Layoffs at John Deere have hit the community hard. An Iowa State University professor says the layoffs reflect a broader cycle in the agriculture economy.
Last week the agricultural giant announced 610 workers at three factories would be without jobs by Aug. 30. That included 510 workers in the Quad-Cities area and 100 more in Dubuque.
In a statement to media, the company blamed "reduced demand for the products produced at these facilities" and expected declines in industry sales in the second half of the 2024 fiscal year.
Politicians respond to layoffs
State politicians have released statements as well. State Rep. Gregg Johnson (D-East Moline) reflected on childhood memories of his father being laid off after the Farmall plant was shut down.
“I remember the fear and uncertainty that my family felt — and I am committed to doing everything possible to help the families harmed by these layoffs get back on their feet," he said. "I encourage anyone impacted by these layoffs to contact my office about state programs and benefits that may be able to help you.”
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Congressman Eric Sorensen (D-IL) vowed to back all UAW members and workers impacted, calling the workers some of the best in the world and saying they build equipment that feeds and powers communities.
"My office will be doing everything we can to connect them with the resources they need, like career counseling, resume writing assistance and more to make sure they land on their feet," the statement read. "Right now, my UAW neighbors and their families are hurting from this announcement, and I stand with them.”
The Moline UAW office did not return a request for comment about the layoffs.
Layoffs part of ag economics cycle
An agriculture economics expert said the layoffs are part of Deere acting ahead of expected economic changes such as declining sales.
Iowa State University agricultural economics professor Chad Hart said the company is acting now to a problem it sees coming in the future.
"When I'm looking at Deere, in this case what you're seeing here is an across the board shot. Basically, you name the Deere facility, they have had layoffs at it," he said.
In addition to mass layoffs in the Quad-Cities, other Iowa communities like Waterloo, Ankeny and Dubuque have been affected. In August 2022, the company announced all cabs, welding and assembly done at the Waterloo plant would be moved to Ramos Component Works in Mexico by June 1, 2023. The move was to be done in phases and be complete by fiscal year 2024, according to Deere.
Like the economy as a whole, the agricultural economy moves in cycles, Hart said.
"The last five to six years have been a classic study in agricultural cycles," he said.
Hardships were felt all across the United States as farmers battled tough weather conditions and multiple drought periods. From 2012-2019, producer prices for corn fell 48%, while producer prices for soybeans fell 40%, according to the USDA.
Narrowing the scope to the last few years, USDA records show Iowa corn was selling for $3.24 a bushel in January 2018. By August of 2020, that number dropped to $3.08 a bushel.
The COVID-19 pandemic hitting in full force did not help matters in 2020. Less driving resulted in less reliance on biofuels, and the grains used to make it. Food demand by hotels and restaurants decreased, but the demand at the grocery store increased.
At the tail end of 2020, prices began to rise. By June of 2021, prices of Iowa corn and beans nearly doubled, up 99% from the year before.
"We saw a huge boom," Hart said. "We saw prices significantly rise, demand was strong. Some of the best incomes for farmers was late in 2021 going into 2022 and 2023."
But, just like the law of physics states, what goes up must come down. The ag economy is now coming off the high and retreating back to low averages.
Part of this, Hart suspects, is what is driving layoffs at Deere. The company is coming off strong years, but is looking forward and seeing lower yields in the fields. The preemptive solution is seemingly to make cuts and save money now, Hart said.
"It's just the nature of the game," he said. "We see these cycles in agricultural machines because we see these cycles in agricultural crops."
In May 2022 Iowa corn was selling for $7.34 a bushel. Two years later in 2024 the price dropped 37% to $4.63, according to the USDA.
Over at Deere, the impact of those lower prices was felt and reflected in the second quarter report. Worldwide net sales and revenues were down 12% for the second quarter and decreased 9% in six months. Net sales alone were down 18% from the second quarter last year and down 14% overall when compared to the same six-month period.
During the "good years" from 2021-2023, when demand was stronger than supply, crop prices were up and there was a relative balance between supply and demand, Hart said. Deere has now been affected by the probability of losses.
He gave the example of losses in 2018 and 2019 when farmers began cutting back. Agricultural companies had to adjust and ensure their supply was not bigger than the demand and overshoot the goal.
"That's the thing that sets up the cycle. We're trying to get this balance just right and we keep going too far over, too far under, then too far over, and too far under," Hart said. "You're trying to hit a moving target."
Another challenge Deere faces is the size of its equipment. It's no secret farm equipment comes with a hefty price tag, in part because equipment needs to be built bigger for efficiency. In addition, there are fewer farmers and they are covering more ground.
"That one farmer has to be able to cover so much more ground than ever before, and the way they do that is larger equipment," he said.
Technology is changing too, Hart said, and Deere is at the forefront of that curve. As more equipment becomes automated, there is a possibility machinery could become smaller and more affordable, but people will need to purchase more equipment to cover the same amount of ground.
With sales still down, Deere no longer has the luxury of waiting for a drop to announce layoffs, Hart said.
This week Deere spent $7 million on an undeveloped property in Indiana with the intention to build a massive warehouse that is expected to create thousands of jobs. Hart said these moves could be a direct result of Iowa's tight labor market.
Jobs at Deere are highly specialized, skilled positions which makes them harder to hire for, he said. Despite the steep cuts locally and the investments in other places, the Iowa agricultural economy is still strong, Hart said, with the amount of manufacturing jobs still rising at smaller plants.
"What we're seeing now is high profile employers like Deere that are laying off folks, but when you look at the general Iowa economy, we’re still adding jobs," he said.