Demand declining | Farmers’ need for new machinery declining after several years of growth
Farm equipment manufacturers and sellers are planning to put fewer machines in farmers’ hands in 2014 but say that is OK.
The Association of Equipment Manufacturers, which tracks its members’ sales of new equipment, said the trend for agriculture is flat or slightly lower this year.
Combine sales in September fell almost 36 percent compared to the previous year, and four-wheel drive tractors are off 53 percent year over year in that month.
However, John Schmeiser of the Canada West Equipment Dealers’ Association, said one month doesn’t tell the whole tale of equipment sales in 2013.
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He said it has been a good year for new machinery sales until recently, and despite September’s sales figures, the number of combines marketed overall has dropped only 1.4 percent year over year, while 4WD tractors are up 1.5 percent.
“We have seen 20 percent or better growth year over year for the past three years,” he said.
“The market is finding a point where it doesn’t need as many (new) units every season.”
He said a significant decline in commodity prices is likely having a limited effect on producers’ decisions to purchase.
Jim Wood of Rocky Mountain Equipment in Alberta said there was pent up demand for machinery after the poor price and production years leading up to 2008.
“Strong commodity prices and good crops lead to significant changes of business for farmers and farm equipment companies,” he said.
With about 36 farm machinery dealerships in the Rocky Mountain chain, Wood has seen the market for new machinery jump dramatically, but said the demand is likely softening for next year.
The introduction of the final form of Tier 4 emissions standards will add additional costs to large tractors, as well as high clearance sprayers and combines for the 2014 and 2015 model years, which might also affect farmers’ motivation to buy.
Wood said dealers are planning to sell fewer new tractors and combines but are still looking at strong sales of sprayers and seeding equipment.
“And precision (agricultural) equipment sales are a very big growth area for us,” he said.
“As a (consolidated) dealership group, we are able to concentrate on marketing services and grow some of our smaller operations, so as a business we have plenty of areas to build sales and profitability in.”
Earlier this year, Jim Walker of Case IH said that he feels North American combine sales will settle into a more reasonable 10,000 to 11,000 annual sales total, rather than the 13,000 that have been marketed in the past few years.
John Deere also plans to scale back combine manufacturing next year and increase sales in sprayers and application technology, as well as smaller tractors over 100 horsepower.
Schmeiser said high yields in Western Canada and a return to average growing conditions in the United States after a record drought has meant producers throughout North America will still be in the market for machinery, despite lower commodity prices.
Walker said his company sees slightly lower demand as an opportunity to concentrate on technology improvements both in the equipment and the manufacturing processes.
Wood said issues related to a glut of good, late model used tractors and combines in the system are improving, with inventories being reduced by many dealers.
“We are finding ways to sell those units, and farmers are adding additional equipment to take advantage of the supply of good, used machines,” he said.
Wood expects to see many growers keep their tractors and combines slightly longer than the one or two seasons seen recently.
“Farmers were coming to us and buying what we could get. They are still coming in, but now they want a quote and they take it away to think about,” he said.
“How many new combines can we afford to sell. We had to flush through the used.… Bourgault ran out of drills last year. A little slower won’t hurt most companies.”
Schmeiser said two wheel drive tractors over 100 h.p. are among the hottest products in Canada.
“That is a sign that producers are investing in their operations for the long haul,” he said.
“Those are the tractors that drive augers, haul grain carts, mow and bale. That was once a job for older machines. Not any more.”
