By Michele F. Mihaljevich
MILWAUKEE, Wis. – Despite continuing supply chain issues and rising global tensions, farm machinery manufacturers are generally optimistic about sales in 2022, according to an official with the Association of Equipment Manufacturers (AEM).
Of the organization’s agriculture equipment members who responded to a January 2022 survey, 91 percent expected growth to continue, said Benjamin Duyck, AEM’s director of market intelligence. Eighty-one percent expected year-over-year growth.
In addition to problems with the supply chain and the Russian invasion of Ukraine, Duyck said COVID-19, labor shortages and inflation could impact sales.
“Whether growth is as strong as 2021 remains to be seen,” he said. “There are always going to be obstacles, but farmers are going to need equipment.”
Last year, sales of self-propelled tractors were up 24.7 percent over 2020, AEM said. Four-wheel-drive tractors, as well as larger two-wheel-drive models, had double-digit increases. Sales of smaller tractors under 40 HP rose 8.9 percent.
For the first two months of 2022, sales of all two-wheel-drive tractors were up 5.1 percent over the same period in 2021, according to AEM. Four-wheel-drive sales were unchanged from a year ago, and combine sales were down nearly 26 percent.
According to data collected by AEM in early February – before Russia invaded Ukraine – equipment production grew in 2021, but was impacted roughly 10-15 percent due to supply chain issues, Duyck said. “The numbers could be along the same line in 2022,” he noted. “Demand for farm equipment is certainly there, but supply chain issues could mean longer lead times.
“Anything that causes instability impacts ag sales. Manufacturers don’t just sell in the United States; they also export. Prior to the (Russia-Ukraine) crisis, AEM members responding to a survey thought supply chain issues might have eased in mid- to late-2023. I’m optimistic. Manufacturers are concerned about getting equipment to farmers and increasing lead time.”
The cost of agriculture equipment has seen an 11.7 percent year-over-year increase, according to AEM. Input costs are also rising for agriculture equipment users, he said. “Efficiency is really the name of the game. I would think it would be in the best interest of farmers to think about how they could utilize new technologies. Also, they should perform preventive maintenance to keep their equipment running longer.”
Farmers should take a look around their operations to see if there’s equipment they aren’t using and consider selling it, Duyck added. Farmers can get a good deal now on their used equipment as dealer inventories are low.
In addition, a recent association survey of its agriculture members found 90 percent had dealt with problems in hiring. The survey’s respondents suggested several options to help alleviate the problem, AEM said, including internships, higher wages, bonuses, flexible hours and marketing and recruitment efforts.
The Russian invasion of Ukraine will probably lead to a decrease in the global economy, he said. In 2021, the global economy increased by 5.1 percent. Before the invasion, a growth rate of 3.9 percent was projected for 2022.
“Expansion or contraction (of the global economy) by itself does not have a direct impact on agriculture equipment sales,” Duyck noted. “Naturally, an expanding economy is much better for farm equipment sales. However, it is just one of many things impacting sales.”
The Russia-Ukraine region produces a lot of wheat, but the area is responsible for other commodities used by farmers and the agriculture industry, he said. For example, Russia is an exporter of several metals. Ukraine produces about 70 percent of the world’s neon, which is used in the manufacture of semi-conductors.