Eric Hansotia, CEO of the farm-machinery producer AGCO instructed CNBC’s Jim Cramer on Friday that raised grain costs — and better meals prices — would stay, even when Russia’s invasion of Ukraine ends tomorrow.
Russia and Ukraine each function main international grain suppliers, with the latter sometimes called the “bread basket of Europe”, and so when the warfare broke out in February 2022 it disrupted the world’s meals provide chain. despatched into turmoil.
When Hansotia sat down with “Mad Cash” final March, he instructed Cramer, “13% of worldwide energy got here out of manufacturing” when the Russian and Ukraine borders closed.
In line with Hansotia, together with local weather points — particularly drought throughout Europe and North America — the meals provide chain catastrophe induced by Russia’s invasion is unlikely to subside anytime quickly.
“despite the fact that [the war] have been to run out tomorrow, the crop rising capability of that area has been declining for a very long time, and so it will stick with the marketplace for a while,” he stated.
Regardless of grain provide chain points, Agco — which sells big-ticket farm tools like tractors and combines — just lately reported a profitable quarter. The corporate raised its full-year forecast considerably, and internet gross sales got here in at $3.3 billion, beating the consensus estimate of $3.16 billion.
Nonetheless, Agco’s gross sales have fallen about 15% from their post-quarter excessive.
However Hansotia confirmed robust demand for Agco’s merchandise subsequent yr as properly, highlighting declining manufacturing prices for farmers in addition to the grain’s reducing stock-to-use ratio.
“The stock-to-use-ratio — basically how a lot grain is available in the market — has been coming down for six years in a row,” Hansotia instructed Cramer.
“It is among the best indicators of how a lot demand there’s going to be, it is the buoyancy for grain costs. Additionally, enter prices are actually coming down for our farmers, diesel, fertilizers and different issues. , and these are prices that may be locked in for the subsequent yr.”