MILWAUKEE, Wis. — The farm equipment industry may finally be able to see some light at the end of the tunnel after years of slow sales, according to information from the Assoc. of Equipment Manufacturers (AEM).

 

Sales through the first four months of the year – the latest figures available at press time – still show negative numbers, but the rate of decline is lower than last year for several larger equipment categories, said Charlie O’Brien, AEM senior vice president.

“I’m cautiously optimistic about what this signals for sales,” he noted. “The rate of decline is shallowing out. We’re fairly close to hitting the trough in terms of larger equipment.”

Through April, sales of two-wheel-drive tractors with 100 horsepower or more fell 11.7 percent from the same four months in 2016, AEM said. For all of last year, sales were down 22 percent from 2015. Four-wheel-drive tractors were off 10.2 percent through April, and down 25 percent all of last year. Self-propelled combines dipped 11.5 percent through April, compared with a 26 percent drop in all of 2016.

Sales of smaller equipment are up or pretty much unchanged, AEM said. Two-wheel-drive tractors under 40 hp increased 12.5 percent through April. Sales of two-wheel-drive tractors 40-100 hp were down 2.4 percent compared with a 2 percent decline all of last year.

“We couple this data with surveys of our members asking their perceptions of what they see happening, where the demand is going to be,” O’Brien explained. “Last year, there were a lot of negative numbers. This year, 40 percent said it was getting better. They’reexpecting a dramatic upturn in demand for equipment.”

The members said demand for harvest equipment and tractors could be up 6-10 percent, while tillage equipment could increase more than 10 percent.

“I’m not sure we can take these percentages to the bank but the arrow is going up instead of down,” he stated. “Stabilization is taking place in the market.”

The industry may have to wait another year or two to start seeing stronger demand but there are signs improvement may be coming, said Kim Rominger, executive vice president and CEO of the United Equipment Dealers Assoc. (UEDA).

“The dip has gone dramatically down,” he said. “We’re not seeing an increase (in larger equipment) but sales aren’t decreasing at the rate prior. We’re not continuing to dig the hole. I hope we’ve reached rock bottom.”

UEDA represents more than 740 dealer locations in Indiana, Kentucky, Michigan and Ohio.

Down cycles such as this generally last five to six years and the industry has been in the current one for a several years,

Rominger noted. One factor impacting dealers is their ability to get rid of excess used equipment on their lots, he added. “Dealers have done a pretty good job of getting used equipment in line,” Rominger said. “They’ve been able to move some of it through auctions and online sales. Most have gotten their used equipment into a manageable situation.

But now they’re very careful about what they’re taking in trade which is just good business for them. Dealers need to work through the used equipment a little more and we need to get producers to where they can make a little more money.”

In a recent interview with Farm Policy Facts, Larry Combest, former chair of the House Agriculture Committee, said farm policy critics are wanting to “gut key safety net provisions (in the new farm bill) like crop insurance and assistance that kicks in when prices fall. We need stronger policies right now, not weaker ones, and if lawmakers can provide that kind of certainty, farmers are poised for a comeback.”

Producers are feeling some uncertainty over trade and with President Donald Trump’s proposed budget for fiscal year 2018, O’Brien said. The budget, released in May, calls for cuts in federal crop insurance and in Title I commodity supports such as Price Loss Coverage and Agriculture Risk Coverage programs.

"(The proposed budget) has created some consternation with buyers of equipment,” he explained. “It depends on what happens with trade. Farmers know if we don’t sell it, someone else may. (Trump) kind of opened a Pandora’s Box with NAFTA (North American Free Trade Agreement) and that’s created a fair amount of uncertainty. Uncertainty is never good.”

The president knew when he released his proposed budget that changes would be made, Rominger said. “Trump’s a negotiator and he won’t throw his best deal on the table first,” he stated. “He knew what he put out there wouldn’t fly. He’s trying to balance the budget. We’ll have to wait and see how this plays out and how it will affect rural America.”