Bad Weather, Good Weather,
Higher yields create biggest threat to
profitability for Deere.
Too much corn.
Weather, Good Genetics, and
advanced production practices have produced an oversupply.
production costs in line, this is the next hurdle in 2015. Exactrix
delivers 12% more net income.
Article included from
Deere rates good growing weather as
its top threat
The "biggest downside risk" to Deere's prospects is that ideal
weather again boosts yields, and cuts crop prices - for which
forecasts are downgraded
Deere rates good growing
weather as its top threat.
Deere & Co rated good crop-growing weather as the biggest threat to
its prospects as the farm machinery giant highlighted the threat
posed by weaker crop prices for which it cut forecasts to levels
well below official estimates.
Tony Huegel, the John Deere-maker's director of investor relations,
said that the "biggest downside risk" to the group's forecasts,
which factor in a 40% slump in earnings, "would be that we have
incredibly positive weather again".
It was weather Mr Huegel termed as "above normal" this year which,
in boosting supplies, had undermined crop prices, and farmers'
enthusiasm for splashing out on new machinery.
Farmers' cash receipts are "the best indicator of sales" in Canada
and the US, with takings from crops - "which have come down quite a
bit recently" - a signal to the market for the big machines used
particularly by arable growers.
Even a return to "normal" weather - and a return to trend yields
would be sufficient to see "a drawdown in US corn carryover" at the
end of 2014-15, Mr Huegel said.
"Demand would outpace production," he told investors.
The estimate assumes demand staying at this year's levels, and US
corn sowings remaining at this year's levels of some 91m acres.
In fact, "as you are probably aware, most analysts now expect US
corn farmers to reduce acreage somewhat next year.
"So if you assume smaller acreage, a trend
yield would be very supportive of both corn prices and would likely
boost cash receipts.
Third time lucky?
The comments - which follow an outline estimate from the US
Congressional Budget Office that US corn sowings will fall some
900,000 acres to 90.0m acres - came as Deere discussed quarterly
results which received a somewhat cool response, sending shares in
the group down 0.9% to $86.99.
While Deere reports a smaller-than-expected profits drop for the
August-to-October period, its forecast of earnings of about $1.9bn
for the year which started this month was well below Wall Street
expectations of a $2.2bn result.
However, Mr Huegel cautioned over expectations of the downturn
lasting into 2016, with steep sales declines typically lasting for
only two successive years.
"In fact there's only really one period if you look back from 1965
forward where we saw three sequential years of lower sales," he
"And even in that scenario one of those
years I think was less than 1% down."
Crop price downgrades.
The bank also cut its forecast for crop prices in 2014-15, in some
cases to levels below those the US Department of Agriculture -
significantly so in the case of soybeans, which it saw averaging
$9.25 a bushel over the season, down $1.00 a bushel from its
previous forecast, in August.
The USDA sees farmgate prices averaging $9.00-11.00 a bushel, while
spot soybean futures closed at $10.47 a bushel in Chicago on
For corn, Deere cut its price estimate by $0.65 to $3.45 a bushel,
just $0.05 below the USDA forecast at the midpoint of the range.
However, the estimate for cotton prices of 65 cents a pound was
above the range of $56-64 cents a pound forecast by the USDA.
Now for the good news.
North Dakota Exactrix producers get top yields and
good protein with fall banded TAPPS.
Deere 1890 Fall Banding at Napoleon, North Dakota.
Click on image to view
High quality Dark Northern Spring Wheat with Exactrix TAPPS
application at Steele, ND.
In North Dakota Dark Northern Spring Wheat has been downgraded to as
low as 9% protein and very poor falling numbers. In 2014 most North
Dakota producers did not make good protein.
The low protein is mostly due to a very wet cropping condition in
the state in 2014.
Stabilizing fall applied nitrogen with TAPPS made a big difference,
especially with Thio-Sul®
in the band.
A bright spot in North Dakota is Exactrix DNSW making good margins.
Exactrix producers with fall banded TAPPS have found good yields and
prices at the North Dakota elevators.
In a survey by Exactrix, it was
discovered that Exactrix fall banded TAPPS had good yields in 2014
at 75 to 80 bushels per acre,
and proteins at 14% to 15% and falling numbers between 350 and 400.
A very good result as compared to their neighbors.
Wednesday Nov. 26 the price of Dark Northern Spring Wheat was
strong at Portland, Oregon. The pricing is based on unit trains or
TAPPS is Tri-Ammonium Poly Phosphate Sulfate, as
shown in Cotton residue at Amarillo, TX.
At Portland, OR., US 1 Dark Northern
Spring Wheat (with a minimum of 300 falling numbers, a maximum of
0.5 part per million vomitoxin, and a maximum of one percent total
protein Nov mostly 9.6375, ranging
9.3275-9.8275 up 2.00
15 pct protein
10.1275-10.6275 dn 18.00-up 2.00
10.9275-11.4275 dn 18.00-28.00
Get on the front side of the Yield Curve
with 12% more net income…follow the nutrient guide lines of TAPPS
and TAPPKTS as established by you on your farm. Or follow the path
of others and keep the nutrient costs in line.
Use the economic method at typical .7 of the university standard to
determine your application rate. Apply bands of TAPPS
deep and keep the residue on
the soil surface. Western producers can plan on a good crop and
improved net margin.
Steele, North Dakota. Pre-plant banding for corn and wheat.
Click on image to view
Corn emerging at Garden City, KS following TAPPS deep
banding (6 in.) with an Exactrix Mustang Tool Bar,
maintaining critical surface residue in irrigated corn and wheat
Speed Tool Bar Video.
Click on image to view.