Ever since WW II, the world has evolved into countries that have significant advantages to specialize in those manufacturing companies. The advantages allow them to sell products for less than other companies can sell and make a profit on them. The countries allowed lower cost items but shifted its economies to more services and their standard of living improved, so most people were content with the system. President Trump loves tariffs and given he is President has moved the world to deal with tariffs. The world of manufacturing is adjusting to the tariffs, and it takes time before domestic manufacturing builds the items that were being imported.

In an article by Kevin Draper of the New York Times News Agency, if you think of green and yellow tractors, you likely think of John Deere, headquartered in Moline. Illinois. The company has 30,000 employees across 60 facilities across the country. More than 75% of its machines are assembled in the US or 25% of the components are imported.

Those big tractors which harvested the country’s corn, soybean and wheat crops are expensive. Some models cost more than $250,000 which is at rise of over 60% in the past 8 years. The article says at that price farmers and ranchers are looking at used tractors.

Demand for new agricultural equipment is largely determined by crop prices. When prices are high, farmers can buy new equipment. At the present time, prices are low with corn selling for 50% of the highs seen in mid-2022 Soybean prices are down 40%. John Deere expects sales of equipment to fall 15 to 20%.

If you watch YouTube there are videos of farmers attending meetings to try to get government help sooner than later.

Corn and soybean crops yields are expected to reach near-record highs according to the Department of Agriculture. The problem is buyers. The US has a large seller to China, but because of tariffs imposed on it, China has been buying from other countries. In addition, USAID was a large buyer for the crops to be sent overseas, but the President has dismantled the agency, who will buy?

The administration did pass a bill to depreciation costs to be a bonus allowing farms to receive a large tax break for equipment purchases. However, if a farmer is worried about paying the bills, depreciation is not a big help.

The good news for John Deere is the competition includes Kubota, Fendt and Mahindra and those companies manufacture most of their machines abroad which would be hit by the tariffs or be more expensive.

Linking to dividend paying stocks, with every industry there is always good and bad news, is the glass half full or half empty? Why will it change? Will the government help or hurt their operations? As an investor, you may love the industry but concentrate on whether the company makes a profit by focusing on how it makes its money, otherwise you are looking at a long-term holding.

There are more questions than answers, till the next time – to raising questions,