By Tyne Morgan, U.S. Farm Report

John Deere recently laid off a significant number of salaried employees as part of the company’s ongoing workforce reductions. The official number of layoffs is still unknown but are part of a broader trend of workforce reductions at John Deere, which have been ongoing for several months.

Cory Reed, president of the company’s Worldwide Agriculture & Turf Division for Production and Precision Ag, spoke publicly about the layoffs for the first time in an exclusive interview with U.S. Farm Report this week.

What You Need to Know

Reed addressed everything from the recent layoffs to the company’s decision to move a small portion of its production to Mexico. Here are highlights from Farm Journal’s exclusive interview:

*John Deere says recent layoffs of both its salaried and production workforce are due to lower net farm income, higher interest rates and market volatility.

*Reed says John Deere expects equipment sales to be down 20% in 2024, due to economic pressures on the farm.

*John Deere is addressing cost concerns by reducing the prices of some new technologies, such as the See & Spray retrofit kit.

*John Deere is investing in automation to improve manufacturing efficiency and reliability.

*Reed emphasized the job cuts are unrelated to the 2021 strike by production workers.

He also stressed that John Deere’s decision to move its cab production to Mexico is separate, saying that production site in Mexico has been in operation for nearly 70 years, calling it “an important part of our global footprint.”

The Reality of the Farm Economy

USDA is forecasting net farm income in 2024 to be $116.1 billion, which is a 25.5% drop from 2023 following a 16% drop in 2023 versus 2022. Those two consecutive years of significant decline mark the largest drop in net farm income in U.S. history.

“Net farm income is expected to be down in the mid to high 20s, and when that happens, and commodity prices pull back, interest rates are a little bit higher and we see volatility in the weather, it creates uncertainty that interrupts demand. We’re experiencing that today. Looking out across our industry, we’re expecting to be off roughly 20% year-over-year from 2023,” Reed told U.S. Farm Report.

The mounting economic pressures are showing up across the equipment industry. The latest Association of Equipment Manufacturers (AEM) flash report released in June showed just how drastic of a drop the ag equipment sector is currently experiencing. AEM’s report showed combine sales in June dropped 31% compared to last year. Total farm tractor sales were down 16%.

While the company forecasts equipment demand to fall 20% overall in 2024, Reed says the second half of the year looks to be even more challenging than the first.

“We kind of have the tale of two ends of the year, ” he says. “If you looked at the front half of the year, in fact, if you took the large row-crop tractor business, what you would have seen is a market that was still peaking in the April and May time frame. A lot of buyers were in the market, based off of performance last year. As we hit May and going into June, used inventory levels started to grow and you saw buyers starting to pull back. Those trade differentials look different for them, and they started pulling back at a faster rate.”

As farmers pull back on purchasing new equipment, the short-term market outlook is hard to project, according to John Deere.

To read the entire report click here.