Sale of Tractors in Brazil Takes a Tumble Due to Drought and Lack of Credit

US Agco combine American company Agco Corp. warned that industry-wide farm-equipment sales in South America could fall by almost a third this year due to drought and tough credit conditions.

The US firm is a market leader in the region, and weaker sales there and in western Europe prompted Agco to trim its 2009 profit and revenue outlook as it reported a 26% rise in fourth-quarter earnings Monday.

Agco forecast tractor and combine sales to South America will fall by 20% to 30% this year, worse than the forecast of a 10% to 20% decline made last November by rival Deere & Co.

The region has been a key growth driver for the farm-equipment sector, which had been riding high on record commodity prices. Tractor sales in Mercosur members Brazil and Argentina climbed 30% last year, with combines up 50%.

Agco expects sales across the industry to fall in every major region this year, with North America down 5% compared with 2008 and Europe off 5% to 10%, led by declines in central Europe and Russia.

Adverse currency movements are also expected to hurt Agco, wiping 800 million to 900 million US dollars from 2009 revenue. The company trimmed its revenue estimate to 7.5 billion US dollars from a prior estimated midpoint of 7.75 billion.

Agco still expects to push through an average 4% price rise this year despite the weaker demand and lower raw-material costs, which had been soaring.

Agco is considered the world's largest manufacturers and distributors of agricultural equipment with brands Massey Ferguson, Valtra, Challenger and Fendt sold to more than 140 countries.

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