MOLINE, Ill. — More than 600 workers at four John Deere factories have been laid off "indefinitely," following a slump in farm machinery sales exacerbated by low grain prices paid to farmers, Deere & Co. explained Aug. 15.
The decision will affect employees at John Deere Harvester Works in East Moline, John Deere Seeding and Cylinder in Moline, John Deere Des Moines Works in Ankeny, Iowa and John Deere Coffeyville, Coffeyville, Kan. Deere & Co. cited the need to align its workforce to meet current demand for agricultural equipment in order to remain globally competitive, when announcing the decision.
The layoffs follow the hiring of "several hundred" manufacturing employees in recent years to meet strong consumer demand for farm machinery, according to a company press release.
The announcement came just two days after Deere announced a slowdown in the farm economy contributed to lower third-quarter profits for agricultural equipment. Net income for the third quarter of 2014 was $850.7 million, compared with $996.5 million for the same period in 2013.
"Deere’s third-quarter performance reflected moderating conditions in the global farm sector, which have negatively affected demand for farm machinery and contributed to lower sales and profits for our agricultural equipment business," said Samuel B. Allen, chair and CEO for Deere & Co.
"At the same time, our construction and forestry and financial services divisions had a higher profit, showing the benefits of a broad-based business lineup. Overall, it was a quarter of solid performance, with income exceeded only by last year’s record for the corresponding period."
Deere’s third-quarter sales slump is reflective of industry sales trends. According to the Assoc. of Equipment Manufacturers (AEM), sales of combines and large tractors through July were down from the same period in 2013 (refer to the Aug. 20 article in Farm World), while sales of smaller tractors were up from one year ago.
Further confirming farmers’ reluctance to purchase new, heavy equipment this summer is AgWeb’s 2014 Equipment and Machinery Survey. Of some 600 farmers polled in mid-June, more than 70 percent indicated the recent decline in commodity prices would affect their willingness to purchase machinery in 2014.
The farmers were questioned specifically regarding purchases of tractors, combines, sprayers, irrigation and other large equipment purchases. Only about 10 percent of the farmers surveyed by AgWeb said commodity prices would not affect their purchasing decisions.
Though Deere’s fourth-quarter profits are projected to come in some 8 percent behind last year, Allen said the company believes the long-term outlook for farm machinery sales holds considerable promise. "For the balance of the year, the company will be scaling back production in line with demand for our agricultural products," he said. "These actions illustrate our commitment to responding with speed and decisiveness to changes in market conditions."
Deere’s plan to expand its worldwide market presence is on track and moving ahead, Allen continued. "We remain confident the company is well-positioned to earn solid returns throughout the business cycle and to realize substantial benefits from the world’s growing need for food, shelter and infrastructure well into the future."