News Agribusiness
Overpriced tractors are a thorn in Trump's side
American farmers can count on a one-time support package worth $12 billion. However, Trump is concerned that some of this money will likely be invested in what he considers overpriced tractors and machinery. This means the support will unintentionally flow to machinery giants like John Deere. The president believes that removing price-increasing environmental requirements in the short term should lower sales prices.
President Trump is promising farmers a one-time $12 billion stimulus package to help them weather the current difficult times and ensure they have sufficient credit to buy inputs for next season. This amounts to a whopping €10,25 billion. According to the White House, this is a so-called "bridge payment" intended to bridge the transition between the Trump administration and that of his predecessor, Biden.
In reality, American farmers are facing a double whammy: strong corn and soybean yields on the one hand, and diminished buying interest from China on the other. China is increasingly sourcing its feed raw materials from South America, despite all its promises to source from the US.
Weak for machines
When announcing this bridge payment, Trump also took a hard line with machinery manufacturers. This isn't the first time, by the way. The president has a soft spot for agricultural machinery anyway. In October, he still called on farmers to immediately acquire more land and bigger tractors after reportedly closing a major sales deal with Chinese President Xi.
Last Monday, Trump personally called on manufacturers like Deere & Co. to drop many of the mandatory environmental requirements. "These are unnecessarily burdening farmers with costs," the president said. "Agricultural machinery has become too expensive, and that's mainly due to the cost-increasing environmental requirements. All these requirements do nothing but complicate matters," he was quoted in the American press.
Cost increase
Crucially, it's not just environmental regulations that are driving up the price of tractors and combines. Higher import tariffs on steel and aluminum have significantly increased costs, in addition to the sharp rise in prices since the COVID pandemic. In the US alone, John Deere expects sales of its agricultural machinery to shrink by 15% to 20% next year. said CEO John May In a recent explanation of the annual figures, Deere & Co. reported a nearly 30% drop in profit in the past (broken) fiscal year.
Trump, of course, sees it differently: "The machines you buy today contain so much environmental technology that does nothing but make the machines more expensive and complicated. We're going to have a lot of this nonsense removed, we're going to tell the manufacturers to do it, and they're going to do it." The Federal Environmental Agency (EPA) must work with the USDA to make this possible and impose fewer requirements on manufacturers.
Collaboration not new
John Deere responded somewhat differently to Trump's harsh words on Fox News. "John Deere shares the president's focus on lowering costs for our farmers and consumers. We're doing what we can to reduce input costs for farmers," a spokesperson said. The world's largest equipment manufacturer is already working closely with the Trump administration to achieve this.
Simply omitting SCR technology (also known as AdBlue), diesel particulate filters, and EGR valves isn't enough, according to Deere CFO Josh Jepsen, as he told Fox Business. "Emissions regulations are just one component of what's driving up tractor prices. The right path lies in implementing new technologies like weed detection with AI. This can save farmers money in a much shorter time than by adjusting environmental regulations. There are plenty of opportunities to support farmers with technology, allowing them to produce more cost-efficiently in the short term, for example, by saving on inputs and increasing yields."
Emission standards
The European Union has had emission standards for road vehicles since 1992, followed by agricultural machinery in 1996. These Euro standards have become a global standard. Many new tractors and machines are now required to meet Stage 5 standards. The US previously dropped out at the Tier 4 Final level, creating a slight difference between the two markets. In Europe, the even stricter Euro 7 standard will apply to road transport from 2030, but a modified version for off-road vehicles has not yet been announced. Tractor manufacturers are already building various tractors because, for example, South America and Africa still have the much lower Tier 2 or Tier 3 emission standards. These tractors are indeed considerably cheaper, largely due to their much simpler controls and cab design.
American farmers are reacting somewhat laconically online to Trump's remarks. They, too, don't see lower environmental standards making a significant difference in cost prices. Moreover, they wonder what this will do to tractors already purchased and the used market. One side effect is that Deere & Co. shares have rebounded slightly after a week of declines. On Tuesday, December 9th, the share price on the New York Stock Exchange reached its lowest point since November 3rd. On Wednesday, December 10th, the share price rose again by 1,3%.
Niels van der Boom
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