FREE TRADE IS GOOD FOR SMALL & LARGE FARMNERS
NAMA 2000 SPEECH
Editors Note: Following are the remarks given by Robert W. "Bud" Porter in accepting the Agri-Marketer of the Year Award at the NAMA convention held in Kansas City on April 13, 2000. Bud added his thoughts regarding support for free trade, the continuing importance of environmental issues, and the explosive growth in technology.
Good morning ladies and gentlemen, and thank you for this wonderful award. It is a privilege and honor to accept it. I am pleased to be able to address this year's National Agri-Marketing Association conference and to talk a few minutes about this exciting business we share - the business of marketing agricultural products.
John Deere has a proud history of supplying quality farm equipment to producers in North America and the rest of the world. We are the fifth-oldest industrial corporation in the United States, founded in 1837, and we are indeed proud of our 164-year history. We also have a rich and long history here in the Kansas City area. We built our first branch house in Kansas City in 1869 and have been a member of the community for 131 years. It was established as a co-partnership between John Deere, his son Charles Deere, and other partners. One of the first branch-house buildings is still standing in downtown Kansas City on 13th and Hickory.
Now, we have learned something through all the years - that agriculture is a great business and a real strength of our nation - but there are cycles of good times and bad. To help us through those weak cycles, John Deere has diversified a good deal in recent years, both in product breadth and geographic reach. Construction equipment, lawn and garden equipment, financial services, and other diversified products all carry the "leaping deer" logo. And Deere now is found in more than 160 countries. Farm machinery, however, remains our flagship business - and the domestic farmer our number one customer.
I don't have to tell you the farm sector continues to struggle due to strong worldwide production and depressed grain and livestock prices. At this point, Deere expects that industry retail sales of farm machinery in North America will be off approximately 5 to 10 percent this year, compared with 1999 levels.
We cut production in order to adjust inventories last year, and actually underproduced demand by roughly 10 percent, resulting in a $800 million reduction in field inventories. This better positioned us to respond to changes in the retail climate ahead. As a result, despite that anticipated 5 to 10 percent drop in demand for tractors and combines, we expect to increase production this year by as much as 15 percent. How? By improving ordering techniques and building equipment closer to actual demand rather than based on a forecast.
Indeed, the future of farming looks good for the long haul. Of the key forces dictating change in agriculture today, the most important ones concern increasingly open markets and freer trade; the continuing importance of environmental issues; and the explosive growth in technology, which is transforming the entire economy these days.
U.S. farmers have a lot to gain from free trade and open agricultural markets. An open market increasingly free of controls and restrictions will accelerate trends already under way - putting a premium on large, efficiently run operations that are able to make the most of today's technology and fast-moving markets. Less regulated farming will have a positive impact in terms of overall economic efficiency and will give U.S. farming a leg up in a global market.
Even small farmers will do well in tomorrow's less regulated world. Those are the ones who devote themselves to a type of management-intensive, or niche, agriculture, such as growing organic crops.
A more open agricultural climate will also mean that farming will become more internationally focused and geared to exports, and this is definitely a plus for U.S. agriculture. Global trade, manifested by exports, has become a mainstay for our nation's farmers. Roughly one-fourth of farm receipts today come from overseas sales.
An important trade issue currently before Congress is the decision to grant Permanent Normal Trade Relations (PNTR) to China. John Deere and other businesses are actively working to solicit broad-based support to influence PNTR for China before May 15. Granting PNTR to China will increase U.S. agricultural commodity exports and put more money in the hands of farmers. It will also lower tariffs on commodities, products, and services, making all of us more competitive in the Chinese marketplace. Our trade balance will benefit, and we will be able to compete with other countries already trading with China.
There's no question that U.S farming will be an export-driven, growth-intensive business with solid prospects well into the future.
Being good stewards of the soil, air, and water has always been a goal of the American farmer. Regulation will see to it that farmers remain serious about limiting emissions, preserving the soil, and controlling the run off of chemicals and waste. There are even proposals to limit the hours farmers spend in their fields, based on dust restrictions. Noise abatement is an emerging concern. And water quality seems likely to be the next big area of regulatory focus.
All this, of course, adds costs and complexity to the farming process. But many of the very things that make farmers environmentally sensitive are actually fiscally sensible. That is, they help farmers become more productive and profitable.
New engines are cleaner-burning and more efficient. Precision farming helps farmers cut down on input costs. New sprayers apply herbicides and fertilizers with laser-like precision, cutting down on waste and over spray. That's not only good for the environment, it's beneficial for the farmer's bottom line.
America's farmers are truly among the unsung heroes in today's environmental movement. Nevertheless, tomorrow's increasing environmental pressures will require an even more intensive commitment on their part.
Technology plays a key role in agriculture's future as farmers scramble to add value to their crops and gain an edge in productivity, yields and costs. The average farmer gets as much done by 9 a.m. now as in a full day in the postwar 1940s. Over this time, crop production has tripled from the same amount of farmland. The reason? Technology mostly - in the form of better seeds and fertilizer, as well as more sophisticated farm machinery.
For example, our new line of combines introduced last fall offers productivity improvements of as much as 25 percent. We've seen similar gains in cotton pickers and sprayers the last few years - true breakthroughs from a single product.
Precision farming and satellite technology will help us become more knowledgeable and efficient with our inputs. Our newly introduced StarFire position receiver gets field accuracy down to 10 inches. Imagine being able to plant and spray without markers - or review full-color field maps detailing crop yields, soil type and other important data. Technology is creating the opportunity for incredible productivity improvements in the near future.
You can't talk about technology without mentioning the Internet. This significant communications tool will no doubt put pressure on dealers, distributors, and other salespeople. It will not, however, stop the farmer's need for service support, or for someone to take their trade-ins of used equipment.
There are those who say farm machinery dealers of the future will be little more than storefronts in cyberspace, trading in their postal addresses for URLs and their showrooms for PDF files. But we can't overlook the crucial role that old-fashioned relationships play in the sale of farm equipment. You may find a farmer buying a $50 part from a competitor over the computer; but it's unlikely he'll order a $200,000 combine that way, at least without involvement from his dealer. That's not to say the Internet isn't a powerful sales tool for John Deere dealers. A number of them have their own Web sites and view e-commerce as a way to enhance personal relationships with their customers.
If I could choose a legacy for which to be remembered in my 35 years at John Deere, it would be my commitment to developing our dealer organization. I continuously pushed dealers toward self-improvement, always encouraging a positive outlook - for I wanted nothing but the best representing Deere and Company. Today those dealers, with 1,600 locations in North America alone, remain at the heart of Deere's success in farm equipment.
As for the current state of the ag economy and its effect on Deere and Company, I remain optimistic for our future. We've gone through down cycles in the past, and, no doubt, will endure more in the future. But Deere is prepared to weather the storm, and indeed, consistently grow through continued investments in new products, as well as expanded markets and technologies.
Today there are some 360,000 commercial farmers in the world, but there are also nursery owners, contractors, small municipalities, and golf-course greenskeepers - all potential Deere customers - and all worthy of learning firsthand why nothing runs like a Deere.
On behalf of John Deere, and myself, thank you again for this special award and the opportunity to address you today. Have a great conference. AM