which contributes to just under 5% of Lindsay sales, is expected to weigh on international ag demand in the second half of 2014.
Doing Business in the Midst of Tension
On the Record checked in with Howard Dahl, president and CEO of Amity Technology, who recently returned from a trip to Ukraine, to learn more about the agribusiness atmosphere in the region.
Amity has been selling sugar beet defoliators and other equipment in Russia, Ukraine and Kazakhstan since 1991. And since that time, Dahl has made 71 trips to the area.
He describes the current atmosphere as very sober and says it’s very difficult for farmers to get credit, even those with healthy balance sheets. With the weakening Russian rubel and Ukrainian currency, North American equipment has become much more expensive and is likely to negatively impact sales.
Dahl says, “Our equipment is more expensive today than it was even 6 months ago, so I’d say there’s going to be a fairly large reduction of sales for most companies in both countries this year and potentially next year.
On March 31 the USDA reported that corn planted area for all purposes in 2014 is estimated at 91.7 million acres, down 4% from last year. If realized, this will represent the lowest planted acreage in the U.S. since 2010.
However, it is estimated that spring fieldwork is already 2 weeks behind in the Corn Belt, and could be delayed further with more bad weather in the forecast, which could result in more acreage being switched away from corn.
Soybean planted area for 2014 is estimated at a record high 81.5 million acres, up 6% from last year. Compared with last year, planted acreage intentions are up or unchanged across all states with the exception of Missouri and Oklahoma.
The Wall Street Journal reported corn prices surpassed the $5 per bushel level for the first time since August 2013.
Ag Equipment Archives
And now from the Ag Equipment Archives…
The year is 1979. In order to keep the elements and animals away from freshly harvested grain in combine tanks, Claas develops the folding grain tank doors on equipment built for Ford.
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They must feel pretty embarrassed when their Equipment can't stand next to and/or compete with another brand.
It won't be long before Deere will run out of Dealers to put up with this type of treatment and tell them to stick their Contract where the sun don't shine. Then again just wait until some of these huge Dealers of Deere's making either start going broke or folding their tent because of unfair treatment. Deere will once again be back begging Dealers to take on their brand again with hat in hand, like 20+ years back. Always remember the bigger they are the harder they fall.
Deere used to be such a great brand, way back when!
Like our once great Country, everything is heading south!