In our latest newscast we take an inside look at the Cuban ag market, what it means for manufacturers if the U.S. Export-Import Bank is not reauthorized, dealers' 2016 outlook for precision farming sales and how worldwide tractor sales compare to North America.
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I'm managing editor Kim Schmidt, welcome to On the Record. Here’s a look at what’s currently impacting the ag equipment industry.
AFN: $36.02 –1.75
Looking Inside Cuban Ag Market
Following the announcement in late 2014 by the White House to move toward normalized relations with Cuba after 50 years — including specific language on farm equipment — an Illinois agribusiness group organized a 4-day trade tour in mid-October that included government officials, agribusiness and farm commodity groups.
Ag Equipment Intelligence caught up with Marion Calmer, CEO of Calmer Corn Heads, on his personal observations on the ag sector of the small country, located just 90 miles from Florida.
“Now their tractors, at least the group we were with they had about 5 tractors all very small equipment, 10 foot wide, a lot of tillage, the soil was red so I think that means it’s got a lot of iron in it.
"Their aquifer was pretty close to the surface so there was a lot of irrigation, and that be able to help them out there a little bit. But their tractors had come from Russia, the last one’s they had bought, and they were over 50 years old.
"And I guess, as we as farmers would put it, they had to cobble them back together or sacrifice one tractor to have parts to keep the rest running. It was still pretty primitive.”
Calmer says the word credit was mentioned in nearly every meeting the group had, which concerned him. He warns anyone who decides to start doing business with Cuba should be cautious and make sure the buyers have the ability to make payment on any machinery they might buy.
Dealers on the Move
Dealers on the Move this week include Company Wrench, Deerland and Ag-Pro Companies.
Company Wrench, headquartered in Caroll, Ohio, will now offer JCB’s full line of equipment in Columbia, S.C., and Raleigh and Charlotte, N.C.
Deerland, headquartered in Fort Saskatchewan, Alta., joined JCB’s dealer network as Deerland JCB. The dealership will now offer JCB telescopic handlers, wheel loaders, telemasters, skid steers and compact track loaders.
John Deere dealer group Ag-Pro is constructing a new headquarters facility in Thomas County, Ga. Ag-Pro has a total of 35 locations across Georgia, Florida, South Carolina and Texas.
Loss of Ex-Im Bank Will Hurt U.S. Ag Manufacturers
The Export-Import Bank's charter expired in July. The future of the program could be revisited as soon as next Monday, after a House coalition reported that it had enough votes to force the issue.
The Ex-Im Bank was created to help U.S. companies sell their goods and services in foreign countries by providing financing for export deals. U.S. ag equipment manufacturers are eager to see the bank reauthorized.
Andy Randle, president of Ace Pump, says his company had been working with Ex-Im Bank since 2000 and it had allowed them to enter higher risk markets like Argentina and Ukraine. The fees associated with private firms are much more expensive, making doing international business more challenging, he says"
“We’ve been approached by several private companies, and we’ve found it’s quite expensive in the private market compared to what we’ve been able to do through Ex-Im in the past. We’re looking at almost a minimum $20,000 policy where with Ex=Im you pay as you use it, basically. It definitely has some benefits and you’ve got the U.S. government standing behind the collections.
"The Ex-Im is definitely for a small manufacturer like us is the best and most economical way to approach some of those riskier world markets.”
If the Ex-Im Bank is not renewed, jobs will shift to countries such as Canada, John Miller, former president and CEO of Miller St. Nazianz, which was acquired by CNH last December, told the Milwaukee Journal-Sentinel. While that is bad news for the U.S., it could be good for Canada, whose Export Development Canada is one of the most trade-friendly agencies in the world, according to Miller.
AGCO’s Martin Richenhagen echoed Miller’s sentiments, telling the Atlanta Business Journal, “This is just the beginning. In the future, if we don’t get Ex-Im Bank coverage, I think there will be plenty of jobs in America that will disappear.”
Richenhagen says the lack of an export credit agency is just another disadvantage for U.S. manufacturing on top of bad tax laws and a lack of repatriation on foreign earnings.
We’ll have more info on Farm-Equipment.com as news breaks on the status of the Ex-Im Bank.
Precision Outlook for 2016
In the midst of an overall slowdown in the ag equipment market, precision farming could prove to be a bright spot for dealers. While North American retailers forecast another challenging year for new equipment sales, technology sales are projected to rebound at a quicker pace, according to Ag Equipment Intelligence’s 2016 Dealer Business Outlook & Trends report.
GPS and precision farming ranked second on dealers’ list of best bets for improving unit sales in 2016, compared to eighth place last year. Nearly one-third of North American dealers project an increase of at least 2% in precision sales in 2016 according to the report.
However, U.S. dealers are slightly less optimistic that precision sales will be as robust in 2016, compared to prior years. About 36% of dealers projected an increase in precision sales in 2015, compared to 30% this year, according to the report.
One contributing factor, according to Jason Hecht, equipment manager with Birkey’s Farm Store in Illinois, is that more farm machinery is coming from the factory already equipped with precision technology.
This has influenced the dealership’s volume of aftermarket hardware sales — a trend that Hecht expects will continue into the foreseeable future. But he also sees areas where precision sales and service can help bolster the dealership’s bottom line in 2016.
“The opportunity is on the planting side of the business, with Precision Planting planters. Case IH planters are now available from the factory, precision ready and we can equip them at the dealership with field installed packages and that’s our biggest area of growth and where we see that business trending.”
Although the overall ag equipment market may take several years to fully recover, avenues to increase precision sales may be more readily available for dealers as a supplemental or even independent source of revenue.
Worldwide Tractor Sales Still Slumping
The Association of Equipment Manufacturers reported last week that the sale of farm tractors in North America continued to decline through the first 9 months of 2015. AEM reports the total year-over-year tractor sales in the U.S. and Canada fell 13% in September.
But farm equipment dealers in the U.S. and Canada aren’t alone when it comes to slumping sales.
Tractor sales in Germany declined 27% year-over-year in September, while sales in France fell by 3% and sales in the U.K. dropped by 29%.
Year-over-year tractor sales fell 28% in Brazil. Russian sales of farm tractors were off 30% in August.
Ag Equipment Archives
In 1960, Elof Karlsson and Mel Van Buskirk conceptualized a way to make a more efficient combine for picking corn by using a rotating cylinder in a corn picker and sheller for a simpler and more robust spiral system.
In 1961, they began building the machine, which would come to be known as the 2MX Corn Picker/Sheller, for International Harvester. Because competition was tight among manufacturers for combine production at the time and engineers were known to steal each other’s work, the 2MX was developed and constructed in secret in a dairy barn with only the key engineers being allowed entry.
The project was none-the-less scrapped in 1962 because the corn sheller International Harvester already had on the market was lower cost.
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