February 17, 2011

Favorable Financing Results in Strong Combine sales in Brazil

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The combination of high commodity prices and favorable financing has accelerated the sale of combines in Mato Grosso. During the month of January, John Deere and Case IH reported that sales of combines in Mato Grosso were 30% above original expectations.

Case IH recently opened a parts distribution center and a training center in Mato Grosso to meet the expanding market in the state. Case IH reported that 956 of their combines will be operating in the state during the 2010/11 harvest season including 70 new combines sold during December alone. Case IH also reported that sales in Mato Grosso alone are better than in all of Argentina.

John Deere also credits strong sales to the financing available through the Finame program from the National Economic Development Bank (BNDES). In January they sold 15 combines and 80% were financed through the program. Mato Grosso represents 20% of John Deere's combine sales in Brazil. The company has sold more combines in other states, but they are generally smaller in size. They do not sell as many units in Mato Grosso, but the units sold in the state are generally the bigger models with higher margins.

The financing program is operated by the federal government through its development bank and its goal is to jump start equipment sales after the worldwide recession. Farmers can purchase equipment at interest rates that are significantly below that of private banks with ten years to pay off the loan and two years of grace period before the first payment is due. It's such a good deal that and the demand has been so great that it has been extended beyond its original time frame.

One farming operation in Mato Grosso that plants 25,000 hectares of soybeans (62,500 acres) recently purchased 15 Case IH combines model 8120, which are the largest combines they sell in Latin America. The delivery of the combines included a team of technicians who conducted training classes for 38 people who will operate and maintain the equipment.

Case IH reported that their combines are selling between R$ 560,000 to R$ 850,000 or US$ 335,000 to US$ 509,000.