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Drought, fiscal uncertainties didn’t mar sales of machinery
By MICHELE F. MIHALJEVICH
Indiana Correspondent

MILWAUKEE, Wis. — Uncertainty seems to be the common denominator, as officials with agricultural equipment manufacturers and dealers associations assess 2012 and look toward this year.
That uncertainty shouldn’t be confused with a lack of confidence in the agricultural market, cautioned Charlie O’Brien, agriculture sector vice president for the Assoc. of Equipment Manufacturers (AEM).

“The issues that are creating the level of uncertainty, those are short-term,” he explained. “But the fundamentals of agriculture, such as demand, have excellent trends. Everyone does have to eat every day. The balance sheets of farmers are strong.”

The primary causes of uncertainty for agriculture at the end of 2012 were the so-called Congressional “fiscal cliff” and the lack of a farm bill, O’Brien said. 

“Farmers were asking, ‘what’s going on with the farm bill?’ and ‘what’s this fiscal cliff mean?’” he said. “Whether good, bad or ugly, there will be uncertainty until they reach a deal on all of it.”
Despite the uncertainty, the number of two- and four-wheel-drive tractors sold in the United States was up last year, according to figures provided by AEM. The number of self-propelled combines sold remained steady.

Sales of two-wheel-drive tractors of under 40 hp were up 8.6 percent through November as compared to the same period in 2011, AEM said in its most recent sales report. For two-wheel-drive tractors with 40-100 hp, sales were up 9.2 percent.

Those with more than 100 hp saw an increase of 15.4 percent. Sales of four-wheel-drive tractors were up 13.2 percent.
Self-propelled combines saw a decrease of 0.7 percent, though O’Brien said manufacturers should be satisfied despite the small drop.

“If you compare the numbers (of combines sold) in 2012 versus 2011, there’s very little difference,” he explained. “Overall, there are only so many combines you can sell, and I would say they’d be happy with those numbers.”

In 2011, total combines purchased in the United States totaled 9,909. Through November 2012, 8,896 were sold last year.
“More than 10,600 combines were sold in 2010, and the last time before that we had sold more than 10,000 was in 1998, so we’re at a pretty high point,” O’Brien explained.

AEM, based in Milwaukee, represents about 400 agricultural equipment manufacturers and suppliers. The sales figures are from an annual outlook survey given to its members.

Agricultural equipment dealers had a good year in 2012 and their confidence is fairly high, according to Kim Rominger, executive vice president and CEO of the Ohio-Michigan Equipment Dealers Assoc. (OMEDA). Despite the country’s fiscal situation and the lack of a farm bill, those dealers have told Rominger they aren’t anticipating any major changes, he said.

“I’m not sure they understand all the changes that could happen,” he said. “Nobody knows where this will end up. There will be an impact, but how it all impacts agriculture I think is still an unknown. There are so many tentacles to what may or may not happen. Nobody likes this uncertainty.”

Some of the dealers represented by OMEDA had their best years ever, Rominger said, adding even those in areas hit by the drought reported a pretty good year. OMEDA and its sister organization, the Mid-America Equipment Retailers Assoc., represent more than 400 agricultural equipment dealers in Ohio, Michigan, Indiana and Kentucky.

As for 2013, dealers should expect another good year if manufacturers don’t overproduce and if normal rainfall occurs, Rominger said.

Manufacturers and dealers are pretty happy with sales in 2012, though there are exceptions in areas affected by the drought, said Mike Williams, vice president of the North American Equipment Dealers Assoc. (NAEDA).

 “Overall, the year was better than they expected,” he noted. “Uncertainty over the fiscal cliff and the lack of a farm bill may have affected sales at the end of the year. Tax planning may have caused a spike in sales toward the end of the year, as there was uncertainty over the tax situation for 2013.”

Farmers also face uncertainty over the weather and the economy, he said.

NAEDA, based in Fenton, Mo., represents about 5,000 dealers in the United States and Canada, and about 90 percent of agricultural dealers in those countries.

John Deere’s Agriculture and Turf Division reported a 13 percent increase in sales for the company’s 2012 fiscal year that ended Oct. 31. The company expects its worldwide sales of agriculture and turf equipment to increase 4 percent in fiscal year 2013, according to its year-end report.

Producers are looking for equipment with the latest technology, such as precision guidance systems that allow for greater efficiency, said Barry E. Nelson, manager of media relations for Deere Agriculture and Turf.

“They’re also looking at expanding their land, improving their existing land and they’re looking for ways to do more acres in less time,” Nelson explained. “From planting to harvest, they want to get more done more quickly.”

The agricultural manufacturing economy is strong with a good environment and optimism, O’Brien added.

“There’s a pretty good feeling in the marketplace,” he noted. “For example, look at the higher-horsepower tractors. Those sales are driven by commodity prices over the last year. Couple that with continued very strong balance sheets and low debt loads and there are plenty of opportunities to buy more equipment.”

Exports

Figures through the third quarter of 2012 show exports of U.S.-made agricultural equipment were up 22 percent, O’Brien said. The top five buyers of U.S.-made equipment were Canada, Australia, Mexico, Brazil and Germany.

“Demand worldwide will continue as we look toward (this) year,” O’Brien stated. “Despite the current uncertainties, agriculture is a great place to be.”

A worldwide sales report issued last fall from the Agrievolution Economic Committee, a gathering of the world’s largest agricultural machinery associations, showed France and India anticipated increases in 2012. Growth was forecast in Japan, Brazil, China and Russia for 2013.
1/9/2013