Farm equipment benefiting from high crops sales
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JEREMY HOBSON: Later this morning John Deere reports quarterly earnings. The company, which is the largest maker of farm equipment in the world, has been thriving this year.
Marketplace’s Stacey Vanek Smith takes a look at why.
Stacey Vanek Smith: 2010 has been a very good year for farmers. And a very good year for makers of farm equipment — sales are up about 25 percent from a year ago. Commodities analyst Dan Manternach says farmers are springing for new tractors because they’re getting more money for their crops.
Dan Manternach: That is truly a perfect storm, where you’ve got rising inflationary fears, plus a good old-fashioned squeeze on supply and demand.
The supply and demand part is coming from China and India, which are getting wealthier and importing more food. The inflation part is coming from investors, who are worried about the dollar losing value. Normally they’d buy gold, but Manternach says gold has gotten so expensive, those investors are moving to other commodities, like food.
Manternach: Right now wheat is a better buy than gold just as a store of value. Because governments can’t print more wheat either, they can’t print more corn.
Investors maybe hurt if food prices reverse, but makers of farm equipment could be safe as long as the global demand for food keeps growing.
I’m Stacey Vanek Smith for Marketplace.
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