By MICHELE F. MIHALJEVICH
MILWAUKEE, Wis. — Sales of tractors and combines increased in 2018, according to statistics from the Assoc. of Equipment Manufacturers (AEM).
Self-propelled combine sales were up 16.6 percent through November 2018 for the same period in 2017, AEM said in its mid-December sales report. Four-wheel-drive tractors rose 15.9 percent while two-wheel-drives under 40 hp increased 9.3 percent. Two-wheel-drive tractors with 100 hp or more rose 5.5 percent, while those of 40-100 hp were up 1.4 percent.
Representatives of equipment manufacturers and dealers said they are optimistic about the industry for 2019 but caution that continued low commodity prices and tariffs could impact sales moving forward.
“It’s not the growth we’d like to see if the ag economy were kicking on all cylinders,” explained Curt Blades, AEM senior vice president of agricultural services. “We are pleasantly surprised at the numbers, given how many negative things are out there with the ag economy. I’m pretty optimistic we’re going to see a turnaround.”
He said the challenges faced by the farm equipment industry may be summarized in one word: Uncertainty.
“Early last year, we were optimistic,” Blades noted. “Tax relief was on its way. That turned out to be really good. In February, we started to hear discussions about RINs (Renewable Identification Numbers) and renewable fuels. That led to uncertainty in the corn market.
“After that came the steel and aluminum tariffs and then the retaliatory tariffs on soybeans. This was all in the first and second quarters of the year. There was more uncertainty not knowing what the farm bill was going to look like and if the safety net would be there; that was another problem.”
With the passage of the farm bill and the possibility China will buy some U.S. soybeans, some of that uncertainty is starting to become clearer, Blades pointed out.
The industry also had to deal with increased costs brought on by the steel and aluminum tariffs. “Most of our members did a good job of trying to control costs (related to tariffs),” Blades stated. “Some may have absorbed costs, while others pre-purchased steel and aluminum before the tariffs went into effect.”
Overall, Sloan Implement Co., headquartered in Assumption, Ill., had a good year in 2018, said Grant Tice, the company’s sales manager. Sloan has 20 locations in Illinois and Wisconsin.
“We started the year with a lot more optimism regarding the farm economy,” he noted. “In our area of the Midwest, yields were extremely good. We were fighting the headwinds of commodity prices, tariffs and trade deals. But farmers were optimistic because they grew a lot of bushels.”
Commodity prices are the primary concern for farmers and those selling farm equipment, Tice said.
“Our farmers continue to adopt technology, whether for inputs on seed and fertilizer or on equipment. They’re trying to maximize their return on every acre. Trade challenges have led to deterioration in commodity prices. We’ve had increases in steel prices, and steel is still the main ingredient in equipment.”
New and used planters and sprayers sold well in 2018, he said. Combines and four-wheel-drive tractors were a little slow. “You always have to be optimistic but, realistically, I think the ag market will be strong. Technology continues to grow. Farmers have to adapt at a quicker pace,” he added.
Last year was a pretty good one for most dealers, but larger agricultural equipment was still a struggle to sell, said Kim Rominger, executive vice president and CEO of the United Equipment Dealers Assoc. (UEDA). The organization represents dealers in Indiana, Kentucky, Michigan and Ohio.
“The dealers were able to work their way through used equipment and they were a little cautious in taking equipment in trade and in valuing trades,” he explained. “They’ve become better at managing. They’re not overloading in used equipment.”
Rominger is also president and CEO of the Equipment Dealers Assoc., which represents 4,500 dealers in the United States and Canada.
The key pressure is commodity prices, he said. “Producers haven’t made a great deal of money, but they’ve been breaking even. They’ve been keeping equipment a year or two longer than they may have in the past.
“The unknown factor is credit. Will they have enough money to put a crop out? Will they be able to get their farm loans?”
Rominger expects the first half of 2019 to go fairly well for farm equipment dealers. “The economy is on the uptick. Farmers have grain in their bins. An increase in (commodity) prices would be good. If things continue as they are, I don’t expect any huge ups or downs.
“I see a gradual uptick in sales as long as things stay as they are and as long as no major calamity occurs.”