For the first time the company saw more than 50% of its AG [agricultural equipment] sales come from markets outside the U.S. and Canada.
For the 2009/2010 crop year, commodity prices remain very attractive... Forecast prices, though down from recent levels, are higher than the past several years. Further, they are at levels that permit our farm customers to earn a good return.
U.S. farm cash receipts for 2008 and 2009 are at good levels and up significantly from most recently as 2007… Our outlook for industry sales of agricultural equipment in the U.S. and Canada is up approximately 5% in fiscal 2009. The increase is being led by higher sales in large tractors and combines, partially offset by lower industry sales for cotton equipment, small tractors, and equipment commonly used by livestock producers [who] have been hurt by the economic slump… largely because of higher feed costs.
In 2009, our forecast calls for material price increases in the range of $500.0 million to $900.0 million. The sizeable range… is warranted [because] the extreme volatile swings in commodity prices that have occurred over the past year have made projecting costs very challenging. [Also,] recall our material cost increases were back-end loaded in 2008. They significantly lagged the commodity market on the way up and will do so again on the way down.
In the second half of the year, depending on whose forecast you are looking at, sheet steel could be anywhere from $500 to $900 a ton.
A: President-Elect Obama certainly was very supportive of renewable fuels, renewable energy… on the campaign trail.
Q: Obviously that is a huge market for row-crop farmers, particularly corn farmers. So that is baked in your assumptions that there will be continuing strong support for ethanol?
A: That certainly would appear to be case and additionally baked into our assumptions is the fact that we have still about 2.0 billion gallons of ethanol capacity that is under construction and is yet to come on. And actually in the last quarter we saw just nearly 2.0 billion of capacity in ethanol in the U.S. come on line in production.
The wind production tax credit was extended in early October and it runs now through the end of December of 2009. Our capital investments for wind in 2009 really do not reflect a pull back on our belief in the renewable wind business, but just simply that we are doing that to be prudent in use of our capital in the current environment.
In South America, our outlook is for the industry to be down 10% to 20% in fiscal 2009. Major factors weighing on the region are access to credit in Brazil and the drought conditions that plagued Argentina early in the planting season… In Brazil last year, soybean farmers provided about 25% of their own crop input funding. This year it is twice as much, at 50%.
We had seen just a handful of cancellations in the U.S. and Canada, virtually nothing in Europe. We have seen some in South America and in Eastern Europe, into the former Soviet Union and in that case it really is related to access to credit, which is a very significant issue there.
The Chinese government’s $500.0 billion plus stimulus plan, announced earlier this month, adds further support to this market. The plan is aimed at highway, railroad, and airport infrastructure spending.
Two months ago we announced… our intent to form a joint venture in India with Ashok Leyland. India is the world’s largest market for backhoes. Initial production is planned for 2010.