In today's newscast we look at how spring planting is progressing, “Tractor Queen” Mallika Srinviasan's interest in AGCO, new machinery breakdown insurance coverage and first quarter financial results from AGCO, CNH and others.


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HSB Introduces First of Its Kind Machinery Breakdown Coverage

I’m managing editor Kim Schmidt, welcome to On the Record. Here’s a look at what’s currently impacting the ag equipment industry.


AFN: $50.27 -1.82

AGCO: $50.89 +2.02

AJX: $0.67 -0.08

ALG: $54.95 -8.48

ARTW: $5.10 -0.06

BLT: $13.09 -0.41

BUI: $5.09 -0.06

CAT: $86.43 +1.64

CNHI: $8.54 -0.34

DE: $89.63 +1.04

KUBTY: $78.37 -4.02

LNN: $77.45 +0.80

RAVN: $19.95 -1.16

TWI: $11.21 +1.74

TRMB: $25.29 -0.44

VMI: $123.32 +0.18

CVL: $18.35 -0.40

RME: $9.39 +0.00

TITN: $14.49 +0.02

TSCO: $85.69 -5.57

Closing Stocks as of 5/815 (Compared to Close on 4/23/15)

Spring Planting Underway

Dry weather out west is causing problems for growers as the drought lingers on. But, good weather in much of the country has helped farmers get seed in the ground. The USDA reported this week that 55% of corn acreage had been planted as of May 3. That is nearly triple the progress that had been made a week earlier.

The 55% of corn in the ground also surpassed the 5-year average of 38% planted through May 3.

For soybeans 13% had been planted vs. just 2% the prior week.

In the Mid-South, rains had been keeping farmers out of their fields. However, things have started to improve. For the week ending May 3, Kentucky had 5.2 days suitable for fieldwork, while Tennessee had 5.8.

That compares to just a week earlier when Kentucky and Tennessee had just 2 and 2.8 days, respectively, that were fit for planting.

Dealers on the Move

Dealers on the Move this week include Cisco Equipment Sales and Archbold Equipment Co.

Cisco Equipment Sales, headquartered in Odessa, Texas, will be opening a new division, Cisco JCB, at its San Angelo, Texas, location. The new JCB division will rent and sell JCB construction and ag equipment, including backhoes, wheel loaders, telescopic handlers, compact excavators and skid steers. Cisco will also provide equipment service, support and financing.

Archbold Equipment is investing more than $2 million to enlarge and upgrade its store just north of Portage, Ohio. The Case IH dealer will add a new workshop, parts storage and a store display for products including lawn and garden items.

 Making Precision Coverage More Mobile

This time of year, an equipment breakdown can create chaos for farmers and their dealers. Operators have no idea when or where a mechanical or electronic issue may grind machinery to a halt in the field.

While equipment warranties and insurance can safeguard against catastrophic accidents, there’s always been a gap in farm owner’s coverage for in-season breakdowns, according to Rebecca Galovich, vice president of the Hartford Steam Boiler Inspection and Insurance Company.

This week, HSB launched its Farm Equipment and Machinery Breakdown Coverage. The optional insurance plan expands coverage for mobile implements and the precision farming systems that control the equipment.

According to Galovich, past farm owner insurance policies never covered portable implement breakdowns and undetectable damage to microelectronics, proprietary computer systems or firmware failure:

“It’s really helpful to both the farmer and dealers, because it’s a type of loss that a farmer can’t fix themselves, a microscopic circuitry type loss. They have to go to a dealer or repair specialist for that type of repair, so it’s supplemental to, or complementary to any type of existing warranty. But in most cases, equipment on farms can be quite old and used for many years, so warranties have their limitations.”

To better understand the lifespan, failure frequency, repair costs and warranty coverage of farmers’ machinery, HSB conducted a survey of farmers and members of the North American Equipment Dealers Association and found that more than half the time farm implements were not covered by warranty.

‘Tractor Queen’ Buys More AGCO Shares

The so-called “Tractor Queen,” Mallika Srinivasan, has bough nearly 400,000 shares of AGCO in recent weeks at a total cost of $18.6 million, according to a report in the Atlanta Business Chronicle. This brings her total shares to 11. 6 million.

Srinivasn is the CEO of TAFE, the second largest tractor company in India.

Last fall, we reported in Ag Equipment Intelligence that AGCO and Srinivasan struck an agreement that she would not increase her holdings beyond 12.5% of AGCO stock. She has not yet reached that limit.

Srinivasn has a longstanding relationship with AGCO, and she sits on AGCOs board and AGCO owns nearly 24% interest in TAFE.

Last fall AGCO CEO Martin Richenhagen told analysts AGCO was glad to have an important strategic shareholder like Srinivasn. He said, “She sees it as a strategic long-term investment without the intention to become a traitor or to sell and buy depending on the stock price. She's not concerned about the market because she believes in the fundamentals that we do. And she's a very supportive and — at the same time — challenging director, helping us to understand the markets of Asia much better than we could do that just from Georgia."

Greg Peterson with AGCO Investor Relations says both parties agree the relationship is mutually beneficial.

“What she has told us and what we have observed is she has a very positive long term view of the ag industry and is very optimistic about the relationship between AGCO and TAFE and how she thinks it’s mutually beneficial and how we’ll both be able to continue to benefit from the relationship as we move ahead and continue to do business across the globe.”

Manufacturers Report Tough 1Q

Last week, AGCO and CNHI both reported revenues were down in the first quarter of 2015.

AGCO reported net sales for the quarter of $1.7 billion. That is a 27% drop compared to net sales of $2.3 billion during the same quarter last year.

AGCO’s chairman, president and CEO, Martin Richenhagen, says the company made substantial progress with its inventory reduction efforts and cost reductions initiatives. Production hours were reduced by 21% vs. the first quart of 2014 and inventories were lowered by over $175 million compared to March 31, 2014.

He says: “We significantly reduced the size of our workforce to achieve meaningful cuts in our operating expenses. While these actions are a response to current market conditions, we are also maintaining key strategic investments in product and market development to position AGCO for future profitable growth.”

In April, AGCO expanded its product offering with the acquisition of Farmer Automatic from The Clark Companies. Farmer Automatic is a manufacturer of poultry systems for layers, pullets and broilers and is based in Laer, Germany. Farmer Automatic’s 2014 sales were approximately $19.0 million.

CNHI’s revenues were down 11.1% in the first quarter. Net ag sales were down 30.5% compared to the same period of 2014.  The drop in sales for ag equipment division was the result of unfavorable industry volume and mix across all regions, primarily in the row-crop sector.

During the first quarter, CNH’s ag equipment unit production was 4% above retail sales in support of the expected seasonal increase in demand from dairy and livestock customers. Production for row-crop related products were cut significantly.

During the quarter, CNH cut production of large tractors by 34% and combines by 41% according to

Trimble and Titan International also announced their first quarter results. Trimble’s first quarter revenue for 2015 was down 4% compared to the same period last year. Revenues for the Field Solutions segment, which serves the ag industry, were down 17%.

Titan International’s net sales were down 25% in the first quarter. North America large agriculture is down approximately 35%, and we believe it will remain that way for the balance of 2015.

Dealer Outlook

Ag Equipment Intelligence’s latest Dealer Sentiments & Business Condition Update revealed that in March ag equipment dealers forecast 2015 sales to be down 13% on average. This is a slight improvement from the down 15% forecast in February.

Their 2015 outlook has been hovering between down 10% and 15% since November 2014.

John Deere dealers are the most optimistic about 2015 sales, calling for sales to be down by 8%. Shortline and other dealers are the least optimistic at sales down 19%.

Compared to the major OEMs, however, their outlook seems positive. John Deere is predicting North American sales to be down 25-35%.

CNH is forecasting tractor sales to be down up to 5%. The company sees much bigger drops in combines, predicting a drop off of 25-30%.

AGCO is calling for sales to be down 5-10% overall, but for high horsepower tractors to be down over 20%.

Ag Equipment Archives

English company, Ransomes Sims & Jefferies built the first Ransomes tractor in 1903. It featured four-wheel braking with foot and hand controls. Most other tractor-makers at the time didn’t bother to fit brakes at all. A foot pedal disengaged the clutch and at the same time applied a transmission brake on the drive to the wheels. A hand lever could be used to apply the brakes to all four wheels. Throughout 1903 and 1904, the tractor was demonstrated and taken to shows, but no sales were ever recorded and the project was abandoned.