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DJ Agco Flags Higher North American Industry Sales This Year -- Commodity Comment

· 02/04/2021 13:53

By Robb M. Stewart

Agricultural-equipment manufacturer Agco Corp. on Thursday said higher commodity prices and improved farmer sentiment are expected to drive higher North American industry sales in 2021.

The company recorded net sales of $2.72 billion in the final quarter of 2020, an increase from $2.51 billion a year earlier. It swung to net income for the period of $135.4 million, against a year-ago loss of $88.3 million that included impairment charges and restructuring expenses.

On the market:

"Increased grain consumption, driven by economic recovery and higher export demand, helped to offset a solid year of global crop production leaving year-end grain inventories lower than anticipated," said Eric Hansotia, the company's chairman, president and chief executive.

Mr. Hansotia said reduced grain stocks supported a rally in soft commodity prices, lifted farmer sentiment and supported higher demand for agricultural equipment during the fourth quarter.

"Higher commodity prices and improved farmer sentiment are also expected to drive higher North American industry sales in 2021."

He said increased sales of precision planting equipment, high-horsepower tractors and parts were offset by lower sales of grain and protein-production equipment, as well as sprayers.

"Increasing demand for commodities, driven by the growing world population, rising emerging market protein consumption and biofuel use, are expected to support healthy conditions in our industry."

In Western Europe, Mr. Hansotia said industry demand improved in the fourth quarter but remained down for the full year of 2020. Market demand was weakest in the U.K. and Scandinavia, and was partially offset by growth in Germany, which benefited from tax incentives during 2020, he said.

"We expect 2021 industry demand in Western Europe to be flat to modestly higher from 2020 levels."

He said South America industry retail tractor sales increased during 2020, with robust recovery in Brazil and Argentina partially offset by weaker demand in the smaller South America markets.

"Healthy crop production and favorable exchange rates in Brazil and Argentina are supporting farm profitability. We expect farm economics to remain supportive in 2021 in South America, with replacement demand resulting in higher industry sales compared to 2020," Mr. Hansotia said.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

February 04, 2021 13:53 ET (18:53 GMT)

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