Farm machinery sales are down, but hopes remain high
The 51st annual National Farm Machinery Show (NFMS) in Louisville, Ky., certainly lived up to its name. Nearly 900 vendors spread out over 1.2 million square feet of floor space with the latest tractors, combines, planters, sprayers, balers, precision technology and more.
But the real question at NFMS wasn’t “What’s for sale?”—it was “Who’s buying?”
“We have a lot of good equipment,” says attendee John Cheesewright, an Indiana farmer. “We’ll just add another year on it.”
According to the Association of Equipment Manufacturers (AEM), farm equipment sales are generally down but not across the board.
Based on the AEM January 2016 retail sales report, several equipment categories are down from a year ago, including 40-hp to 100-hp two-wheel-drive tractors (-5.7%), 100-hp two-wheel-drive tractors (-38.5%) and four-wheel-drive tractors (-9.3%).
However, two equipment categories saw increased sales from a year ago: under 40-hp two-wheel-drive tractors ( 13%) and combines ( 21.4%).
“We’re seeing some bright spots in the data from January sales, and our members tell us they’re gearing up efficiency and are better prepared to meet the challenges of this new normal than they were 12 months ago,” says Charlie O’Brien, AEM senior vice president.
Farm equipment manufacturers at NFMS tend to agree, and they also recognize the often cyclical nature of the business.
“Now is normal,” says Todd Stucke, senior vice president with Kubota. “We have to manage both the good times and the bad.”
Stucke contends there is still a glut of used equipment on the market, and it will take a few years to iron out the situation. Others, such as Leif Magnusson, president of Claas of America, speculate used equipment values have found a bottom and will turn the corner in 2016.
The 2016 NFMS gave attendees a break from the show floor and a chance to attend two Farm Journal Media seminars, a live taping of “U.S. Farm Report” and the popular 48th annual Championship tractor pull.
“Livestock and dairies are strong and were throughout 2015,” he says. “That’s for forage and silage production. We are seeing prices of used equipment starting to normalize. It’s easier for our dealers to go to the farmers because they know what they can offer for the trade-in. Before, pricing was all over the map.”
Whether buying new or used equipment, farmers such as Sid Hawkins from Michigan, say it will be a carefully studied decision.
“If I buy something, it’s not because I want it,” he says. “It’s because we need it.”
Leasing could also prove to be a smart option this year. Manufacturers say they are seeing more farmer interest and are exploring the tool.
“We haven’t done a lot of leasing but we need to,” Stucke says. “I have a whole team of people studying it, and we will come out with some very attractive lease products. Our customers are demanding it.”
Jim Walker, vice president at Case IH North America, says it’s ultimately about striking a balance.
“I think as a manufacturer and as an industry, we have to make sure we are keeping it in balance because of returns that come back later and we’re not flooding the marketplace with a lot of used inventory,” he says. “It’s important in this market, but I don’t think it’s any more important than any other year in agriculture. We just need to keep the right balance.”
Another authority on used equipment trends, Greg Peterson, founder of Machinery Pete, was at NFMS to share insight from dealers and the auction trail. Machinery Pete notes there are several types of used equipment that have bucked downward price trends, fetching steady or even higher prices at recent auctions.
“It’s not all doom and gloom,” he says. “We’ve seen some used equipment holding or even going up in value.”
For starters, 10-year-old tractors or older and in good condition have done well, even in the 200-hp category.
“It doesn’t matter what color, either,” he says. “Those tractors are holding steady or even going up. The demand for these things is just through the roof.”
Hay and forage equipment prices have also generally been moving higher, Machinery Pete adds. Then comes the real wildcard—values are actually rising in vintage tractors with odd configurations.
“These things are going nuts right now, even in a down market.”
But make no mistake, for the most part, it’s a buyer’s market, Machinery Pete says. Just don’t leave your self-control at home when you go to equipment auctions, he says. He remembers what a friend once told him—go to auctions ready to buy everything but have enough discipline to buy nothing.
Those looking for a specific piece of equipment should not hesitate to ask around, Machinery Pete adds.
“Now is a prime time to be working with your dealer,” he says. “Let them know of any equipment you’d consider, and they can work their networks to find it for you.”
Next year’s NFMS is slated for Feb. 15-18, 2017.