Canada’s farm equipment manufacturers are “hunkering down” for what is shaping up to be another disastrous year, says an industry leader.
“The year we went through was a very grim one,” Brent Hamre, president of the Canadian Farm and Industrial Equipment Institute, said in a Jan. 22 interview. “No one sees anything but it getting worse in 1999.”
He said sales of large tractors and combines are expected to plummet below last year’s dismal levels.
The result will be more tumult in the industry, production cuts and probably more layoffs, said Hamre. “It is going to be a tough year.”
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He said part of the problem is the expectation of low prices and incomes in the grains sector.
As great a role is played by farmer pessimism about the future.
At the annual meeting of the CFIEI Jan. 21, Case Corp. Canadian general sales manager Bob Mann produced 1999 sales estimates and underlined the uncertainty.
Governments have promised up to $1.5 billion in farm aid over two years, but cheques won’t be in the mail until summer and it remains unclear if Saskatchewan will ante up its 40 percent share, he said.
“Can the provinces afford it, particularly Saskatchewan where two-thirds of Western Canada’s farmers reside?” Mann asked in his presentation to the meeting.
“Will the banks extend the farmers’ credit lines in the interim? These factors will greatly influence these sales forecasts.”
Other factors
Even without that uncertainty, some of the 1999 outlook projections are dismal for the industry.
Sales of four-wheel tractors, off 53 percent last year, are expected to fall another 18 percent. After selling a 15-year high 2,376 large tractors in 1997, the industry now expects to move just over 900 tractors in 1999.
Combine sales are expected to fall 14 percent this year to 1,787. Last year, sales plummeted 37 percent.
In the past two years, prairie combine sales will have fallen 50 percent to a projected 1,451 units in 1999.
Hamre said there were extraordinary reasons for the 1998 disaster. In addition to fears of falling incomes, there was some hangover from the previous year.
Decent grain prices and Crow buyout money buoyed the prairie grain economy in 1997. Farmers bought new equipment and traded-in the old.
Last year, dealers were trying to sell their used equipment and farmers were looking for deals.
Sales of new equipment suffered.
“This year, we won’t be able to use that excuse,” said Hamre. Much of the used equipment has been sold.
“The problem this year will be low incomes and the depressed outlook that farmers have now,” he said.
Meanwhile, company inventories are growing as new production is moved into storage.
“I think companies will move quickly this year to curb production,” said the industry executive. “I think they realize they have to react faster than they did during the Dirty Eighties when inventories got out of hand.”
