MILWAUKEE, Wis. — Sales of combines and larger tractors through July were down from the same period in 2013, according to the Assoc. of Equipment Manufacturers (AEM). Sales of smaller tractors, meanwhile, were up over a year ago.
Self-propelled combine sales declined 15.2 percent over the same period last year, AEM stated. Sales of four-wheel-drive tractors were down 11 percent, and those of two-wheel-drive tractors with 100 hp or more fell 8.7 percent.
"I wouldn’t say I was shocked (by the numbers), but some of the negative numbers were slightly more negative than I expected," said Charlie O’Brien, senior vice president with the organization. "The numbers (for combines and larger tractors) were both down more than 10 percent. I had expected them to be in the range of 5 to 10 percent."
Two-wheel-drive tractors under 40 hp saw a sales increase of 6.6 percent, while those with 40-100 hp were up 4.2 percent. AEM, based in Milwaukee, represents about 400 agricultural equipment manufacturers and suppliers.
Sales so far in 2014 are following the same seasonal trends of previous years and of the five-year average, AEM said, with sales at their highest in April or May. The trends show sales gradually declining until another increase begins in September.
"The fall spike is due to the pre-harvest buying that goes on," O’Brien explained. "Producers also tend to buy at the end of the year when they understand what their financial position is. Summer is that lull before the storm because they don’t know what (commodity) prices are going to be or what kind of crop they’re going to have."
Larger pieces of equipment may not be selling quite as quickly as the last couple of years because many farmers, bolstered by high commodity prices and a generally strong agricultural economy, already made those purchases, O’Brien noted.
"Those larger tractors are the bread and butter of production agriculture," he explained. "That’s their livelihood. With commodity prices lower and net farm income down, they may decide they can wait another year (before making a purchase)."
The increase in sales of smaller tractors is attributable to weekend farmers who may have 10-15 acres of land, O’Brien said. "They’re looking for these compact utility tractors. They don’t need a 40-hp tractor, but they’re feeling good about the money in their pocket.
"The population as a whole has made a pretty nice recovery, and there’s more positive perception of what’s happening with the economy."
Kim Rominger, executive vice president and CEO of the Ohio-Michigan Equipment Dealers Assoc. and the Mid-America Equipment Retailers Assoc., said the dealers he represents have seen the lower sales figures AEM noted in its survey.
"It’s understandable. We’ve sold a lot of new combines in the last few years," he said. "Sales are more normal than they’ve been the last few years. I’ve emphasized to the dealers that, ‘What you’ve had for the last few years has been abnormal.’"
Rominger’s organizations represent more than 400 agricultural equipment dealers in Indiana, Kentucky, Michigan and Ohio.
Dealers as a whole are more concerned with the glut of used combines and larger equipment filling their lots than they are about new equipment sales, he said.
"It’s hard for the dealer to make a deal if he already has several (pieces of large equipment) on the lot," he stated. "You tell them to operate as normal, but that’s problematic because the outlets for used equipment are so slim."
Foreign countries have been a market in the past for used equipment from the United States, but conflicts with countries such as Russia have limited sales to those areas, he noted. "If we can’t absorb used pieces in this country, they have to go out of the country," he said. "There are some outlets; not a lot, but every little bit helps."
The excess inventory could create a bottleneck and eventually impact the sales of new equipment, O’Brien said.
"The dealer has to have the ability to take in trades and, in order to take in trades, he needs to move used inventory off the lot," he said. "It’s a little more challenging to make a trade if you have 15 combines sitting on the lot. That could impact the dealer’s ability to take more trades."
There doesn’t appear to be an easy answer to the glut of used equipment, Rominger said. "If sales would continue without a downturn in the economy and the agriculture economy, dealers might cut back on new orders," he noted. "It’s rare to sell a new combine without a trade.
"Dealers might cut back on new orders until they sell off the lot. But dealers would be pressured to sell new equipment from the manufacturers."