ORLANDO, Fla. – Sales of farm equipment have fallen over the past year, tracking in near lock step with commodity markets and the global financial crisis.
However, international manufacturers and government representatives attending the Agrievolution meetings in Orlando Jan. 11 said farm equipment and agriculture sectors have weathered the global industrial downturn better than most industries, with sales and profitability mostly returning to pre-2008 levels.
Globally wider margins in early 2008 due to a combination of low input costs and dramatically higher commodity market prices resulted in producers renewing equipment lineups.
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The cooled commodity markets and input costs lagging the grain and oilseed price declines have resulted in dramatic declines in retail farm equipment sales.
For the U.S., China and European manufacturers, those declines manifested themselves mainly in exports, but domestic sales also dropped.
“We had a unique year in 2008, we fell back rapidly in 2009, but there is a cycle in these things and a seasonality … we’ll have to see how spring 2010 plays out,” said Doug DeVries of the U.S. Department of Agriculture.
“In the largest equipment, we see a trend of continual replenishment based on use and expansion of acreage for the largest producers. There the reductions are not as large as in the smaller machines,” he said.
In the U.S., retail sales of four-wheel drive tractors fell 0.6 percent between 2008 and 2009.
Attendees at the conference say Canada tracks similarly to the U.S., especially as the two currencies move closer to parity.
At the end of November in the two- wheel drive tractor sector over 100 horsepower, the decline in sales from 2008 was 14.1 percent, while in the 40 to 100 h.p. range, sales in America dropped 29.3 percent.
The largest combines remain strong performers. Sales for 2009 surpassed the strong sales figures of 2008 by 16.3 percent as of November.
Export numbers tell a tale of tumbling sales.
U.S. export sales of farm equipment fell by 21.7 percent, according to the U.S. Census Bureau Foreign Trade Division.
Jinfu Xiao of the China Agricultural Machinery Distribution Association said Chinese exports “turned bad in 2009.” Smaller tractor sales declined by 24.9 percent, medium sized tractors were down 54.7, and large tractor exports fell 50.81 percent.
This followed large increases in sales in 2007 and 2008 for medium and large farm equipment.
Chinese imports of farm equipment remained flat overall.
Jinfu Xiao said a recent increase in government subsidies for the purchase of medium and large sized farm equipment has resulted in an increase in domestic sales and imports.
“Income for producers also (rose) due to the increase in grain production subsidies in corn and soybeans and wheats,” he said.
“We see big sales increases in new, larger tractors in 2010. And (corn planters and combines) will be a hot demand.
“We don’t make cultivators, sugar beet harvesters and these are also big items to import,” Jinfu Xiao said.
In Brazil, subsidies on loans of two percent and terms of 10 years have increased sales of smaller tractors and farm equipment.
Overall, Brazilian equipment trade fell by about 50 percent in 2009 with imports faring slightly better than Brazilian exports.
Agricultural sales remain the same as 2007 at about $3 billion US, but sales fell from $4.5 billion in 2008.
Domestically, the country has some issues with the currency gaining against the American dollar. This hurts exports of equipment and soybeans, coffee and orange juice.
A fall 2009 presidential election also looms and Brazilian equipment manufacturers fear politicians of all stripes will want to ensure low food prices through 2010 and 2011 in order to appeal to voters.
The European Union has seen a sales drop of 20 percent in 2009. EU member nations are large domestic buyers of farm equipment and large exporters.
The drop resulted from tightened credit conditions in the former socialist Soviet republics, where agricultural reform continues to expand acres farmed.
Lower commodity prices and optimism in the market are partly responsible.
