Farm machinery sales immune to credit crisis-Agco

SAO PAULO, Nov 13 (Reuters) - Sales of farm machinery such as tractors and combines will keep rising in the coming years despite a credit crunch resulting from the global financial crisis, the head of Agco Corp AG.N said on Thursday.

Martin Richenhagen, Agco's chairman and chief executive, said global agriculture fundamentals remain as strong as they were some months ago, before the deepening of the financial turmoil.

In Brazil, the company expects tractor sales at record levels this year and again in 2009 as farm income increases, helped by a reduction in fertilizer and other agrochemical costs due to falling oil prices.

"The financial crisis does not have an impact on farm growth drivers (which are) growing population, biofuels and increasing (food) consumption," Richenhagen said at a news conference in Sao Paulo.

"Banks will be stronger and companies will be stronger (after the crisis) although some of them will die. The future for farmers is bright. Fundamentals have not changed," he said.

Richenhagen said Agco is in a strong position to face the turmoil as it has enough cash, its debt-to-capital ratio "is down to zero" and it has financially "powerful" partners to finance future demand among Agco's clients.

The U.S.-based company, which sells equipment under the Massey Ferguson and Valtra brand names and has a global presence, expects sales to reach $9 billion in 2008, up from $6.8 billion last year.

South America accounts for about 20 percent of sales.

Brazil is seen as a strategic market for Agco due mainly to its potential in biofuels and favorable weather conditions which allow farmers to harvest several times a year, Richenhagen said. The company has about half of the nation's tractor market.

Andre Muller Carioba, senior vice-president for South America, said the Brazilian government could do more to assure that recently announced measures to boost credit take effect.

Brazil's government recently took steps to increase the availability of money for automakers' financing units to raise lending and stimulate sales.

"Good intentions are not enough. Farmers have to plant and to harvest at the right time, they cannot wait. This (lack of) speed is bothering a little," Carioba said at the news conference.

Agco confirmed investments announced last year of $150 million in the country by 2010. It includes doubling the production capacity of a factory in the southernmost state of Rio Grande do Sul, which was bought last year.

Early this month, Brazil's auto manufacturers' association, Anfavea, said sales of farm machinery in Brazil dropped in October for the first time this year.

In one of the first signs the global economic slowdown could have started to hit the sector, one of Agco's main rivals, Deere & Co (DE.N), said last month it laid off 200 employees in Brazil after Argentine clients canceled an order for a large number of harvesters. (Reporting by Inae Riveras; editing by Reese Ewing and Jim Marshall)