Deere lures Africa’s first-time buyers of tractors

U.S. Decline

Dealers for CNH, the second-largest farm equipment maker, have added 20 to 30 new sites in the last three years for a total of about 300 sales and service locations, said Diego de la Calle, the business director in Africa for Case IH and New Holland equipment. It plans to continue expanding, particularly in distribution in West Africa.

“There is substantial growth for farming equipment, for more mechanization,” De la Calle said in a telephone interview from Lugano, Switzerland. “The trend has intensified in the last three to five years.”

Africa still accounts for a small slice of business at Deere, where sales in Canada and the U.S. represented 64% of revenue in its last fiscal year, according to data compiled by Bloomberg.

That core business is facing pressure after prices for corn and soybeans dropped. U.S. farmers’ cash receipts, the main indicator for agricultural machinery purchases, will fall 5.5% to $211.1 billion this year, the Department of Agriculture said Aug. 27.

Asian Competition

Deere’s sales will dip 0.5% in the year through October, according to the average of 17 analysts’ estimates compiled by Bloomberg.

Deere dropped 0.6% to $83.83 at 9:58 a.m. in New York. The shares have fallen 3% this year while CNH has gained 17% and Agco has climbed 21%.

In Africa, the big three face stiff competition from Asian players who are more established in that market. The tractor bought by Sinyimba, the businessman with four farms in Zambia, was made by India’s Mahindra & Mahindra Ltd., he said in a phone interview.

“I have never heard about the American tractor brands, but I believe they must be expensive,” said Dennis Kamoga, 34, who plans to start farming in Mpigi district about 30 kilometers west of Kampala, Uganda. While he currently has no plans to buy a tractor, Kamoga said that if he were to do so, “I would go for those from Asia as they are cheaper and their spare parts are readily available.”

‘Strong Opportunities’

Most tractors sold in Africa are have less than 100 horsepower, according to Deere’s Jayaram. The company’s 5503 75-horsepower model, made in Pune, India, is its bestseller in Africa, according to Afgri Equipment, a Deere dealer.

Despite the competition from rival manufacturers, Afgri is planning to add two more outlets in South Africa, Zambia and Ghana, Patrick Roux, the Pretoria-based company’s managing director, said in a telephone interview.

“Africa is a continent with strong opportunities for years to come,” CNH’s De la Calle said.

<< Page 3 of 3

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome