Equipment manufacturers are dealing with strains on their production floors as higher grain prices lead to increased sales of farm machinery.
Canadian tractor sales rose 71.8 percent to 2,374 units in January and February. Combine sales increased 11.6 percent in the same period.
Last year, Canadian tractor sales rose 10.3 percent and combine sales rose 5.7 percent. Sales are also strong in the United States.
“The reality is that there’s almost (no equipment) left,” said Karsten Hapel, a Saskatchewan sales manager for manufacturer Case IH.
The company has sped up its production lines and is looking at the process for ways to further improve productivity. Its plant in Fargo, N.D., has added a new paint system and more welding robots. It is also evaluating whether to expand its factories.
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In a move that hasn’t been necessary since the late 1970s, Case IH is taking orders from equipment dealers much earlier this year. Typically, equipment dealers are not able to order products for the next year until around June. This year, the company will be taking orders on its new model year as early as spring, and Hapel expects that will be the case in 2009 as well.
Smaller companies are also experiencing the boom and its associated pressures, said Robert Fagnou, advertising manager for St. Brieux, Sask., based Bourgault Industries Ltd., which makes seeding equipment and other farm implements.
“We’re sold right out. We don’t have anything available from the plant and our dealer network is starting to look pretty skinny also,” Fagnou said.
Although Bourgault anticipated the surge in demand, it is still having trouble keeping up. An expansion that will increase production capabilities is almost complete, but a lack of tradespeople has slowed construction.
“We can only build so much, and (we) can only grow so fast also,” said Fagnou. “Those two things provide a restriction for our capacity.”
In its most recent quarter, Deere & Co. earned $369.1 million, compared with $238.7 million a year earlier, a result of farm equipment sales rising 33 percent for the company. Rival equipment maker CNH Global more than tripled its fourth quarter net income to $114 million. The company expects a 15 percent increase in sales for 2008.
Buhler Industries Inc., the sole Canadian manufacturer of tractors, is seeing the same effect on profit.
Alex Buchko, head of Buhler’s financial department, said the company’s first quarter sales are up about 14 percent from 2007, an increase to $32.5 million from $28.3 million.
To meet the demand, Buhler is re-evaluating its production processes and buying some equipment to increase productivity.
“There’s nothing that would make me happier than to have an ocean of product to ship to dealers,” said Buchko.
“Because of the demand across the board, all the suppliers to the (agricultural) industry are also stressed to supply,” said Buchko.
“That would be the biggest problem right now, is getting the supply chain up to snuff.”
The company is feeling the strain that comes with a high demand, and Buchko thinks that in the end farmers will suffer from the manufacturers’ inability to keep up.
“The farmers themselves are going to feel the frustration of having the money and wanting to make the investment and not being able to because of the way things are now,” said Buchko.
