| Show i F A etter Times Around Corner r CYCLICAL FARM- FARM EQUIPMENT UPTURN Hard hit during the period of peak interest rates has been the agricultural equipment in industry in- in Large modern farms and livestock pasturage and feeding facilities use high high cost ost equipment generally financed on on a three to five year basis Hence as interest rates climbed climb climb- ed toward their highest levels in a hundred years exaggerated exaggerated exaggerated borrowing costs and credit stringency forced a cutback cutback cutback cut cut- back in farm equipment purchases pur pur- chases CURRENT DOWNWARD PHASE NORMAL In late 1969 the U U. S. S Commerce Commerce Commerce Com Com- merce Department forecast a modest upturn in the agricultural agricultural agricultural tural equipment field for 1970 It looks now as though output and shipments of farm implements implements implements ments will fall short of the governments government's prediction for this year Instead 1970 will likely be the fourth tive year with monthly output rates sagging below levels of the preceding year and the third with a reduction in dollar volume of shipments THIS DOWN AREND in production production production pro pro- of farm equipment represents a normal cyclical decline for the industry The Thelast Thelast Thelast last upbeat ended at a 1966 peak after an unprecedented prosperity starting in 1962 INTENSIFIED ADJUSTMENT After this boom a normal adjustment period began made worse than usual by several several several sev sev- eral adverse forces First there was the need to absorb the production bulge of 1962 1966 There was too the rise in borrowing costs plus the stringent credit cutting demand demand demand de de- de- de mand for farm implements and starting a downturn in farm land prices FARMERS' FARMERS confidence was also dampened by the slip in general business and the distressed distressed distressed dis dis- dis- dis state of the stock market Bad weather during planting months in some of the past four years further hurt agricultural equipment demand This year has been the most trying of the period with slow retail sales production production production pro pro- cutbacks reflecting this lagging market and labor la labor labor la- la bor troubles in the final calendar calendar calendar cal cal- quarter BETTER TIMES AROUND THE TilE CORNER The adverse factors which have hit the agricultural equip equipment equipment equipment ment business are basically temporary and are common to many industries Now that monetary authorities are infusing infusing infusing in in- fusing credit into the banking system and money rates have eased somewhat sentiment in farm regions should improve and demand for equipment rise rise especially especially when business rebounds after the GM dispute dispute dispute dis dis- dis- dis is resolved FORTUNATELY inventories of farm implements in dealers' dealers hands are arc not burdensome in inmost inmost inmost most cases Hence even a modest boost in farmers' farmers buying buying buying buy buy- ing should be quickly transmitted transmitted transmitted trans trans- into higher production rates for equipment ture In addition the record level of farm income sustained over recent years is a promising promising promising prom prom- ising factor in this business And it is obvious that the awesome awesome awesome awe awe- some burden of feeding the population of the country country- and of the world world cannot cannot annot be accomplished without full use of mechanical assistance FARM EQUIPMENT STOCKS The scourging which most farm equipment stock have taken over the past four years is not not- very encouraging for this segment of the stock market But when the companies companies companies com com- involved enjoy better sales and profits investor buying buying buying buy buy- ing interest will doubtless re re- re- re vive TODAY TODA Y TilE THE farm equipment equipment equipment equip equip- ment manufacturers are well diversified especially the major companies In Iri most cases despite their important stake in the industry operations operations operations opera opera- in the farm equipment field comprise only a minor part of their total business Nevertheless the problems of the agricultural equipment in industry industry industry in- in as a whole have seriously seriously seriously ser ser- depressed the securities of these firms For participation tion in the anticipated rebound in the farm equipments the Research Department of Babson's Babson's Babson's Bab- Bab f sons son's Reports currently favors A A kA A A such issues as the convertible convertible convertible con con- preference stock of Tenneco Inc and the common common cornman com corn mon man stock of Chalmers Allis-Chalmers and International Harvester |
