On The Record: April 18, 2014
Spring Planting Ahead
of 2013 Despite Slow Start
In today’s newscast we talk to Titan’s president Peter Christianson about how the company’s 2 dealerships in Ukraine are faring among the turmoil, a look at how spring planting is progressing, quarterly reports from Art’s Way and Titan Machinery, and an update on the 2014 dealer outlook.
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In today’s episode we look at: How Titan Machinery’s Ukrainian dealerships are fairing, USDA’s latest Crop Progress Update, Art’s Way has a tough 1st Quarter, Titan Machinery’s 4th Quarter Results and The 2014 Dealer Outlook.
I’m Kim Schmidt, Managing Editor, welcome to On the Record
Geopolitical & Financial Turmoil in Ukraine Continues
While the geopolitical turmoil in the southern Crimean and eastern portions of Ukraine isn’t having a major impact on Titan Machinery’s two Ukrainian dealerships, the financial uncertainty is.
To get a micro-level view of the situation, Ag Equipment Intelligence interviewed Titan executives, who operate 2 stores in Kiev and Vinnytsia, in the center of Ukraine. We spoke with Titan President Peter Christianson.
“Our customers are experiencing reduced credit availability for crop inputs as well as their equipment purchases. Rising interest rates and the devaluation of the local currency are affecting all businesses throughout the country. But even considering these current factors, our customers are proceeding with spring planting to start the crop production cycle. Potential economic investment packages from the west to Ukraine could improve the financial climate during the back half of the year.”
According to a CNN report, the European Union approved tariff cuts for all agricultural goods, making it cheaper for Ukraine to export them to the EU.
Cuts will start at the end of April and last until November, by which time a fuller free-trade deal is expected to take effect.
Wheat prices soared following the announcement April 15 by Ukraine’s acting president of an anti-terrorist operation against pro-Russian demonstrators occupying a number of government properties in the far east of the country.
USDA Crop Progress Report
Spring planting is off to a slow start and is causing some impatience by farmers, dealers and manufacturers alike, but USDA’s latest Crop Progress Report indicates planted corn is ahead of last year and just slightly behind the 5-year average.
A look at 18 states, responsible for 91% of planted corn last year, shows that 3% of corn had been planted as of April 13 vs. 2% on the same date last year.
The 5-year average is just 6% by this point.
In Minnesota, fieldwork isn’t expected to start until April 25-30. That said, the optimal window for planting for southern Minnesota is April 25-May 7.
Univ. of Minnesota Extension corn agronomist Jeff Coulter told the Associated Press that producers can delay planting until mid-May with no yield reductions.
Art’s Way Manufacturing Has Tough 1st Quarter
Art’s Way Manufacturing reported its 1st quarter results on April 14.
For the first quarter ending February 28, net sales were down 25.9% and net income was down 131.5%.
Fiscal quarter and year-to-date sales for the manufacturing division were down 36.6% compared to the same period of 2013.
The company attributed the revenue decrease to the colder than average winter — which negatively impacted available labor hours — and fixed overhead that remained constant while variable overhead increased.
While demand is off significantly for sugar beet harvesters, the company says demand for products serving the dairy and livestock markets is robust, providing both a significant backlog to fulfill and reason to be optimistic about the rest of the year.
Art’s Way Chairman of the Board of Directors Ward McConnell points out that the agricultural markets are cyclical and the first quarter has historically always been one of the weakest for the company.
He expects the next few quarters to improve.
Titan Financial Results
Titan Machinery reported its 4th quarter and fiscal 2014 results on April 10. For the 4th quarter, total revenue was down 9.7% vs. 2013, with equipment revenue down 13.4%.
For the full year, revenue was up 1.3% vs. 2013, but equipment revenue was down 2.3%.
We spoke with Titan Chairman and CEO David Meyer.
While there are challenges ahead, Meyer remains positive about the long-term outlook. He had this to say:
“It’s no secret that our ag customers are looking lower commodity prices and USDA is projecting farm income to be down 27%. As a result, we’re forecasting our ag business to be down in that 10-15% range this current year. Achieving full market realization on new equipment will be a challenge due to the price increases associated with the Tier 4 Final. I believe this problem will be compounded as we start to see a deterioration of the used values, especially on late model trades. On a positive note, our customer balance sheets remain strong, ag exports are at record levels, planted acres will be up, livestock is very good and we continue to see very low interest rates for our customers. We are confident in the long-term strength in the agriculture industry and the increasing global demand for agriculture production.”
2014 Dealer Outlook Improving
In our latest Dealer Sentiments & Business Conditions Update, released March 28, dealers in four out of 11 regions projected sales to grow for the full year 2014 in February.
In January, only one region projected annual sales growth.
The Northern Plains region continues to forecast the largest sales decline for 2014 at down 6% year-over-year, while the Southeast region is projecting the strongest growth at up 5% year-over-year.
And now from the Ag Equipment Archives…
Ag Equipment Archives
During World War II, Servis Equipment Co. switched gears from making construction equipment to making magnesium incendiary bombs until August 14, 1945.
Later that year farm equipment production began.
In 1947 Servis Equipment engineers Clyde Robinson and Hoy West develop the first front-mounted stalk shredder to shred cotton and corn stalks.
The following year, the company introduced the first pull-type mower/shredder. Today, Servis Equipment Co. is part of Alamo Group.
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