Machinery on the Move

December 12, 2008 06:00 PM
 
For the past two years, machinery has been harder to come by. The increase in demand has been apparent as used prices have risen and new equipment barely gets parked on dealer lots before delivery.

This year's machinery market stands on the shoulders of the previous year's escalating strength. As strong U.S. and export machinery markets have coincided, equipment makers have responded by ratcheting up production.

The Association of Equipment Manufacturers (AEM) reports farm equipment exports were up 30.5% in the first half of 2008 compared with the first half of 2007.

Major manufacturers cite a host of forces impacting demand: high commodity prices, rising global affluence, bioenergy and increased farm income.

"We've seen robust demand,” says Larry Christenson, tactical marketing director of John Deere. "We are trying to serve strong demand both here in the U.S. and abroad.”

John Deere's net sales outside the U.S. and Canada have more than doubled since 2000. With announcements in February and August, John Deere committed a total of $187 million to increase larger high-horsepower tractor production by 40% by 2010. The company also invested $35 million to increase combine production capacity by 30% in East Moline, Ill.

AGCO's total production in 2008 is expected to increase 16% to 18% compared with 2007. "The professional producer segment is seeing the strongest demand for equipment in North America,” says Todd Stucke, vice president of AGCO. "We've worked hard to match demand to inventory and production, filling the farmers' needs.”

Shortline manufacturers have also responded to strong market trends. "We started to plan for a manufacturing increase in late 2007,” says Jerry Ecklund of Unverferth Manufacturing.
By the end of the year, Unverferth will complete a 70,000-sq.-ft. expansion at its Shell Rock, Iowa, facility.

CNH's agricultural equipment sales almost doubled from 2001 to 2008. Case IH has canceled plans to close its manufacturing plant in Goodfield, Ill., in response to increased demand. "The Goodfield facility was going to close at some point in 2007, but with an uptick that year, the term was extended to quarter one 2008,” says Bill Preller, senior director of crop production marketing. "Then, the decision was made to reconsolidate tillage manufacturing to that facility due to unprecedented growth in a two-year period.”
Preller credits increased sales overseas and in North America, as well as product introductions, for the need to increase manufacturing. He says export opportunities never superseded who got equipment when.

As large manufacturers recalibrated capacities, some shortline manufacturers report they had equipment available when others did not. "Our opportunity is in the ability to respond,” says Jamie Meier, ag division sales manager for Landoll Corporation. "Dealers will be in the position that when a farmer comes in to buy, we'll be able to react to their needs.”
Fluctuating raw material prices, mainly steel and tires, have been another challenge for manufacturers.

"Traditionally, we've tried to make annual price adjustments,” Unverferth's Ecklund says. "This year raw materials went up monthly and even weekly. We did enact a midseason price increase.”

Moving forward, the availability of machines is dependent on many factors, especially the status of the economy and credit availability. At Landoll, Meier says, at least one machine sale was canceled because credit for the transaction fell through.                                               &nbs​p;                        &nbs​p;                        &nbs​p;                 

In John Deere's sales commentary broadcast in October, the manufacturer acknowledged recent economic developments. But as of yet, virtually no orders have been canceled, and their 2009 order book remains strong.

There's confidence in the momentum of strong sales. AEM's 2009 outlook forecasts strong demand for combines, four-wheel-drive tractors and 100 hp and greater front-wheel-drive tractors.

"In the farm machinery world if once in your career you see a year like 2008, you're lucky,” says Tom Evans, vice president of sales for Great Plains Manufacturing. "Domestic demand has stayed strong, and I've wondered if it would soften but the retail business has remained strong.”


You can e-mail Margy Fischer at
mfischer@farmjournal.com.



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