By MICHELE F. MIHALJEVICH

Indiana Correspondent

MILWAUKEE, Wis. — Things may be looking up for the farm equipment industry, as sales showed some promise in 2017, according to statistics from the Assoc. of Equipment Manufacturers (AEM).

Sales of self-propelled combines were up 4.5 percent through November from the same period in 2016, AEM said in its mid-December sales report. Four-wheel-drive tractors were up 3.4 percent, while two-wheel-drive tractors under 40 hp rose 8.4 percent.

Two-wheel-drive tractors of 40-100 hp increased less than 1 percent, but November 2017 sales were up 10.7 percent over November 2016. Two-wheel-drive tractors with 100 hp or more dropped 8.1 percent.

Representatives of equipment manufacturers and dealers cautioned against reading too much into the numbers. “I’m an optimist like all farmers, and I do think the market’s going to be better,” said Curt Blades, AEM senior vice president of agricultural services. “From the manufacturers’ perspective, it feels like we found the bottom in the middle of 2017.

“I don’t expect to see significant growth in 2018 but I’m optimistic we’ll maintain these levels. This is tempered with the reality of where the corn and soybean markets are. I’m cautiously optimistic, but with a dose of reality. Inventory is in line with demand and production is in line with the market.”

Generally speaking, 2017 was better for Sloan Implement Co. than the previous two years, said Grant Tice, the company’s sales manager. Sloan has 20 locations in Illinois and Wisconsin.

“I think we’re looking at a slow trend,” Tice explained. “We’re not at the peak of acceleration like we saw in 2012-2013. It’s a flatter market with a more gradual increase in sales.”

Kim Rominger, executive vice president and CEO of the United Equipment Dealers Assoc. (UEDA), is also cautiously optimistic about the industry.

“There’s a light at the end of the tunnel, and dealers can see it,” he said. “There have been two drags on new equipment sales: used inventory and an overcapacity of new equipment.

“Manufacturers have done a pretty good job of controlling new equipment. That pressure has been relieved. There’s a more appropriate amount of new equipment, and that’s helped out tremendously.”

While dealers are more optimistic, they’re also aware of the many outside factors in the world that could impact the market, Rominger said. For example, a change in a trade agreement could have a negative effect, as could any weather-related problems.

UEDA represents more than 740 dealer locations in Indiana, Kentucky, Michigan and Ohio. Rominger is also president and CEO of the Equipment Dealers Assoc., which represents 4,500 dealers in the United States and Canada.

Producers who put off making machinery purchases in the last couple of years may have decided they needed to buy in 2017, Blades said. “At some point a farmer has to make a decision to buy and sell,” he noted. “They may have made the decision it needed to be replaced.”

The improvement in sales of some equipment may be traced, in part, to last year’s harvest, Tice said.

“Generally, at least in this area, yields were higher than expected,” he added. “That permeated more optimism in the market. The reason for increased sales was a blend of both needs and wants. Farmers may have held off trading in the last couple of years, and they decided it was time to trade again.”

Used equipment

Dealers have been working to get rid of excess used equipment, Rominger said. When the farm economy was better a few years ago, producers traded in their new equipment every year or two, resulting in an inventory of fairly high-priced, used late-model units, he explained.

In the last couple of years, dealers have been able to move more of that used inventory. Some stopped taking used equipment in trade for new machinery, which helped keep used equipment off lots, he added.

The used equipment inventory on Sloan lots is generally better than it was a year or so ago, Tice said. “It’s nice to be in a little bit better spot. We’ve had to keep chipping away (at the inventory) one piece at a time.”

Some customers prefer used equipment because they may not see a need for the newest technology. “It has to be of benefit to them,” he noted. “Some want the latest and greatest, but others see it as being the latest and greatest to them though it may not be the newest available.”

Ted Everett, owner of Ted Everett Farm Equipment and Ted Everett & Kurt Everett, Auctioneers, based in Monrovia, Ind., said the used equipment market is stronger than anticipated, given commodity prices. His companies sell farm machinery such as combines and tractors, and construction and lawn and garden equipment.

“Anything with quality brings a lot of interest,” he noted. “The older equipment – two-plus years – of good quality is bringing a real premium. Equipment has got to have the right hours and a good appearance.”

Some farmers prefer equipment that’s a bit older because they “don’t like all the computers,” Everett said. “It costs so much to get them repaired. They can’t work on the newer equipment; it’s expensive. No one has a program to fix them but the dealer.”

Financing options

Farmers are still taking out loans, but that’s slowed a bit, said Vince Bailey, senior vice president credit – agriculture underwriting – for Farm Credit Mid-America.

“There’s a lot of equipment still to move,” he said. “For agriculture in general, there’s a wide variety of financial situations. Some producers are pretty well financially stable, but others are highly leveraged. They’re not walking in with cash in hand.”

As farmers work to restructure cash flow, equipment loans that previously were for 2-3 years may now be 5-7 years, Bailey said. A few years ago, producers might have bought a combine one year and then purchased another within a year or so.

“A well-run agriculture operation should have liquidity and working capital that helps weather some storms,” he explained. “Much of that liquidity is about gone today. Farmers are trying to figure out what they need versus what they want.

“In many cases, there’s probably excess equipment capacity on farms. They have more capacity than the acres they’re farming.”

Cash is probably used less for equipment purchases as farmers are trying to conserve their cash, Rominger said. Producers may still find 0 percent financing on some equipment, he added.

“The concern in rural America is local banks are tightening up a bit,” Rominger said. “Farmers are having a hard time and the banks are seeing that. They’re cautiously tightening up to be sure no one is getting in trouble.

“Keep an eye on rural lending. That’s a concern for us.”