Can Deere Overcome Tariff Impact & Weak Agricultural Sector?
Zacks Investment Research | Sep 01, 2019 10:00PM ET
Deere & Company (NYSE:DE) is expected to be hit hard as China’s latest round of tariffs is aggravating the woes of an already struggling U.S agricultural sector.
The U.S Agriculture industry has been grappling with low commodity prices and sluggish farm incomes over the past few years. Moreover, tariffs imposed by China on U.S. agricultural exports last year dealt a severe blow to the industry as China is the largest export market for U.S. agriculture producers. Per American Farm Bureau, farm bankruptcy filings have gone up 13% in the 12-month period ended June 2019. Further, delinquency rates for commercial agricultural loans are at a six-year high.
Farmers have thus been more cautious about spending on farm equipment, which in turn put pressure on Deere’s top line. China’s recent announcement to hike tariffs between 5% and 10% on U.S. goods worth $75 billion including agricultural products, in two stages on Sep 1 and Dec 15, 2019, thus raises a red flag for Deere’s customers.
Apart from the impact of weak farm equipment spending on Deere’s top line, its margins continue to bear the brunt of higher raw material costs on account of the implementation of tariffs.
During third-quarter fiscal 2019 conference call, Deere, one of the major names in the Original post
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