John Deere Layoffs Trace Back To Lower Grain Prices - News and Weather For The Quad Cities -

John Deere Layoffs Trace Back To Lower Grain Prices

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The USDA expects farmers to bring in less money this year.

After a bumper crop of corn and beans was harvested coming out of the 2012 drought.

That decline has trickled back to ag manufacturers like John Deere.

The company announced this week it was laying off 120 employees in anticipation of a five to ten percent decrease in farm equipment sales.

The USDA also expects farmland prices to grow more slowly this year.

It expects land prices to grow 2.4 percent this year, down from 4.2 percent last year.

That, coupled with high prices for fuel and fertilizer has halted the steady increase in income farmers have seen over the last three growing seasons.

Falling grain prices are also causing farmers to weigh major equipment purchases more carefully this year.

The ag economy in a nutshell, all depends on the price of corn and beans that farmers can get from planting through harvesting. When the price of corn goes down as it has done, there is less money in farmer's pockets to spend on fuel, fertilizer, and equipment.

Edgington farmer Phil Fuhr says, "When you're looking at large equipment purchases, things you don't have to make, you think about, but you don't have to make, you put those off," says Fuhr.

He says the last few seasons have been great for corn. Now though, the prices have reset, causing farmers to grow a little more cautious. Fuhr says instead of trading in his combine this season, he'll hold off until corn prices improve.

"It's real easy to repair your old one or put some new parts in, and you can easily get another season through it, that's got to be on a lot of people's minds right now."

USDA economist Mitch Morehart says a lot of farmers will be weighing their spending decisions carefully this growing season.

"When the expectation looking forward is for lower income, than people are going to be more cautious about big purchases," says Morehart.

Because $4.00 corn brings in a lot less at harvest than $7.00 corn.

"It changes your bottom line," says Fuhr.

This is not the first year the USDA has projected a decrease in farmer's income, it said the same thing in 2002 and 2009, seeing in those years about a 28 percent decrease. It all comes back to the price of corn and beans, if there's not enough income there won't be as much spending.

A business expense tax deduction was also eliminated this year.

Instead of allowing a farmer to write off the entire cost of a major purchase, like a combine, the tax deduction has been reduced from $500,000 to $25,000.