Agriculture will take any good news where it can get it. Yesterday's World Agricultural Supply and Demand Estimates from USDA was less mundane than expected as it helped extend a small run up in corn futures when the ag agency actually trimmed the U.S. harvest
Corn prices got at least a short reprieve from its 40% decline from a year ago on the news that USDA lowered ending stocks to 13.9 billion bushels, a drop of 64 million bushels from previous estimates.
It has been shown that U.S. sales of farm machinery closely correlate with the price of U.S. corn. With the two core components of demand for corn being exports and ethanol, equipment dealers and manufacturers closely scrutinize the trends in both these segments.
USDA increased its estimates of corn and soybean yields and wheat production in its Nov. 8 World Agricultural Supply and Demand Estimates report, which most analysts agree was another bearish sign for farm machinery sales in the year ahead.
USDA raised its estimates of corn and wheat ending stocks, but cut its soybean forecast with its September 12 World Agricultural Supply Demand Estimates report.
While opinions vary on the impact the drought will have on farm equipment sales for the rest of this year and next, most analysts agree the lower yields will result in higher commodity prices. This combined with the wider use of crop insurance is likely to blunt a major falloff in ag machinery sales in 2013.
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In this episode of On the Record, brought to you by Associated Equipment Distributors, Deere Director of Investor Relations Josh Beal told JP Morgan analysts that the OEM is confident it will be “producing to demand” in fiscal year 2025.