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BA Deere
Honored Advisor

John Deere Financial getting into crop inputs.

Oh, they probably always were into a limited amount of input financing, but this year there seems to be a concerted push.  A local elevator sent a letter that JD Financial will offer "prime +1%" and 2% cash discount on fall fertilizer, it will be due December 2016.  Then a seed dealer called, his brand JD Financial is offering "minus 1% prime' plus a 8% cash discount on seed due November 2016.

 

Okay, what`s going on here?  Is there an anticipation that banks will say no to some opperating loans?  There are no free lunches, I`m sure that the sweetheart financing is amortized into the price of the seed and fertilizer.  Perhaps if a farmer doesn`t have to explain his plans with a banker, he will be more apt to buy higher priced seed and spread more fertilizer....just put it on the ol` credit card!

 

So, what`s gonna happen if next winter (2016) comes and there isn`t the money to pay it off in full?  Well, that JD credit card retroactively goes back to day one and soaks you 18% for what you don`t pay off in full.  With the teaser cheap rates, plus or minus prime, they can`t be making money, they are gambling that you can`t pay and they`ll get 18% apr from day one on you.  Financing the 2017 crop will really be tough if some are still paying off their 2016 crop with 18%. 

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16 Replies
RJG640v8
Senior Contributor

Re: John Deere Financial getting into crop inputs.

Nothing is for nothing.

 

they just front load and build it in.

 

pretty easy to ferret it out, ask what the cash price is. 

 

 The game is they create a captive audience

and possibly a beholding customer

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idalivered
Advisor

Re: John Deere Financial getting into crop inputs.

BA, lots ofthings going on. 1) the seed companies want our early orders. I do it, too. the marketing thought is "If we entice you to sign you will be less likely to purchase (later)from viking, renk, pfister," There is a finite number of corn acres, so no real expansion in sales can ever be had. 2) JD finance is just a darn good segment of their business. Very profitable. The scenario that you stated is possible but very few will let the finance plan go to the 18%. They will make darn good money on those tho and i'm sure they are extracting some measure of funds from any retailer that uses their service. I'd do it too, if i could.  3) and lastly....i don't need more loans, I need more income.  Like you don't know that already.  Have a good harvest.

 

 

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BA Deere
Honored Advisor

Re: John Deere Financial getting into crop inputs.

Hey Ida, if I`m not around to pay for fuel when it`s delivered, the coop puts it right on the Farm Plan card, which is good and bad.  It`s good if you don`t already have a balance on the card, because if you do the 18% meter starts running the minute that new, extra purchase is put on the card. One guy said he found a competitor banker`s card in his door one day, so I wonder if local bankers aren`t scrambling for quality borrowerers.

 

With seed one company will give a 25% discount if you committ all your acres to that brand.  There`s "new customer discount" "customer loyalty discount"  and that declining cash discount that goes from 10% on down.  But these companies will not tinker with the actual price of their seed..."here`s a cap and a paring knife, now buy my seed!". 

 

But with 3 parent companies basically owning all the seed they can hang tough and be "price setters".  The FC coop man talked me into trying some Hoegemeyer and it`s looking good, I told the Pioneer man that and he laughs "You know we own them?  Hoegemeyer gets the second choice traits after Pioneer"  I did not know that, I figured they were a Mom and Pop company oughta Nebraska that had a pretty competitive price on their seed last year...and pretty good corn for being a Chevy to Pioneer`s Cadillac. 

 

But from what a guy hears, if you can place a 2,000 unit corn order, you can pretty much get a 50% discount whenever you order.   The "golden rule" you know  Smiley Happy

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Red Steele
Veteran Advisor

Re: John Deere Financial getting into crop inputs.

the 50% discount sounds realistic for an order of that size. I know that its hard for many to believe, but that would be pretty accurate from what I have seen.

 

You are not going to get the latest, greatest, sold out number, but if you want to plant the "old" standbys and save some money, get together with enough neighbors, put a volume order together , put some feelers and offers out and see what happens. They can always say "no", just like asking out the prettiest gal, but what do you lose? You miss out on a lunch and a free cap and don't finance some sales person's carribean vacation?

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Kay/NC
Honored Advisor

Re: John Deere Financial getting into crop inputs.

Just one more example of the literal house of cards that passes for a positive balance sheet in much of corporate America, to me.  The whole goal is to get credit balances built up, teaser rates or not, and as you say, soak the high interest rate down the road. 

 

I have received two ten percent off offers from Lowe's in ten days...if you charge to your Lowe's commercial card, which always discounts five percent anyway.  Ask your better half how many department stores offer extra sales percent off, but only if you use the store card to charge. 

 

As long as the Fed lets them sit on zero percent money, why wouldn't credit companies offer seemingly sweet deals?  And, yes...I think there will be standard banks stepping away from ag, yet again.  

 

 

Kay/NC
Honored Advisor

Re: John Deere Financial getting into crop inputs.

In general, the actual merchandise is just a means to the end of an interest accruing account balance.   Banks and other lenders make their best money off the worst borrowers, at least yo a point. 

 

Just had someone tell me that our credit card carrier would deem us " deadbeats", because we pay the entire balance off each month.  Once made a mathematical error, where I split the business card balance between two entities, and left a few bucks standing, was charged interest.  

 

When I saw interest, I called and questioned the charges,realized my mistake from my management notes while we we talking, and they waived the interest,after seeing my history of payment.  They make ebough on transaction fees to want to keep our business....

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k-289
Senior Advisor

Re: John Deere Financial getting into crop inputs.

Lets  see  -  2000 units  =  50 %  off   -  glad to hear there's that much slake in the price rope --- Alligator tears on the side please ---     

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elcheapo
Veteran Advisor

Re: John Deere Financial getting into crop inputs.

Maybe JD figured out equipment wasn't going to
Be good, so looking at profits elsewhere.
Oh yes, JD charges the seed co and others
To do business. Unlike regular credit cards that
Are 1 to 2% plus 30 cents per transaction, last
Word I had was 5% or better. Coop looked at them to
Handle finance...$15 million in sales minium for
Better terms
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k-289
Senior Advisor

Re: John Deere Financial getting into crop inputs.

EL Chepo  - interesting   - very interesting 

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