Our data bases include information for tractor sales which are derived from AEM’s monthly Flash Reports and dates back to 1969, USDA reported net farm income that dates back to 1969 and U.S. Department of Labor’s GDP data that dates from 1970. We also house information from USDA Agricultural Censuses from 1978 to 2017. All of this data is essential in making a reasonable forecast for the industry.
Our models consists of historic data models that track net farm income, net farm cash income, commodity prices, currency exchange rates, worldwide agricultural market data and other factors that influence the purchase of tractors and combines within the United States. These models undergo regular examination to make certain that they are tracking the changes that occur in the markets over time and often require some adjustments that range from minor tweaking to major overhauls, depending upon the changes observed.
Under 40 HP Tractors
For the past decade these smallest tractors have historically measured more than 55% of the total tractors sold within the U.S. and we expect this class will represent 63% of the total number of tractors sold in 2023. The principal purchasers of these units are Lifestyle Farmers, who are actually not farmers but derive the majority, if not all, of their income from sources other than farm income. Certainly there are other buyers of this class of tractors such as landscape contractors, general contractors and governmental agencies and specialty farmers but the Lifestyle Farmers purchase the majority of these tractors.
The U.S. general economy has endured growing inflationary pressures in 2022 and those are expected to continue well into 2023. The shelter-in-place orders of 2020 and 2021 were lifted in 2022 as lifestyle farmers spent their available funds on vacation travels and other items that were limited for the past several years. As prices rise for the vast majority of the products that these consumers require cash available for investment in tractors and equipment will be reduced in 2023.
Under 40 HP Retail Forecast: 187,683
40 to 100 HP Tractors
This category represents a wide range of horsepower and applications for these tractors. Our research has shown that the lower horsepower range (40 – 60 HP) has been purchased predominantly by Lifestyle Farmers and we anticipate this to be the case in 2023. This lower range of tractors will represent a large percentage of the growth in total number of tractors sold within this category next year and is driven by the U.S. general economy.
Production farmers make up a large purchasing group in this category and their purchases are affected by the net farm income produced in 2022. The increasing costs of inputs required for crops in 2023, along with the steadily increasing price of the tractors and equipment and the increasing interest costs will hold down purchases by this group of farmers in 2023.
40 – 100 HP Retail Forecast: 72,658
100+ HP 2 WD
The producers who purchase this category of tractors are typically the larger farmers in terms of acres and total income. They also are ones who are more likely to take advantage of available crop insurance programs and hedging activities. These producers will have the available financial resources to purchase new tractors but their purchases will be tempered by the future cost related to producing their crops, interest rates for financing their equipment purchases and the increasing cost of new tractors in 2023.
There are an increasing number of farmers who acquire equipment through lease contracts and that will continue to provide for replacement units within this segment of tractors as those agreements mature.
100 HP Retail Forecast: 27,203
4 Wheel Drive Tractors
These very largest tractors showed a measure of strength in 2022 and we anticipate this growth to continue into 2023. The purchasers of these units are the largest farmers and are ones who generate a net income that surpassed their living expenses and general production expenses and do have available capital to invest in new equipment. These farmers have also shown a propensity of moving to lease agreements in acquiring these tractors in the past and that will most like grow in 2023. This will contribute to a steady replacement market within this category in 2023 and in the future.
4WD Retail Forecast: 3,481
Combines sales are totally dependent upon a strong commodity market and the resulting growth in net farm income. Many retail sales in recent years have been lease contracts and that has helped to maintain the level of sales on a rather consistent basis but has shortened the traditional length of ownership for these units which suggested increased sales in 2023.
The current problems associated with shipment of grains from farm to port for export sales and the steadily increasing cost of diesel fuel has created concern among these buyers. Combine sales in 2022 has been steady and it is anticipated that will be the case in 2023.
Combines Retail Forecast: 7,657
As we have done in the past, these total numbers will be our final forecast for 2023 and we will spread the monthly forecasts after the release by AEM of the December Flash Reports in early January, 2023. Those monthly numbers will be shown in our January 2023 monthly analysis reported in early February and will not change in the ensuing months of 2023.