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Farm machinery sales may shift out of reverse

HANOVER, Germany — Tough times on the farm caused by poor crop prices have left the farm machinery industry struggling under the weight of shareholder expectations and market instability.

Many in the industry hope that recent improvements in sales might be marking a turning point.

“Farmers have had to make tough choices. Not just in North America, but also around the world … and we (at Claas) have done better than expected, lately. But times have been challenging,” said Hermann Lohbeck of Claas, during the Agritechnica farming event in Hanover.

Overlooking a sea of farmers, industry watchers and other machine companies from a second-floor vantage point at the big farm show, Lohbeck said European Union farmers are spending again, despite lower grain and oilseed prices and a loss of supply management in the dairy sector.

“That is stable with some growth. In Kazakhstan, Turkey, the CIS (Commonwealth of Independent States), we did better than expected. North America was acceptable, under the circumstances it was a good year,” he said.

“Farmers are seeking out new technology that improve their (efficiency) but also their soils and future productivity,” he said.

Klaus Braunhardt agrees with the sentiment that farmers are looking for technology “not just power to replace power.”

“And we are seeing those investments, especially in places like Western Canada, where the economy is a bit better and farmers are seeking new ways to increase margins with each generation of machinery,” said Braunhardt, head of precision agriculture for John Deere in Europe. Previously he worked in North America and focused on machinery design for markets like Western Canada.

He said farmers are looking for less down time, and telematics technology, which can provide remote diagnostics and data transfer, delivers on that.

“But you need the latest equipment to fully take advantage of it,” he said, while showing off Deere’s European Technology Innovation Centre in Kaiserslautern, Germany, earlier this month.

Deere last week reported its first increase in year-over-year sales in four years. The company forecasts an improving revenue picture for 2018 that includes boosts to sales and earnings.

Jim Wood handles operations at Rocky Mountain Equipment in Western Canada and feels producers are starting to turn in machinery that has been out in the field for as many as four or five seasons.

“It’s been reliable for them, but there is better technology available, the value of the trades is important. But ensuring that they won’t be facing service issues in-season and that they can take advantage of all the latest tools is becoming a bigger part of their business plans,” said Wood, whose company deals in CaseIH and New Holland.

“For sure the (telematics) side of things is starting to become more important in their plans. We know how big it is in construction. It’s starting to show how it pays and so it makes it onto their balance sheets,” he said.

Martin Richenhagen, head of Agco, said the North American market presents a challenge for all equipment companies because of low grain and oilseed prices. However, his company has also seen improvements in sales despite this, especially in Western Canada.

At the Agritechnica show, he said sales had improved in most markets, except Germany.

As Deere reported its numbers, Tony Huegel of the company’s investor relations department confirmed the trend of farmers having to once again start investing.

“The strength that we’re seeing in large ag is not coming from im-proved fundamentals (related to profits from farm production).”

He said machinery sales have been generally very low, “so the equipment has begun to age a bit.

Deere said North America will be the hot spot for 2018 farm machinery sales, climbing as much as 10 percent overall. He predicted European and South American sales would each rise five percent, while Asia will remain flat after some relatively strong seasons.

For the company itself, Deere expects to see a 22 percent increase in 2018 sales.

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