Russian President Vladimir Putin’s announcement on Wednesday that he plans to slap a 1-year import ban on agricultural products from countries that have imposed sanctions on Russia is unwelcome news to U.S.-based makers of farm equipment.
But the move is unlikely to have a big impact on the near-term financial performance of companies like Deere & Co and AGCO Corp. because Russia accounts for a small part of their sales.
Even so, both companies expressed concern on Wednesday about the escalating trade fight triggered by Russia’s support of Ukrainian separatists.
Both Deere and AGCO expressed concern the list could include farm equipment, as well as food items.
According to data from the U.S. Department of Commerce’s International Trade Administration, in 2013, Russian farmers purchased just $130 million of American-made ag implements, accounting for less than 2% of U.S. exports of farm equipment.
Russia lags much of the rest of the developed world in farm mechanization and has the potential to become a big market for farm equipment makers. That is a positive prospect for AGCO and others, which are facing a widely expected decline in sales to the rest of the world in the next few years as record crops push farm incomes lower and discourage investment in new equipment in North and South America and Western Europe.
“That whole area — Russia and the former Soviet Union — accounted for less than $100 million in sales for us last year,” Martin Richenhagen, the chairman, chief executive and president of Duluth, Ga.-based, AGCO, told Reuters. “So it’s really not that important to us. But the bad thing is, we were hoping that area would compensate for weaker business we are facing in other key markets.”
Responding to Putin’s announcement, Ray Gaesser, president of the American Soybean Assn. said, “Russia is a key trading partner for U.S. agriculture, and the Russian people are our customers like so many others in the world’s emerging markets. However, we would add that Russia, while very important, is only one of hundreds of our customers worldwide.”
According to Gaesser, soybeans are the biggest crop export from the U.S. to Russia, largely due to the country’s burgeoning economy and growing demand for meat. “Sanctions and bans like the one proposed by President Putin serve only to hurt the Russian people by limiting their access to the food and products they need and want,” he said.