In the latest episode we discuss Farm Credit Canada’s outlook for ag equipment sales in 2016 and 2017, the results of the latest Strip-Till Operational Practices Benchmark and the Precision Farming Dealer Benchmark studies, some positive signs in the latest Dealer Sentiments & Business Conditions Update and how concerned producers are over the impact of severe weather on crop yields this year.
On The Record is brought to you by AgDirect.
Built for agriculture and powered by Farm Credit, AgDirect serves the ag equipment financing needs of equipment dealers across most areas of the U.S. It’s among the fastest-growing equipment financing programs of its kind – offering equipment dealers and manufacturers a reliable, risk-free source of credit for equipment financing and leasing on ag equipment – including irrigation systems. Along with attractive rates, AgDirect’s financing terms are among the most flexible in the ag equipment business – matching the income stream of ag producers.
Discover why more dealers and their customers are choosing AgDirect to finance, lease and refinance ag equipment by visiting AgDirect.com.
We're interested in getting your feedback. Please feel free to send along any suggestions or story ideas. You can send comments to email@example.com.
You May Also Be Interested In...
Willie's Farm Repair took on the Versatile line in 2013 and quickly discovered there was a well-established customer base waiting for a dealer.
I’m managing editor Kim Schmidt, welcome to On The Record. Here’s a look at what’s currently impacting the ag equipment industry.
Canadian Ag Equipment Sales to Improve in 2017
Farm Credit Canada released its outlook for 2016 and 2017 farm equipment sales in Canada. The group has a mixed outlook for 2016 sales, relative to 2015 and projects total farm equipment sales to be down 7.1%, combine sales to be down 5.2% and 4WD tractor sales to increase by 24.5%.
AFN: $39.88 -0.36
Closing Stocks as of 07/08/16 (Compared to Close on 06/23/16)
It is important to note that while total farm equipment and combine sales are a leading indicator of farm health, 4WD tractor sales are not. Despite the declines predicted in 2016, FCC says Canadian farm equipment sales for the year will still be in line with the 10-year average.
Looking to 2017, their outlook is for total farm equipment sales in Canada to be up by 7%, combine sales to be up 8.9% and 4WD tractor sales to increase 2.4%.
J.P. Gervais, FCC chief agricultural economist, shared some insights on farm equipment sales and how they relate to farm health.
“Farm equipment sales are a leading indicator of farm health. The slowdown in 2015, I would say, was more the result of expectations that farm income would be softer than an actual decline in farm cash receipts. While producers, manufacturers and dealers must exercise caution in the current economic environment, the strength of demand for agricultural commodities at low interest rates and the Canadian dollar stabilizing in the range of 75-80 U.S. cents, those are factors that should trigger an improvement in the market for new farm equipment.”
Dealers Target Precision Growth Needs
As farm equipment dealers continue to emphasize areas of opportunity, precision growth remains a priority for many. So what areas are dealers targeting as long-term precision profit centers?
According to the recently published 4th Annual Precision Farming Dealer benchmark study, dealers view variable-rate systems, seeding and application technology as their best bets for increasing revenue during the next 5 years.
Based on a categorical evaluation by dealers, variable-rate planting and fertilizing technology topped the list with 64% identifying this area as most important or important for precision growth.
Ranking second was planter and seeding control systems at just over 60%, followed by application technology hardware at about 52%. Rounding out the top 5 were data management service at 46% and GPS and guidance systems at about 42%.
Looking at how these rankings compare to last year’s benchmark study, variable-rate technology again topped of the list, with more than 70% of dealers viewing this area as most important or important. Planter and seeding control ranked second at just over 58%, followed by a third place tie between application technology and data management service, both with about 55%.
Rounding out the top 5 last year, were GPS and guidance at 50% and signal subscriptions at about 46%.
Even as dealers begin to transition into more service-based revenue sources, it’s clear that many will continue to rely on hardware and components as the backbone for precision revenue in the coming years.
Strip-Tillers Increasing Equipment Size
The results of Strip-Till Farmer’s 3rd Annual Strip-Till Operational Practices Benchmark Study show that for the second year in a row, farmers increased the number of acres they strip-tilled. Overall, survey respondents strip-tilled 1,139 acres on average compared to 948 in 2015.
With that increase in acreage, comes an increase in equipment size. While 12-row strip-till rigs remained the most popular size, 37.5% of farmers used 16- or 24-row machines, an increase over previous years.
The most commonly used brand of equipment by strip-tillers was Kuhn Krause for the second year in a row at 20.7%, followed by Case IH/DMI, Orthman, Dawn Equipment and Environmental Tillage. Thurston-Blu Jet rounded out the top five.
The complete results of the study will be published in the August issue of No-Till Farmer’s Conservation Tillage Guide.
Dealer Sentiment Shows Improvements
Ag Equipment Intelligence’s latest Dealer Sentiments & Business Conditions Update, which was released on June 30, revealed some positive signs, likely due to the recent rally in grain prices.
According to the June report, a net 4% of dealers were less optimistic compared to the month prior. This is the best we’ve seen the Dealer Optimism Index since May of 2014 when a net 5% of dealers were less optimistic. The last time the index was positive was in March 2014 when a net 3% of dealers were more optimistic than the month prior.
Dealer ales growth also saw improvements. Average dealer sales were down 6% in May, an improvement from down 10% in April. This is the highest reading for dealer sales since March 2015 when dealers reported a sales decline of 8%.
One dealer commented, “The recent grain price rally has us more optimistic on 2016. We’ve seen a good run in corn and soybeans. I hope farmers are locking in some of their profits, as we could see a tumble late in the summer.”
Concerns Over Severe Weather
Purdue University’s Center for Commercial Agriculture released its latest Ag Economy Barometer on July 5. The latest survey, conducted in June, included questions about the likelihood of widespread, adverse impacts on 2016 crop yields associated with extreme weather events, such as those related El Nino or La Nina.
Responses were scaled from 1 to 9, with 1 being “very unlikely” and 9 being “very likely.” Forty-four percent of respondents said widespread, adverse impacts on crop yields this year were at least somewhat likely.
Producers were also asked a similar question but as it relates to their local area over the next 12 months. Just over half reported they expect extreme weather to reduce crop yields in 2016. Last year, 47% of producers surveyed said extreme weather adversely impacted local crop yields in 2015.
Nearly 30% of respondents reported making some changes in their marketing plans as a result of their concerns over extreme weather.
Implement & Tractor Archives
Charles Gause, former vice president of marketing for John Deere, worked for the company for 40 years from 1962-2002.
He began as a territory manager, responsible for 12 dealers in southeast Kansas before working his way up the ladder. During an interview with Farm Equipment editors back in 2012, Gause recalled the differences in prices of combines from when he started in the ‘60s to the 21st century.
“The price of those combines pretty much matched their model numbers,” Gause said. “A model 45 was about $4,500 list price and a 55 was roughly $5,500 list price.” Today the model number and base price for John Deere combines don’t match. For comparison sake, a 2016 John Deere S690 Combine HX has a base price of $492,901.
We always like hearing from you. You can send comments and story suggestions to firstname.lastname@example.org. Thanks for watching, I’ll see you next time.