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By Paul Kiernan and Bob Tita
RIO DE JANEIRO--Farm manufacturer Deere & Co. said it is
laying off nearly 10% of the workers at a factory in southern
Brazil in response to falling equipment sales in South America and
"the volatility of the Brazilian market."
The factory where the layoffs are taking place, in Horizontina,
has roughly 1,800 workers and produces mechanical harvesters and
planters. Deere has four other factories in Brazil.
The move came as farmers, faced with lower prices for sugar cane
and grains, hold off on buying expensive new machinery. Prices for
soybeans, Brazil's biggest agricultural export, have fallen almost
30% since the beginning of the year.
"Faced with this scenario and despite all efforts, John Deere
Brasil has had to adjust to the volatility of the Brazilian
market," the company said in a statement.
In recent years, Brazil has been a key growth market for
U.S.-based farm equipment manufacturers looking for sales expansion
beyond mature markets in North America and Western Europe. Because
of Brazil's climate, many farmers plant crops year-round, putting
greater demands on machinery than in the U.S. Rising commodities
prices in Brazil combined with a government-supported loan program
for equipment purchases fueled a robust demand for tractors and
harvesting combines.
Deere's farm machinery sales in Brazil account for about 10% of
the company's annual sales, according to analyst estimates.
Illinois-based Deere has been introducing new tractor models into
the market that have made it more competitive with rivals Agco
Corp.--the leader in tractor sales in Brazil--and CNH Industrial,
maker of Case and New Holland branded equipment. Deere intends to
start producing more high-horsepower tractors in Brazil starting
next year. The company has been importing high-horsepower models
into Brazil from its assembly plant in Waterloo, Iowa.
Deere's overall share in the Brazilian tractor market is about
21% of total units sold, up from about 14% in 2008.
In its latest quarterly earnings release, Deere said it expect
sales of agricultural machinery in South America to decline 15%
from 2013. Brazil is by far the continent's biggest market for such
equipment, followed by Argentina. Deere executives told analysts
last month that it expects industrywide farm machinery sales in
Brazil to be flat in 2015 compared with 2014.
"Faced with this scenario and despite all efforts, John Deere
Brasil has had to adjust to the volatility of the Brazilian
market," the company said in a statement.
Write to Paul Kiernan at paul.kiernan@wsj.com and Bob Tita at
bob.tita@wsj.com
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