While questioning farm equipment dealers about indicators they’re observing and actions they would take if and when confronted with agriculture’s next big business cycle, Farm Equipment editors recently asked dealers for their views of the near-term prospects for the industry.
Specifically, we asked the dealers, “How do you rate the chances of a significant change shaping up for the farm equipment business in the next 12-24 months? Will it be up, down or somewhere in between? Why?”
Here are their responses:
“I believe the next down turn could come so fast that we could be hit like the R.V. industry was 6 years ago and lose 50% or more revenue within a few months. We have very few customers that couldn’t farm with their existing line of equipment for a number of years. I believe this can easily happen at any given time. I just don’t know when.”
— Leo Johnson, Johnson Tractor, Janesville, Wis.
“Overall, I believe we will be flat to up 5% depending on considerations of price increases. In the ag business, input costs have caught up with revenues. We will possibly see negative consequences from any Farm Bill changes. In our consumer sales, I believe we will continue to see very low growth due to reduced spendable income and lower sales to large property owners due to new tax legislation. In the construction markets for our products, again, I believe we will see a decline due to issues mentioned.”
— Randy Amosson, Precision Equipment, LLC, Muscatine, Iowa
“Very, very high [chance] there will be a downturn … 75% plus … I’m 50/50 on whether it’s a partial slow down or an all out crash. We cannot count on droughts to run the profitability of the dealership. The equipment industry has sold a pile of stuff over the last few years, and when this turns quiet, it will be extremely quiet. There will be few needs that most producers didn’t cover in the cycle. Combines will be a blood bath, closely followed by planters.”
— David Ross, Advantage Farm Equipment Ltd., Wyoming, Ontario
“Up 10% chance. Down 20% chance. Stay the same 70% chance.”
— Christopher Carnevale, McFarlanes’, Sauk City, Wis.
“100% down. Unstable grain market, unstable economy.”
— Lance Carlson, Quincy Tractor LLC, Quincy, Ill.
“It will depend on interest rates. It looks like the commodity prices over the last 3 years have become the new norm. With the current state of the world financial market, interest [rates] will go up, but it is hard to guess when. I would guess 50-60% chance a significant change will happen. I have been saying that for the past 5 years, but the market keeps climbing up.”
— Casey E. Seymour, Prairieland Partners, Hutchinson, Kan.
“As soon as the commodity market takes a downward turn, the relationship between the manufacturer and the dealer network will also change, and the shoe will have been transferred to the ‘other foot.’ As the grain market is truly a ‘worldwide’ market, from both a production and consumption standpoint, with little in reserves, this may take longer than expected.”
— Al Parolini, Coastal Tractor, Salinas, Calif.
“Probably down 20% after this fall if we get a big crop and lower grain prices because most farmers have upgraded equipment and can stop purchasing for a couple of years.”
— Karl Stuekerjuergen, J.J. Nichting Co., Pilot Grove, Iowa
“We analyze our own new and used inventory constantly. If new builds, there is usually a softening of new sales. If used turns worsen, that signals a softening of used sales or buying more trades. We cannot move fast enough and profitably.”
— Fran Romsdal, Central Sales Inc., Jamestown, N.D.
“I feel we may be on the upswing over here in the northeast where a significant portion of our business is dairy. Assuming a good harvest this year, it would appear commodity prices should come down some, milk prices are holding fairly steady, so I think that there’s some commitment to keep interest rates low for the foreseeable future. Our farmers are going to have more buying power than they’ve had in the last couple of years. I’m projecting a pretty strong 2013 into 2014 for our particular market. Our consumer confidence is a little better than it’s been. They’re not robustly confident by any means, but there is more willingness to commit to a zero percent for 60-payments on a small tractor or something like that for their lifestyle farm.”
— Brian Carpenter, Champlain Valley Equipment, Middlebury, Vt.
“Maybe I’ve over-predicted that a downturn was coming, but there will be one; there’s about a 60% chance of change. It won’t be as drastic as it was in the ‘80s because the debt-to-asset ratio with farmers is one of the lowest levels ever and interest rates are probably going to remain low for a while. There are a lot of things that look good, but there probably will be somewhat of a correction in the other direction,”
— Don Athen, A&M Green Power, Pacific Junction, Iowa
“We see a moderate trend upward in the next 12-24 months, but the pace of growth is going to slow down some. The demand will still be good. We’re breaking records every year right now, but I don’t think we’ll be smashing records every single year [going forward].”
— Clint Schnoor, Agri-Service, Twin Falls, Idaho
“Unless we see some really poor growing conditions for a second year in a row or some kind of geopolitical turmoil, I don’t see anything that’s going to really adversely impact what’s been going on. I would expect a little more of the same for the next 12-24 months. I don’t see any decline in the demand for grain; the world still needs a food supply, there is still demand for corn for ethanol. I would anticipate interest rates continuing to be very low for the next 12-24 months.”
— Mike Hedge, Birkey’s Farm Stores, Champaign, Ill.
“That’s a huge question. I honestly believe that 2013 will shape up to be pretty close to what we had in 2012. The general sense right now is a little nervousness because they can’t get in the fields and plant, but some of the nervousness has subsided just because there’s a little moisture in the ground. Commodity prices are coming up a little bit and I think 2013 is going to remain pretty consistent with 2012. At the end of the year we’ll be happy with most of the results, I would say.
“From a farming standpoint, I would say in 2014 there is a likelihood that it’ll be down in comparison to ’12 and ’13. How much? Probably not significantly. There might be a little bit of a reset in the marketplace from a dealer perspective just because of inventory levels. But I would say maybe 5% or so; I wouldn’t call it overly significant from a farming perspective. I would certainly think that there’s going to be dealers that may call it significant because they haven’t managed their inventories like they should have, but there’s also going to be dealers that are out there looking for great opportunities.”
— Kent Senf, C&B Operations, Gettysburg, S.D.
“The last couple years we’ve projected only about a 5% increase or flat sales because we had a strong economy on the ag side of it, and of course each of the last 2 years we’ve been proven wrong and we’ve grown it closer to 10-15% if not higher depending on the store and the location. In 2012, we looked at it as, ‘We had significant sales growth last year in same-store sales and looking at commodity prices and weather conditions in our area, we felt it was going to be flat to up 5%, and I would say that’s true over the next couple years barring some global occurrence or something.”
— Graham Drake, Cervus Equipment Corp., Calgary, Alberta