Equipment investments critical to bottom line

Few issues in the farm equipment world are black and white, but here are some observations after spending a week in Hannover, Germany, attending Agritechnica, the world’s largest farm equipment show.

First, the development and manufacturing of farm equipment is a huge worldwide business with much of the innovation and investment happening in European nations. American short-line equipment manufacturers are notable by their absence at Agritechnica. Most U.S. firms obviously concentrate on their own domestic market.

Some Canadian manufacturers are shoring up soft domestic sales with a brisk export market, and a devalued loonie helps.

Farmers in countries that have experienced substantial currency devaluation, such as Russia, are enjoying higher returns for commodities like wheat, which has put them in the market for upgraded equipment.

Statistics show that the sales of big ticket items are down significantly this year. Grain producers in many parts of the world have used the strong returns of recent years to retool their equipment fleet.

Now, with storm clouds on the economic horizon, farmer investment has slowed.

In the United States, the storm has arrived. The strong U.S. dollar makes commodity prices far more worrisome than in Canada. An abundance of late-model used equipment is sitting on dealers’ lots, and inventory levels are in some cases worrisome.

European farmers love their equipment, and there’s an interesting battle between brand loyalty and economics. Conspicuous consumption also plays a role.

Some producers will stick to their favourite brand of tractors and combines no matter what. Their brand loyalty is akin to religion.

However, while most producers have some brand loyalty, they’re willing to see what competitors have to offer.

Many European farmers aspire to owning a Fendt, which is widely considered a high-quality tractor.

As well, the display of high-priced Lamborghini tractors at Agritechnica shows that some farmers want luxury and the ability to show off to their neighbours. It’s probably a bigger factor in Canadian purchases than many like to admit.

Creature comforts in cab design are relatively easy to add, but true equipment innovation takes time.

The big German company Amazone displayed an innovation called AmaSpot, which senses green growth on the soil and only turns on spray nozzles when plants are present.

This type of technology has been displayed before, but Amazone is a year or two from commercialization. It probably needs to assess whether the chemical savings warrant the expense of the technology.

Krone, another German company, displayed what it claims is the world’s first mobile pelleting machine, the Premos 5000.

It picks up a swath of straw or hay and turns it into 16 millimetre diameter pellets. Krone has working machines but will test and refine them for the next couple of years.

Agtron Enterprises of Saskatoon launched a seed blockage and rate monitor that can be mounted on the bottom of the seed tube near the ground opener. It’s completely wireless and powered by machine vibration. However, it may take a year or two for the cost of the technology to drop enough to make the product competitive.

Deciding when to invest and how much to invest in new equipment and technology is a critical business decision for farmers. There are no easy answers, but it’s best to take emotion out of the equation.

Kevin Hursh is an agricultural journalist, consultant and farmer. He can be reached by e-mail at kevin@hursh.ca.

About the author

Comments

explore

Stories from our other publications