Editor’s note: This editorial appeared in the July 22, 2024, print edition of the QCBJ. The spate of layoffs from John Deere has us and others concerned about the farm economy and the Quad Cities’ economy in general. What has been transpiring shouldn’t come as a surprise to anyone who has been paying attention to […]
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Editor's note: This editorial appeared in the July 22, 2024, print edition of the QCBJ.
The spate of layoffs from John Deere has us and others concerned about the farm economy and the Quad Cities’ economy in general.
What has been transpiring shouldn’t come as a surprise to anyone who has been paying attention to farm prices, the national and international economy and the cyclical nature of farming.
Grain prices are at the lowest point since the pandemic and interest rates are still elevated. This combination puts farmers into financially challenging situations and will undoubtedly lead to less capital expenditures on large farm machinery.
It is no wonder that Deere is laying off workers.
Economists have been warning about this situation for some time.
“Regardless of the fine details of crop insurance payments and (government) payments, alarm bells should be going off about the scale of potential corn/soybean losses for the 2024 crop in the Corn Belt,” University of Illinois Agricultural Economist Scott Irwin wrote recently on the social media platform X.
“Right now the losses look punishing due to the combination of rising expenses in recent years and the downdraft in corn and soybean prices. Corn losses look like they could easily exceed $200/acre. Of course, the usual caveat applies that this is not a done deal yet. It could still turn hot and dry in the second half of the growing season and prices could rebound,” he added.
The message from John Deere’s Director of Corporate Economics Kanlaya Barr at the QCBJ’s Mid Year Economic Review event was pretty clear. The farm economy is cyclical.
“If the trend yields hold, if we have normal weather, which right now a lot of signs are pointing to, we’re going to have a record year on corn and soybean yield in the U.S.,” she said. “So that’s going to mean we’re going to have more crops and therefore lower prices and that’s what the general market is trending on right now.”
Peter Orazem, an economics professor at Iowa State University, said in a news report "I think one of the reasons these seem so large is because we haven't been experiencing a whole lot of layoffs in John Deere.”
He added “This retrenchment isn't unusual in durable goods manufacturing. I mean, they tend to be much more cyclical demand for labor than other sectors of the economy. But, it was unusual that a year ago, John Deere, experiencing rising stock prices and high revenues, was already projecting that 2024 was going to be troublesome. And so they were already seeing that the retrenchment in terms of farm incomes was going to have an adverse effect on their business."
The only silver lining to these layoffs is that Deere is making the necessary adjustments to keep the company financially healthy. That, unfortunately, is little consolation to the impacted families and communities.
