Weather uncertainty, falling government support payments and weak grain prices are making prairie farmers think twice and thrice about whether to invest in expensive farm equipment.
The result is that farm equipment dealers are suffering through a year of falling sales for large tractors and combines, according to sales numbers compiled by the Canadian Farm and Industrial Equipment
Institute.
Equipment manufacturers are finding their inventories soaring.
“The inventories are troubling,” CFIEI president Brent Hamre said in a July 8 interview.
“Logically, the next step would be to start to cut back on production. In the 1980s, inventories got out of control and companies had to cut back. Some went under. You have to ask if they learned the lesson.”
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To the end of May, sales of combines were down almost 16 percent from 1997 levels. Sales projections are for a similar decline through the rest of the year.
Meanwhile, inventory held by companies has increased by more than 60 percent in the past year to more than 1,000 units.
Tractors sales stalled
The sales outlook is even more bleak in the heavy tractor category. Dealers had sold fewer than 700 four-wheel drive tractors by the end of May, half last year’s sales.
Hamre said the sluggish sales have been a prairie problem.
During the past two years, strong grain prices and Crow buyout payments gave farmers cash.
“They decided it was time to replace some of their bigger equipment items and we had tractor and combine sales that we hadn’t seen since the early 1980s,” said the CFIEI president.
“Clearly, farmers have less cash this year and they are more uncertain. They are not inclined to indulge in the big item purchases.”
However, sales in smaller tractors are keeping pace or exceeding last year’s strong showing.
Hamre told a recent convention of CFIEI members that falling sales of big equipment were expected this year.
“Sales were so strong in both 1996 and 1997, when farmers in Western Canada went on a real equipment buying spree, not seen in such enthusiasm in over a decade,” he told members. “The final payment from the cancelled Crow rate, and generally strong commodity prices for the previous two years, stimulated sales.”
This year is different.
“All in all, Canadian producers are cautiously watching prices for virtually every commodity and have shown real reluctance to make capital purchases of new farm equipment … particularly for big tractors and harvesting equipment in western Canadian markets.”
