Massey Ferguson, Fendt and Valtra manufacturer, AGCO, has booked first quarter sales worth AU$2.95 billion, a decrease of approximately 3.4 per cent compared to the first quarter of 2019.
The company’s production operations in China and Europe were both adversely hit by the COVID-19 pandemic but North America proved to be resilient with production levels maintained and an increase in retail demand for the company’s machines.
In most areas of operation, AGCO’s business was deemed essential, allowing for the maintenance of operations. However, production was severely impacted by component supply availability, particularly during late March and throughout April, which had a flow on impact on sales levels. The affected plants all resumed production in late April, but the company says the ability to maintain full-time production remains uncertain for the foreseeable future due to potential supply chain constraints, workforce limitations, safety equipment availability and government restrictions.
AGCO expects the COVID-19 pandemic to have minimal impact on global crop production. Most farm operations, which generally have been deemed essential, are working at normal levels. Soybeans and other crops are being harvested in the Southern Hemisphere, fields are being planted in the Northern Hemisphere and farm equipment is being used intensively in most regions. However, the consumption of grain for food, fuel and livestock feed is being negatively impacted by the economic constraints caused by the pandemic. As a result, grain inventories are expected to increase in 2020, and soft commodity prices have trended significantly lower in the first quarter.
In North America AGCO’s sales of low horsepower tractors softened, while demand for high horsepower tractors was relatively stable. While the need to replace a relatively aged fleet remains, lower commodity prices and a cautious farmer sentiment are also influencing equipment demand.
Sales in Western Europe decreased modestly in the first three months of 2020. Market demand was weakest in Spain and Italy but was mitigated by growth in Germany. Dry weather across much of Western Europe is negatively impacting the development of the winter wheat crop, limiting production estimates. Conversely, stronger grain export demand and supportive wheat prices look good for Western European farmers. European dairy and livestock fundamentals are mixed. Milk prices have come under pressure as demand is being negatively impacted by the effects of the pandemic, while strong pork exports are supporting pork prices.
Sales in South America decreased during the first three months of 2020, with most of the decline in markets outside of Brazil. While the benefit of a strong first crop in Brazil and Argentina as well as favourable exchange rates are supporting relatively positive economics, farmers are exhibiting a cautious approach to equipment purchases due to the current economic and political environment.
In the Asia/Pacific/Africa region AGCO’s net sales decreased 13.4 per cent in the first quarter compared to the same period in 2019.