The Deere strike will be felt throughout the agriculture industry
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Later this week, we’ll get quarterly earnings from Deere & Co.
The numbers could show any financial damage to the farm and construction equipment manufacturer following a monthlong strike by Deere employees in the United Auto Workers union. That strike just ended last week.
The workers approved an immediate 10% raise. But does increasing workers’ pay mean tractors will also cost 10% more?
“No, no, no,” said Ann Duignan, a machinery analyst for JP Morgan. Based on her calculations, Duignan said, Deere would need to raise prices by around 1.5% to offset the increase in labor costs.
That’s still not a welcome prospect for farmers. “And I have heard farmers describe Deere as the new Apple, where, you know, prices continue to rise, but there’s nowhere to go. So you have to keep buying the product.”
And the equipment is only one of many costs farmers have to pay attention to, Duignan said.
With that in mind, Deere is under pressure to create higher-tech products that save farmers money in other ways, according to Kristen Owen, an analyst with Oppenheimer.
“So if you think about spraying for fertilizer or spraying for crop protection, how to get a more precise spray and more prescriptive spray, it saves farmers money,” she said.
The Deere strike and the new contract have implications for the agriculture industry generally, and farmers will take the long view, said economist Daniel Sumner at the University of California, Davis.
“But another big part of it is that this, this kind of contract, is going to be built into other things. I’m going to see it throughout what I buy, not just Deere,” Sumner said.
That could mean costs for trucking or at processing plants. Sumner said the events at Deere will inspire those workers to push for higher pay, too.
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