Equipment Manufacturers Hint at the Start of a Recovery

2/20/18 Ag Equipment Trends

The start of 2018 is showing a hanging of tides for the U.S. equipment market.

“The used equipment market seems to be coming back,” said Aaron Plattner, sales manager for Ag-Power Inc., a John Deere equipment dealer in Higginsville, Mo. “I felt like the last few years we hit the lull, and we started seeing it in harvest last year of the comeback in used equipment.”

It’s the “better than expected” storyline of planter, sprayer and tractor sales that’s playing out on Ag-Power’s lot.

“It seems like the older series tractors, their values are going through the roof,” he said.

Deere and Company’s latest earnings report showed a 23 percent jump in sales for the first quarter of 2018. Looking forward, the company is forecasting a 29 percent increase in equipment sales for the year, including a 10 percent bump in agriculture equipment sales in both the U.S. and Canada.

“I thought we were still maybe 12 months out, and they're [used equipment prices] coming back a little sooner than I thought,” said Plattner.

Ag-Power says the only sector still lagging is the combine market. He anticipates it will take another harvest season before the excess combines will be cleared. However, John Deere says nationwide more people are reentering the market to buy.

“If we look at the roll and the trade cycles that have gone on throughout our industry, people who were already considering that now might be the time to jump in a new combine, are now more serious,” said Cyndee Smiley, North American Ag & Turf media relations and communication manager for John Deere. “Having a new model combine with new technology has really helped people make that confident decision to buy new for ‘18.”

The Association of Equipment Manufacturers (AEM) revealing a similar trend. The latest AEM Flash Report showing an 11.7 percent jump in combine sales in January. Companies like Case IH are also experiencing that trend.

“When we have producers looking at their combine, and that they maybe have not traded based on the last two to three years, what we've seen is that uptick those customers with enough hours on the machine, they want that maximum uptime, durability, reliability, so they've actually come in and replaced that machine or they're thinking about replacing that machine,” said Leo Bose, harvesting marketing manager for Case IH.

Bose says while more people are seriously considering buying, there are producers who are still opting out of making large purchases this year, and instead, making smaller upgrades.

“We knew that producers are getting to the point where they're going to have to make some tough decisions, whether it was actually replacing the internal components of that machine or then looking at some of the new features,” said Bose.

Some of the new features include a narrow-row corn head just introduced by Case, catering to the farmers choosing to go with 20-inch narrow inch rows. It’s agronomic decisions also driving purchasing decisions this year.

“What we saw was some people were starting to analyze from an agronomic aspect the tractors they really needed,” said Tiffany Turner, John Deere product marketing manager for large ag tractors. “Traditionally wheels is the way many folks went, and then it went to two tracks and now many folks are looking at like our 9RX narrow- and our wide- to really think about how the agronomic impact of those units can really help their operation.”

AGCO says two main sectors are building momentum for the company this year: the commercial hay business and the application equipment.

“Part of that is being driven by some of the new products being introduced, but also by some of the issues that are customers are facing out there today,” said David Webster, director of national accounts for AGCO North America.

One of those issues is dicamba and having newer technology that helps with spraying precision. He says it’s not just ag retailers coming to the market to buy newer sprayers, but the increase in cotton acres is also translating into more sprayer sales for the company.

There is also excitement growing in the hay market, as hay exports are exploding.

“That's good news for our commercial hay business, because a lot of our farmers are exporting the product,” said Webster. “As they're looking to upgrade, they're looking for improvement in efficiency.”

AGCO just introduced a new ultra high density baler in February, showcasing the technology by crushing a car into the size of a hay bale. Webster says the demonstrations proof of how the new technology and makes bales more cost-effective to ship.

“Increased efficiency is from bale density, and it's also critical that you can maintain consistency in bale length,” said Webster. “If you have a bale that's six inches or three inches too long, you can’t get the doors closed on the container.”

From combines to hay equipment to sprayers, the narrative of somber equipment sales is turning into more positive numbers.

“We feel like machinery sales are going to keep ticking up,” said Plattner. “I don't want to say we are going to hit that bell curve and take off, planters and sprayer sales are really strong right now.”

Equipment manufactures aren’t banking on a fully recovered market in 2018, but the hint of higher sales is providing a glimmer of optimism in the new year.