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Tariff Aid Gives Ag Equipment Makers a Boost
USAgNet - 07/26/2018

When the Trump administration unveiled a $12 billion aid package for farmers on Tuesday, it wasn't just soybean growers who had cause to cheer: So too did Deere & Co., one of the largest and most successful U.S. manufacturers. According to Bloomberg, shares of the world's biggest tractor maker jumped as much as 4.8 percent after it emerged that the government was planning to compensate farmers who stand to lose export business amid escalating trade tensions with China.

American farmers are the biggest market for Moline, Illinois-based Deere's green-and-yellow machinery. Prices for the company's models can run into several hundred thousand dollars apiece. As such, its fortunes are closely tied to the financial health of its customers.

Those customers been battling low crop prices and falling incomes for years now. While there have been some positive developments in 2018 -- Deere raised its full-year sales forecast in May -- a looming trade war with American agriculture's biggest customer, China, has clouded that outlook. China went ahead and imposed tariffs on soybeans earlier this month, pushing Chicago futures prices lower.

The timing of the aid announcement raises hopes that growers could receive payments by the end of the year and bolster strained balance sheets, said Matt Splitter, a fifth-generation farmers who grows soybeans, corn, wheat and sorghum on about 4,000 acres in central Kansas.

Deere and AGCO Corp., one of its largest rivals, have warned about negative impacts from a trade war. AGCO has said that tariffs are putting additional pressure on farmers, while Deere has stressed its support for open markets and free trade.

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