In our latest newscast we share Case IH's response to Deere's acquisition of Precision Planting, some trends from Agritechnica, an update on California's drought, and third quarter financial results from Cervus Equipment and Rocky Mountain.
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I'm Managing Editor Kim Schmidt, welcome to On the Record. Here's a look at what's currently impacting the ag equipment industry.
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Case IH Responds to Deere Acquisition
Last time we dedicated our broadcast to John Deere’s acquisition of Precision Planting and Monosem. Since that broadcast, we’ve heard from Case IH.
According to Case IH public relations manager Dan Danford, the change in Precision Planting’s ownership will not impact current arrangements with CNH and Case IH dealers.
“The agreement between CNH Industrial and Precision Planting that licenses the use and supply of certain components at a competitive cost are not impacted by the change of control of Precision Planting. Our agreements with Precision Planting also provide select CNH Industrial dealers the opportunity to carry Precision Planting components as part of their aftermarket parts offering. And just as with the component supply agreement, CNH Industrial’s rights are contractually preserved under any change of control.”
At the time of the acquisition announcement, several Case IH dealers told Ag Equipment Intelligence they were surprised and concerned about Deere’s acquisition and the impact it would have on their supply agreements with Precision Planting.
On the heels of John Deere's acquisition of Precision Planting on Nov. 4, Raven Industries announced that it has reached new long term agreement with CNH Industrial, strengthening the partnership between the two companies. The agreement will expand the use of Raven products and technology through the global dealer network for CNH Industrial brands Case IH and New Holland Agriculture.
According to Raven, the new deal will enable Raven and CNH Industrial to help customers increase efficiency, decrease input costs and deliver higher yields, which is very similar to what Precision Planting is expected to do for customers serviced by Deere and other dealers.
Brian Meyer, vice president and general manager of Raven's Applied Technology Division, says:
"We are committed to developing ground-breaking products and high quality service that has a positive impact on our customers' efficiency and profitability in their operations. One of the ways we achieve this is by working with partners such as CNH Industrial to develop solutions to the challenges our mutual customers face every day in the field. This agreement also positions Raven well for growth in key markets moving forward."
Dealers on the Move
Dealers on the Move this week include Haney Equipment Co., Arthur Ring and Sons and A.C. McCartney Equipment.
Haney Equipment Co., headquartered in Athens, Ala., has opened a dedicated JCB dealership, Haney JCB, in Cullman, Ala.
Two-store AGCO dealer Arthur Ring and Sons based in Rushville, Ill., has merged with A.C. McCartney Equipment, a 4-store AGCO dealer with locations in Durand, Wataga, Carthage and Mount Sterling, Illinois.
Contrasting Dealer Evolution at Home and Abroad
Last week, we sent Technology Editor Jack Zemlicka over to Germany to attend Agritechnica, the world’s largest trade show for ag equipment and machinery, to scope out the latest advancements in global technology trends.
With nearly 3,000 companies including global giants and ambitious start-ups, there were plenty of innovations to attract the attention of serious investors or curious competitors at Agritechnica.
One of the objectives for international farm equipment retailers attending the show was to evaluate the global appetite for new products and services.
According to Olga Hall, division manager of agricultural exports for RDO Equipment, having a presence at the event is as much about reinforcing the products the dealership carries, as it is about prospecting for new supplier partnerships.
For the last decade, the Fargo, N.D.-based John Deere dealership group has developed its agricultural business in Russia, the Ukraine, Australia and other European countries. In well-developed regions, the dealership’s agricultural business is advancing at a pace similar to North America, according to Hall.
However, one of the trends differentiating North American growth compared to emerging markets overseas, is the emphasis on parts and service as a source of revenue.
“In some countries, we still do see that a lot of dealers would look at it as a necessary evil as they have to service equipment and provide parts just because they still enjoy the good sales of equipment. The market is just not as saturated with equipment like it is in North America. There will be the time when we see the same thing as we’ve seen in America where parts and service is going to be the focus for all dealers.”
Hall adds that one of the challenges to increasing adoption of precision farming technology in developing overseas markets, is the abundance of available land. This is especially true in Africa, she says, where farmers can claim vast areas of farmable acreage, and don’t view technology as a necessary investment.
You can find more coverage from Agritechnica here.
California Drought Nears End of 4th Year
As we approach the end of the fourth year of drought in California, we checked in with a grower in the San Joaquin Valley to gauge how some are fairing.
Edwin Camp, a third generation California grower, says in his area they bank water underground during wet years. This has allowed them to keep pumping water over the last 4 years. But he says it’s unknown how much longer they’ll be able to — possibly only another year or two.
On top of the hydrologic drought, Camp says a “legislative” drought is intensifying the problem.
Heavy rains in the last month created mudslides and flooding problems in California. However, Camp says it wasn’t enough to help the overall situation. He says they need about 275% of normal moisture to break the drought.
More so than rain, Camp says they need a lot of snow pack in the Sierras for consecutive years to lift California out of the drought.
That said, USDA Meteorologist Brad Rippey says thanks to El Niño there’s a chance we could be seeing the beginning of the end for the California drought.
Cervus & Rock Mountain Report Earnings
John Deere dealer Cervus posted an increase in total ag equipment revenue of 16% for the period ending Sept. 30 and 19% through the first 9 months of 2015. During its third quarter Cervus registered strong sales across the board: equipment revenues were up 13%, parts up 29%, service up 42%, rental and other up 47%. Total revenues increased by 17% during the third quarter.
For its third quarter, Rocky Mountain reported total revenues were up by 10.9% to $256 million. While new equipment sales were off by 2% vs. the same period last year, used equipment sales were up by 23%. Inventory decreased by $51.3 million or 9.5%. Product support revenues were strong, improving by 6.6% to $48.6 million: parts up 7%, service up 7% and other up 40%.
Analyst Ben Cherniavsky of Raymond James said, “Encouragingly, Rocky managed a $51 million inventory reduction from the second quarter. This helped reduce net-debt by $31 million, although leverage remains high.”
He added, “Rocky continues to make small steps toward a comprehensive turnaround in its operations.”
Ag Equipment Archives
Kinze Manufacturing created the adjustable-width plow in 1971 and patented it in 1974. It had half the vertical clearance of ordinary plows and could be adjusted on the go from 12 to 22 inches in width. The secret to building the adjustable-width plow was the addition of a tie-rod and the parallelogram frame that could be pivoted with a hydraulic cylinder. Other plows of the time were set up upon order to a set width.
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