Ag equipment sales down sharply last year

Sales of farm equipment manufactured in Saskatchewan were down by 30 percent in 2015.

That, combined with similar trends in the United States and elsewhere, is seen as another signal that farmers are less inclined to make major capital purchases in the face of global economic uncertainty, weak commodity markets, and weather-related concerns.

Saskatchewan farm manufacturers account for roughly 23 percent of Canada’s annual farm machinery sales, according to figures supplied by the Saskatchewan Manufacturing Council.

Sales of Saskatchewan-made implements fell to roughly $765 million last year, down significantly from the record $1.1 billion worth of sales made in 2014.

“There’s no question it is still quite a challenging marketplace, not only in terms of the Canadian market, but globally,” said Derek Lothian, the council’s executive director.

“The United States hasn’t bounced back at quite the rate we though it would, and there’s still a tonne of used inventory our there, on the farm machinery side.”

Political uncertainty in Eastern Europe has also taken a toll on export numbers, along with persistent drought conditions in Australia, another key market.

“Sales (in eastern Europe) have recovered somewhat from the start of the year but it’s not nearly back to the levels that we were seeing pre-conflict, if you will,” Lothian said.

“And Australia seems to be in a perennial drought, which has kind of dampened a lot of activity there as well.”

Despite last year’s decline, Lothian said Saskatchewan’s equipment manufacturing sector is in a good position.

The 30 percent year-over-year reduction should be viewed a downward blip in an otherwise upward trending industry, he added.

Sector sales are still up nearly 150 percent since 2000.

“Not every year can be a record year,” he said.

“If you look at the ag equipment sector as a whole (since 2000) we’ve had a period of phenomenal growth so I do think we have to keep things in perspective.”

The low Canadian loonie relative to the U.S. dollar has provided some support for export manufacturers, however, a low loonie is not the factor that it once was, Lothian said.

Canadian farm equipment exporters who sell their products in U.S. dollars are also sourcing components and materials in U.S. dollars.

In other words, when sales revenues are up, input costs also rise accordingly.

“That’s sort of the natural hedge that a lot of companies have quite aggressively adopted to shield themselves or to mitigate the impact of currency fluctuations,” Lothian said.

The currency’s impact is further reduced because Canadian manufacturers are often competing with manufacturers from other countries whose currency has also depreciated relative to the U.S. dollar.

Lothian said the slowdown in sales and exports, while a concern, represents an opportunity for manufacturers to retool, adjust staffing levels and make operational adjustments.

“It wasn’t that long ago that we had companies whose employment policy was if you had a pulse and you showed up for work, you were hired. Long-term, that’s not sustainable, so right now … is a good time to look at what you’re doing on the operational side….

brian.cross@producer.com

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