A digest of some of the top insights that I’ve gathered from this week’s earnings calls. Full notes can be found here.
Global grain and oil seed demand is strong, unfavorable weather could lead to price spike
“Planting is well underway in North American where farmers appear to be shifting some acreage from corn to soybeans in response to relative prices. But even though supplies appear to be adequate, global grain and oil seed demands remain strong. Unfavorable growing conditions in any part of the world would hurt production, reduce the stock to use ratio and result in prices quickly moving higher.”
Farm income expected to decline slightly
“While remaining near long term averages, grain prices and farm income are expected to decrease in 2014. As a result, farm machinery demand is expected to be lower for the year”
upbeat on construction and forestry markets
“Housing starts are slowing ramping up, home inventories are low and prices are improving. Landscaping activity is picking up and financing for land developers is slowly recovering. Additionally, we continue to see a strong domestic energy sector.”
Pull rather than push inventory model
“keep in mind that one of the difference for Deere versus at least many of our competitors is our order fulfillment process. We have very much a pull type system where our dealers, we don’t push a lot of inventory out into the market. We allow our dealers to pull it as needed and with our pretty short order windows that we at lease attempt to have, we’re much more of a just-in-time type of process versus build up that inventory ahead of time sort of situation.
So we’ve been building much closer to retail and that part of the timing difference that you’ll see for Deere versus maybe some of our competitors who push some significant inventory in the field ahead of those sales materializing.”