Anticipation about declining farm incomes may have hit another major agricultural company. AGCO Corporation – the Duluth, Georgia-based company – announced that it is laying off about one in 16 employees and more could be coming.
The company makes tractors, combine harvesters, hay and forage equipment, seeding and tillage implements, grain storage and protein systems, and replacement parts, according to its website.
AGCO said in its filing with the Securities and Exchange Commission that it is undergoing “a restructuring program in response to increased weakening demand in the agriculture industry.”
The challenges for farm incomes in 2024 are well documented with the USDA projecting a 25% drop from 2023.
RELATED: American Farmland Owner detailed how restaurants and other businesses in smaller communities are already feeling a loss as farmers are spending less. Read that story here.
The SEC filing shows that AGCO expects to incur a cost of $150-200 million in connection with the layoffs during the remainder of this year and the first half of 2025. It expects future annual savings from the reductions to be $100-125 million.
The company also announced that it was cutting production by 10%.
Additional reductions may be possible, according to the filing.
“As part of the (restructuring) Program, the Company expects to evaluate other opportunities to further enhance global operating efficiencies that could result in additional restructuring charges related to future phases of the Program. The Company is unable at this time to quantify the charges and benefits related to potential future phases of the Program.”
Investing.com still considered AGCO to be in solid financial shape. Its analysis stated, “From a financial health perspective, AGCO's liquid assets exceed its short-term obligations, and its cash flows can sufficiently cover interest payments, indicating a stable financial footing as it navigates through the restructuring process. Moreover, despite an expected net income drop this year, analysts predict the company will remain profitable, a sentiment echoed by the company's positive performance over the last twelve months.”
The analysis pointed out some declining numbers from AGCO. “The company's quarterly results showed a 34% year-over-year decline in operating earnings per share (EPS) to $2.32 and a 12% decrease in net sales.”
AGCO is also shifting jobs to Mexico, but it claimed in a statement that the 6% workforce reduction was not part of that.
“These reductions announced [Tuesday] are related to the weakened demand in the agriculture industry, not the shift in production to Mexico announced earlier this month,” a spokesperson said, according to a report by KWCH-TV in Wichita, Kansas.
AGCO operates a facility in Hesston, a town of about 3,500 people north of Wichita. Hesston is also home to Excel Industries, which produces lawnmowers.
KWCH-TV reported that AGCO will continue to operate in Hesston.
“Hesston will continue to manufacture Massey Ferguson windrowers, large square balers, combines and combine headers using the more than $28 million in investments made in the Kansas facility since 2021,” AGCO’s statement read.
RELATED: See the story from KWCH-TV regarding the future of AGCO Corporation in Hesston, Kansas here.
AGCO is one of several large agricultural companies that have announced layoffs. John Deere, Bridgestone-Firestone, and CNH Industrial have all confirmed cuts. But that doesn’t indicate a collapse in agriculture.
“While the farm machinery industry might be pulling back for now, its bottom line is expected to expand in the coming years,” Farm Progress reported in an article on the big company layoffs. Read that here.
