By MICHELE F. MIHALJEVICH

Indiana Correspondent

MILWAUKEE, Wis. — Uncertainty over weather, yields and tariffs led to mixed farm equipment sales in the first half of 2019, industry representatives and agricultural economists said.

Sales of 2-wheel-drive tractors under 40 hp were up 6.4 percent compared to the same period in 2018, according to the Assoc. of Equipment Manufacturers (AEM). Those of 40-100 hp dropped 1.4 percent, while those with 100 hp or more rose 2 percent.

Four-wheel-drive tractor sales increased 15.2 percent and self-propelled combines were up 4.5 percent. AEM released the numbers July 10.

“It’s been a funky weather year and that’s reflected in the numbers,” explained Curt Blades, senior vice president of agricultural services. “Delayed planting and all the other weather uncertainty, plus the general malaise – those are reasons for the June numbers to be soft. Uncertainty causes people to think twice about their purchasing decisions.”

Historically, equipment sales see a boost in June, he noted. “That bump didn’t happen this year. You can point to malaise and you can point to the late effect of planting. (Farmers) were working and didn’t have time to pull the trigger on a purchase.”

The increase in combine sales is a reflection of the late harvest last year, Blades said. Four-wheel-drive tractor sales rose in part due to demand from the construction sector.

The tariff disputes with China, Mexico, and Canada have had an impact, he added. “China makes headlines and it’s important to agriculture,” he said. “But it’s our No. 3 trading partner. Canada and Mexico are more important.

“If Congress were to get off dead center and get the USMCA (U.S.-Mexico-Canada Agreement) passed, that would help agriculture. The USMCA should transcend politics, but it’s been politicized.”

Based on conversations he’s had with equipment dealers, Kim Rominger, executive vice president and CEO of the United Equipment Dealers Assoc., was shocked at the sales numbers reported by AEM.

“The dealers aren’t having a lot of activity, especially on the sales side,” he said. “Depending on where you are, the weather is affecting them. There’s little activity in new or used equipment.”

For the most part, combine sales are done for the year, said Rominger, also president and CEO of the Equipment Dealers Assoc. Farmers are looking at grain prices and are concerned about their yields.

“These concerns are dragging on the agricultural economy. It’s really a big unknown – it’s hard to project (where sales will go). We do wonder if any farmers are going to cancel their orders.”

The United States needs to get trade issues resolved with China, Canada, and Mexico, Rominger said. “The burden on agriculture is high. Our position is we need to get tariffs off. We want free and fair trade. For a long time, it was free but not fair.

“We need the USMCA out of Congress and passed. That alone will cause an uptick.”

Michael Langemeier, professor of agricultural economics at Purdue University, wasn’t surprised to see sales numbers lagging for the first half of the year. The Purdue/CME Group Ag Economy Barometer for May showed only 18 percent of farmers surveyed felt it was a good time to make an equipment purchase. For June, the number was 20 percent.

“There is uncertainty about cash flow,” he said. “In general, they look at net cash flow, their income prospects, and interest rates. Interest rates have generally been low and aren’t a factor. Working capital is so low and many are not in a position to make a down payment. They don’t know if they’ll have a positive net cash flow.”

Concern over cash flow could linger into next year, he said. “We’re not going to see a big pop-up in purchases until we have more clarity in what income will look like in 2019 and 2020. Things look bright down the road, but until the situation improves, the sector is going to be sluggish.”

Equipment sales are probably a relatively good gauge of the overall farm economy, noted Patrick Westhoff, director of the University of Missouri’s Food and Agricultural Policy Research Institute.

“Farmers don’t spend hundreds of thousands of dollars on equipment if they’re feeling dismal about things,” he said. “Farmers have to ask themselves if they can do it, if they have enough cash to make a down payment. They’re also looking at their expectations for the future – they won’t buy a piece of equipment they don’t absolutely, positively need.”

Next year’s presidential campaigns and election will also provide uncertainty, Westhoff noted. The industry will look at how the election may impact trade disputes and payments to farmers, he explained.