John Deere (DE) Q3 2016 Earnings Call

John Deere’s (DE) Josh Jepsen said low agricultural commodity prices still hurting sales of agricultural equipment

“Low commodity prices, weakening farming income and elevated used equipment levels in the U.S. and Canada are continuing to pressure demand for farm equipments especially high horsepower models.”

Construction market continues to get weaker

“Notwithstanding these positive signals the market demand for construction equipment continues to soften. Among the factors contributing to the weakness, conditions in the oil and gas sector continue to be slow with the impact most pronounced in the energy producing regions of the U.S. and Canada. Contractors are less apt to replenish or grow their machine fleets when faced with uncertain markets.”

John Deere’s (DE) Chief Economist JB Penn said consumption of agricultural commodities continues to increase despite not growing at the same pace of a few years ago

“Consumption remains very strong, still rising steadily year-after-year and it has risen without fail every year since 1994, 1995 even including the great recession of 2009. Now fuelled by earlier high prices and after four consecutive great growing seasons worldwide, commodities supplies now are fully adequate to meet all needs. Prices of course have moved off the previously high levels and farmer margins have narrowed.”

Sk Additions:

With commodity prices coming down, mood is less positive

“es, as you might imagine, and we talked last quarter and even the early part of the third quarter where sentiment was a bit more positive as those commodity prices were up, and as we mentioned there, that can change in a hurry, and it certainly with the commodity prices coming down, I think it’s fair to say the overall mood would be less positive than it was a couple months ago even.”

Have seen some pricing stabilization in used equipment

“We’ve seen some pricing stabilization on used equipment, so, again, I think things are stabilizing but I want to be clear we have a lot of work on the actual level of used inventory at our dealers that will continue into 2017.”

Brazil looking better

” I mean if you ask me today which market was likely if I had to pick one which one has the best likelihood of being up, I think I would have to say Brazil or South America in general. One of the things to keep in mind is and we talked about this throughout the year is a lot of downturn there has been related to the uncertainty around the government and the overall economy. Farmers have been pretty profitable. As a result of that with the new government at least today there appears to be a more positive sentiment, inflation is coming down as an example so the overall economy seems to be showing some level of improvement.”