By MICHELE F. MIHALJEVICH

Indiana Correspondent

MILWAUKEE, Wis. — Farm equipment manufacturers may have to make the choice to raise prices if the tariff situation isn’t resolved soon, according to an official with the Assoc. of Equipment Manufacturers (AEM).

“Most manufacturers don’t want to have to raise prices,” explained Curt Blades, AEM senior vice president for agricultural services. “If they see (the tariffs) as a short-term issue, they may try to hold off. But if it continues, they’re probably going to have to change.

“If the cost of goods goes up 20 percent, they have no choice but to raise their prices.”

An increase in steel and aluminum prices was expected before the tariffs were put into place, he noted. Some manufacturers may try to get steel and aluminum from countries not impacted by tariffs.

“That varies by manufacturer to manufacturer. They have to look at the manufacturing specs for their particular piece of equipment,” he said. “Optimism – or pessimism – also varies from manufacturer to manufacturer. The members who typically take orders for equipment during this time period are feeling pretty pessimistic.

“But those who tend to take orders later in the fall are still pretty neutral. They hope it will all be settled by then.”

Earlier this year, President Trump imposed tariffs on steel and aluminum from Canada, Mexico and Europe. More recently, he said the United States and Mexico had reached agreement on a revised trade pact between the two countries. The steel and aluminum tariffs were reportedly not addressed in the agreement.

Sloan Implement, based in Assumption, Ill., is a John Deere dealer. The company has been told by Deere that 2019 prices for tillage equipment, sprayers, planters and combines will go up 4.5-5.5 percent, according to Grant Tice, sales manager. Normally Deere’s prices go up about 2-3 percent annually, he noted.

“Is the price increase the result of tariffs or the result of demand? Probably a little bit of both,” he said. “Prices for tillage equipment, planters and sprayers – those were announced before the tariffs came out.”

He expects a larger-than-average price increase from all manufacturers. “It’s a challenge for farmers to see prices (of equipment) go up,” Tice said. “The price of the commodities they sell is still significantly down.”

The latest farm equipment sales numbers from AEM show increases in all categories, but Blades said tariffs weren’t built into the data released in mid-August.

“I fully expect (the tariffs) to manifest themselves in future reports,” he added. “The low commodity prices haven’t hit yet. Many are not actively selling their grain right now.

“I’m happy to see (the numbers). I want to be guarded in my optimism. The numbers are what they are. We’re at high sales across all the categories, and that is fantastic.”

Sales of all two-wheel-drive tractors were up 7.4 percent through July of this year, compared to the same period a year ago, AEM said. Four-wheel-drive tractor sales increased 12.7 percent and self-propelled combine sales rose 23.7 percent.

Tice said a number of Sloan Implement’s customers are fairly confident the tariff disputes will be resolved. “There’s still optimism,” he explained. “We’re growing some really nice crops out there. That is tempered by lagging commodity prices.”

Some of the equipment purchases noted in the most recent AEM sales report actually occurred earlier this year, Tice pointed out. Producers may not take ownership of some new equipment until several months after it was ordered.

“Overall, we’re having a good summer. A lot of that is bushels-related. We’ve already seen some orders placed for planters for next year. December is definitely our busiest month. Harvest is finished and farmers have a chance to get their numbers in line. Then they’ll look at possible purchases.”

Farmers are seeing price increases on such items as storage bins, said Wally Tyner, a Purdue University agricultural economist. He’s heard about increases of as much as $5,000 for a bin made of steel and aluminum.

“It’ll vary by industry and by the extent of the competition, but manufacturers will try to eat a part (of any tariff-related price increase), but a good part of it has to be passed on,” Tyner said. “The broader the tariffs get, the more tariffs are applied, the harder it is to back out.”

His biggest concern is the impact of the tariffs sticking around longer-term. “If tariffs are around, say, three years, we’re going to lose substantial grain production to Brazil. Once we lose it, we may never get it back.”