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Kuhn cuts reflect ag sales slump

MONROE — Falling dairy prices are putting a pinch on farm equipment dealerships and manufacturers.

Farmers are holding off buying new equipment unless absolutely necessary, local farm equipment dealers said.

"It's a chain reaction," said Peggy Dierickx, Communication Director for the Dairy Business Association.

Kuhn North America, which has a facility in Brodhead, announced last week an indefinite layoff of 50 full-time employees. Kuhn had a similar layoff in March of about 60 employees.

Kuhn employs more than 500 people between locations in Brodhead and across the country and Canada, but it is unclear where the layoffs will occur. The company referred the media only to a press release, which did not specify locations.

The company is the largest manufacturer in North America of TMR mixers and manure spreaders and a leading provider of hay and forage tools.

Kuhn attributed its situation to a lack of new equipment orders. In response, Kuhn is reducing its sales and production for 2009.

As farmers are losing revenue the demand for farm products has fallen as well.

"Dairy farmers are taking a pretty good hit with their income cut in half," said Gary Anderson, owner of Washington Implement Company, Monticello.

Milk prices fell dramatically in January and February, with USDA all-milk prices falling from $19.40 per hundredweight in July 2008 to $11.50 per hundredweight by February 2009.

In that same time period, income over feed costs—milk prices minus feed costs—dropped 60 percent, from $7.49 per cow to $2.99, according to a Penn State University report.

Farmers are doing more repair of equipment, but the costs of planting and harvesting are still with them, Anderson said.

The return of milk prices may not have an immediate effect on manufacturing and sales of farm equipment.

Milk prices on the Mercantile Exchange continue to lag, so producers won't see an increase in their checks until this month. Most gains will not show up until the second half of the year, according to the Penn State report.

After two good years in 2007 and 2008 fueled by favorable economic conditions, a strong growth in farming and consumer demands for farm equipment, companies like Studer Super Service, Washington Implement and Kuhn North America did not anticipate the rapid decline, Kuhn said in its layoff announcement.

By late 2008, a decline in farm commodity prices, lower anticipated farm incomes and a general lack of credit availability caught farm equipment manufacturers off-guard, the Kuhn statement said.

Kuhn North America said the deterioration of farm prices and available credit resulted in a lack of confidence in the future of agricultural markets, a substantial drop in retail sales of equipment production and an increase in field inventory of equipment, according to the company.