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A century of prosperity

According to Martin Richenhagen, AGCO’s
chairman, president and CEO, the company hasn’t yet reached the level
of sales it would like to see for its equipment in North America.
Speaking during a recent interview on the U.S. Fox News Network, he
said most of the organization’s sales occur in the remainder of the
world. A full 50 percent of overall sales happen in Europe. “We are
small in North America,” he said. “That has to be changed.”

But, he adds, the company has geared up
to tackle that problem and things are progressing. When asked what,
specifically, AGCO has done to grow its North American market share,
Richenhagen cited developing new and better products, better
distribution and installing a better management team. “Last year
for the first time we made money in North America,” he said. So
things are heading in the right direction for the company.

But perhaps the most remarkable comment
made by Richenhagen during the interview was his belief farmers may
be in for one of the best centuries ever. He thinks farm commodity
prices are going to trend much stronger and remain that way for 100
years!

“My personal vision is demand will be
much stronger than supply for the next century. When you think about
the history of mankind, we had higher demand than supply for
thousands of years. Only around the 1900s, when we started to

mechanize, that changed. I think we are going back to where we have
been in the past.”

Part of the reason is the world’s
rapidly rising population. But the growing population angle alone
likely won’t get farmers betting on higher prices. They’ve heard it
before. The world’s population has been rising for a long time, and
hunger has been on the radar for decades. Unfortunately, it seems
politics rather than food shortages has been the cause of most
hunger. Even with large numbers of starving people, the world’s
farmers have had to cope with periods of low demand for their
produce.

But Richenhagen sees things playing out
differently this time. That is partly because there are some other
key factors also in play, such as changing consumption trends in
developing economies. As people emerge out of poverty in many
countries, like India, they tend to develop a preference for
including high-protein meats in their diets. Not surprisingly they

don’t usually go back to eating only rice when they have the cash to
afford better. And people in that segment are now a rapidly growing
demographic.

Producing meat takes a lot of grain,
which means as demand for meat grows, so does the demand for grains.
Add alternative grain-based energy production, such as ethanol, into
the mix and that pencils out to a high probability of good prices.
“All this to me means there will be strong demand for farm
products,” said Richenhagen.

He isn’t alone in that belief. Quoted
in an article printed in the August/September issue of Country
Guide
magazine, Al Mussell, a senior research associate at the
George Morris Centre also expressed the view that grains are poised
for strong prices in the near future, although he didn’t speculate on
the market as far into the future as Richenhagen.

It seems the timing is perfect for AGCO
to make a stronger effort to capture more of the North American farm
equipment market. Put better products in front of a population of
farmers with more money in their wallets, and sales figures are bound
to trend upward. At least that is clearly Mr. Richenhagen’s hope.

Scott

About the author

Contributor

Scott Garvey

Scott Garvey is a freelance writer and video producer. He is also the former machinery editor at Grainews.

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