Deere, Agco Equipment Sales May Drop as Euro Falls, Bernstein's Dowd Says

Deere & Co., the world’s largest farm- machinery maker, and Agco Corp. may post declining agricultural- equipment sales if the euro extends its drop against the dollar, a Sanford C. Bernstein & Co. analyst said today.

The rapidly rising dollar may reduce farm cash receipts, a key driver of sales of machinery such as tractors and combines, by making U.S. crop exports more expensive, Daniel Dowd, the New York-based analyst, said in a report. That could mean revenue declines for Deere and Agco, he said.

“In past periods of currency crises, farm cash receipts have either declined on an annual basis or seen growth slow,” Dowd said. “For investors who believe the euro will weaken significantly from current levels against the dollar, caution on Deere and Agco is warranted.”

Dowd, who has an “outperform” rating on both companies, added that the fundamentals of the agricultural market “remain intact.”

The euro fell to the lowest level against the dollar in more than a year today on concern Europe’s debt crisis is worsening. Moody’s Investors Service placed its Aa2 rating for Portugal on review for a possible downgrade and protests amid Greece’s financial woes turned deadly.

Deere, based in Moline, Illinois, fell 31 cents to $58.11 at 11:35 a.m. in New York Stock Exchange composite trading. The shares gained 8 percent this year before today. Agco, based in Duluth, Georgia, dropped 37 cents, or 1.1 percent, to $34.34 and climbed 7.3 percent this year through yesterday.

Agco European Sales

Lower production and weaker demand in all major European markets contributed to a 32 percent decline in first-quarter sales for Agco’s Europe, Africa and Middle East region, the company said last month. Retail tractor sales in France, Scandinavia and Germany all declined at least 25 percent in the quarter, Agco said.

“Our forecast in 2010 calls for the European market to be weaker,” Greg Peterson, an Agco spokesman, said today in an interview. “We expect our sales in Europe to be lower than in 2009. A weaker euro means our sales in dollar terms will be somewhat reduced.”

A lower euro presents a “mixed bag” for European farmers, Peterson said. The cost of imports such as fuel may increase for European farmers while their crops may become more competitive to buyers overseas who see local currencies strengthen, he said.

Deere spokesman Ken Golden declined comment, citing the quiet period ahead of the company’s earnings report on May 19.

To contact the reporter on this story: Shruti Date Singh in Chicago at

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