Farming in America
could not exist without John Deere.
I don't care where you are,
in the rural parts of America, there's farmland,
and you're inevitably going to see green tractors.
Specifically in the Midwest
where people who've had Deere machines for generations
say that their family bleed green,
it's really to that extent.
But John Deere's tractors
aren't the only thing bleeding green.
John Deere is on pace
to have its most profitable year ever.
John Deere is forecast
to make about $7.7 billion in their fiscal year, 2021.
That would be a record.
But while John Deere shareholders
and executives could not be happier,
John Deere has been in a battle on two fronts.
Between a massive union strike from upset workers
and a legal battle with farmers
concerning equipment repairs called right to repair,
John Deere must convince their customers and their employees
that they care about more than just profits.
This is The Breakdown.
There's a saying that you'll hear
either Deere say or other people say,
"If farmers are profiting, Deere's profiting."
And Deere wants to do everything they can
to make those farmers a lot more profitable.
Since the pandemic hit in 2020,
and millions of Americans sheltered in place
buying nothing but groceries, both John Deere and farmers
became even more essential in feeding America
and both profited a great deal as a result.
Because the machines that they make
are essential to an industry
that has to provide an essential product for consumers,
not only in the United States, but across the globe.
John Deere's profits during the pandemic
are eye-popping,
and that wealth has spread out to executives
like CEO, John May, who brought in $15,6 million in 2020,
a 160% raise.
And according to our Bloomberg data,
he's gonna make about 30 million for the 2021 fiscal year.
So you're talking about almost $10 million more
for the CEO earnings.
Shareholders also saw their slice of the pie
in part because of John Deere stock buybacks.
Buybacks are a piece of financial engineering by a company
to repurchase shares of its own stock
to reduce the number of shares in the market,
which in-turn creases the ownership stake
for the shareholders.
The stock buybacks for them have been significant.
So in the past 12 months,
they bought back $1.9 billion in stock,
and they bought back 716 million alone
in their fiscal third quarter of 2021.
One group who thought
they were not sharing in that wealth,
John Deere factory workers.
So the optics
are obviously looking bad for the company
now that a labor strike has broken out
among part of their workforce.
During this boom time,
Deere offered their workers 5% pay increase,
that's when over 10,000 United Auto Workers
who worked for John Deere went on strike.
I had one person in particular say,
"Our CEO is about to make $10 million more for this year
than he did last year.
The company is seeing earnings go to records.
The stock price is surging,
and yet we're the group who during the past recession
and past down economic cycles in the farming industry,
we took cuts."
After the union turned down two contracts,
John Deere was finally able to meet their demands
in late November,
which doubled raises and improved pensions
for union members.
Those employees that are represented by the UAW
are immensely valuable employees to us.
We're super proud of where the contract ended up.
It's groundbreaking in a lot of ways,
both from near-term wage increases,
as well as the retirement medical benefits that it offers.
It's super helpful to understand how the work is done
in the factories,
and what the opportunities are to make improvements
for whatever the operation happens to be
to make the lives of those that are doing that work better.
So while John Deere workers
fought and won their battle to see the profits
the company has brought in over the past two years,
farmers are still in their own fight with Deere
when it comes to repairing their own equipment.
So a lot of farms our size use a variety of technology.
We use old technology, we use new technology.
My name is Tom Brandt,
and you are currently in Plymouth, Nebraska.
I am a farmer and also a State Senator.
I represent district 32 Fillmore, Thayer, Jefferson,
Salem, and Southwestern Lancaster counties
here in Nebraska.
The State of Nebraska's agriculture
is the fourth largest ag-powerhouse in the nation.
We feed way more people with the food we produce
than just the 1.96 million people here
in the State of Nebraska.
The farm that you're on today is a farm that's common
to Southeast Nebraska.
We rotate corn and soybeans.
It takes hundreds of thousands of dollars
to operate a small farm like this.
Our margins are razor thin.
Farming is an industry where we buy retail
and we sell wholesale.
While the principles of farming
remain the same,
the equipment used to farm has changed dramatically.
This is a 1952 Allis-Chalmers WD.
This is the style of tractor I grew up on
in the '60s and '70s.
This tractor has not started for two months.
It's tough, and it works.
And this is what American farm equipment used to be like.
Farming equipment
for both John Deere and their major competitors
has become much more technologically sophisticated
in the past two decades.
A little after 2000, tractors changed
from being strictly just a power source
and got to be a lot more computerized.
Now they're all basically drive-by-wire systems
where there's no physical connection
between any of our controls in the tractor,
except a piece of wire.
And every generation tractor since
is even more computerized.
It surprises people every day
how technologically sophisticated the equipment is
whether that's GNSS satellite guidance in our equipment,
or whether it's the digital information
that comes off those equipment that helps make customers...
enable them to make better decisions every day.
This is the main computer screen right here.
It can show us moisture, it can show us yield,
it can show us some various components on the combine.
20 years ago, our irrigated corn
probably yielded 150, 60 bushels to the acre.
This last crop we just harvested,
we did 250 bushels to the acre.
So if your crops are gaining yield 40% over 10 or 20 years,
you're gonna need bigger, faster equipment to harvest it.
And those bigger, faster machines
have increased productivity an estimated 1.4% per year
over the past 70 years,
and US farmers now produce an average corn yield
of about 175 bushels an acre.
And then the really valuable information
that starts to move markets is what the harvest looks like.
So now one of these enormous harvesters will tell,
in real time, through this modem,
under the farmer's rear end back to Deere
and who knows where, to Goldman Sachs maybe?
Exactly how much corn or wheat is being harvested
on that farm acreage at that moment.
It's really staggering.
We get a lot more done in the day.
We can work longer hours,
especially with the auto-steer, auto-guidance systems.
We can get a lot more hours in,
we're not tired at the end of the day.
So the efficiency factor is great when it works.
Unfortunately, like all electronics,
it doesn't always work.
And that's where there's a catch.
While the technology in a John Deere tractor or combine
makes farming easier than ever before,
there are very real concerns from some farmers
when it comes to repairing that equipment
because as of right now, they can't.
John Deere and other agricultural machinery companies
won't let farmers fix their own equipment
without a licensed mechanic.
For Deere and its dealerships,
parts and services are three to six times more profitable
than sales of original equipment
according to company filings.
Historically, farmers have always repaired
their own equipment.
Farmers love to tinker, I will grant that.
We all like to tinker with our equipment
and we all modify our equipment.
The right to repair gets down to the nuts and bolts
that currently, farmers don't have access
to the computer systems on their farm equipment.
It doesn't matter whether it's green John Deere,
or it's red Case, or AGCO's, they're all proprietary,
they won't let us in on that.
The thing that you fix on the tractor
isn't necessarily a moving part,
it may be something that has to be fixed in the software
or hitting a reset button for your computer.
We've had a few cases
where we get an error code on the panel and it is basic.
You look it up and it says,
"Call your dealer."
So the dealer has to come out
and they plug their computer into the tractor,
and they have to diagnose what the problem is.
We have operators
who have had computer glitches during planting.
They have a newer tractor, they have a newer planter.
It happens on a Friday,
they gotta wait till Monday to get it fixed,
they've lost 2 1/2 days.
If they were given access to the operating system,
they knew what they had to do to repair that.
And there are literally
billions of dollars at stake for John Deere
when it comes to repairs.
They make a lot of their money in the dealerships
from parts and repair because frankly, they have a monopoly,
and that monopoly has been significantly enhanced
by these software controls in the modern tractor.
No one else can work on 'em.
Annual parts sales increased 23%
to a $6.8 billion from 2013 to 2020,
while Deere's total agricultural equipment sales fell
20% to $22.3 billion.
So there's very real money at stake
when it comes to repair.
If a right to repair law
allowed parts and services markets to compete,
it could be a huge blow
to a vital income stream for the company.
The farmers of the world say,
"We've been repairing these things forever."
Farmers know how to fix things,
know how to keep things working in the field.
And by denying us that,
you're essentially taking away a kind of birthright.
John Deere is also the target
of a potential federal class-action lawsuit
alleging antitrust violations tied to its repair policies.
John Deere declined to comment on the litigation,
but said it meets company commitments to provide parts,
information, and software to owners of its equipment.
However, there is precedent when it comes
to right to repair.
The best way of explaining
the right to repair is to go back to automobiles.
As automobiles were built
with more and more software and chips,
it became more and more difficult for the average car owner
to fix their car because of the software,
you didn't have the tools to do that.
So in 2012,
the State of Massachusetts introduced a right to repair bill
on light cars and trucks.
They were the only state in the nation to do that.
And what that did is that opened the floodgates
and made it possible for third-party mechanics,
the mom and pop, to access and repair all those vehicles.
I can tell you locally,
we have a situation just like that.
Last January of 2021,
based on the fact that the Farm Bureau membership
overwhelmingly wanted to see a right to repair bill,
we introduced one.
That bill called LB543
was voted in favor 176 to one by the farmers.
Yet right now, that bill sits in committee
because it required amendments to only reference
repairing farm equipment and not other electronics
like iPhones, computers and televisions.
Our position's fairly straightforward.
We believe that farmers
have the right to repair their equipment.
Where we draw the line is the right to modify
and it generally involves the embedded software
that we put on the machines.
Agricultural equipment is less like consumer electronics
than it is really like aviation.
You wouldn't want just anybody
fixing and repairing software on an airplane
because there is a safety component to it
in the same way I think a tractor going down the highway
is a fairly comparable situation.
That's really where our efforts are best spent
to try to make sure that people understand the ramifications
and the risks associated with the conversations
that are currently happening in the space.
While farmers are waiting
for a ruling to be made on right to repair,
some are taking matters into their own hands
by using gray market technology
to run diagnostics on their own equipment.
When you rebel against a technological barrier,
you hack it.
And there are a number of farmers
who've availed themselves of John Deere repair
and diagnostic software from places like Hong Kong
and other markets where things are sold
without the proper licenses, the software black market,
or in this case, it's really a gray market.
Right now, the right to repair
is still moving forward.
But its future is anything but certain.
Currently, LB543 is sitting in committee
and we chose to have it stay there for one year
to allow all parties to give us some input on this,
and it's pretty much been crickets.
But the human cry out here in the country is getting louder.
People want more regulation
or at least the opportunity to control their own destiny.
They don't like seeing it in the hands of big corporations.
We'll keep working at it
until we get it accomplished.
I'm not afraid of a fight.
I haven't met a farmer yet that's not afraid of a fight.
So we'll state our peace and see what we can get done.