John Deere reported quarterly earnings today. The results disappointing investors and the stock which ended yesterday priced at 124.16 a share reached a low today of 112.87 before closing at 117.31.
In a supplement to the quarterly analyst call they issued a presentation with a couple of interesting charts.
Perhaps one of the most interesting charts is the provision set aside for credit losses on loans to farmers. It seems pretty low.
As profiled in the Wall St. Journal, John Deere has become a major agricultural lender, which might make some sense because it extends credit to farmers to buy its own equipment. However it also provides credit for seeds, chemicals, and fertilizer. From the article:
RDO Equipment also recently did a podcast on John Deere’s lending and they said that the short term loans are no interest loans for the first 180 days.
Regardless of whether this is good or bad from Deere (it is good if it helps them get more customers, bad if there is a wave of defaults). The fact is that credit for farmers has never been easier.
This impacts land values because over the last few decades collateral for farm loans has moved away from the underlying land and is becoming more dependent on farming operations. This development makes it less important for a farmer to own the land he or she is farming on.