MILWAUKEE, Wis. – Rising interest rates and inflation may be causing some farmers to re-think their plans to purchase farm equipment, but the primary reason for some sales declines so far this year continues to be demand outpacing inventory, according to the head of the North American Equipment Dealers Association.

Supply chain issues plus problems finding workers are impacting the ability of manufacturers to deliver equipment to dealer lots, said Kim Rominger, president and CEO of the group.

“The segments are down not because of demand but because of availability,” he explained. “Manufacturers tell us production capacity is down. They’re having problems getting parts and labor. They’re behind on orders. All manufacturers could sell more if they could get the product to dealers. Customers, if they can’t find what they want at one brand, are going to another brand. That’s just compounding the problem.”

Sales of two-wheel-drive tractors under 40 HP were down 17.5 percent through September of this year compared with the same period in 2021, according to the Association of Equipment Manufacturers (AEM). Two-wheel-drive tractors of 40-100 HP fell 12.4 percent, while those of 100 HP or more rose 11.6 percent. Four-wheel-drive tractor sales dropped 10.6 percent while self-propelled combines were up 3.4 percent. AEM’s report was released Oct. 11.

“It’s extremely frustrating for dealers from a customer relations standpoint,” Rominger noted. “A dealer can’t give a firm arrival date or availability to a customer. In many cases, they can’t give a firm price. They tell the customer they will notify them of the date or when they have a price.”

Curt Blades, AEM’s senior vice president of agriculture, said the agricultural equipment market is turbulent, as are most markets for manufactured goods. “Farmers want to take advantage of the efficiency gains and technology that new equipment brings to their operations, especially with commodity markets being as positive as they are,” he said in a release. “However, supply chain difficulties continue to weigh on our member manufacturers’ deliveries.”

The industry continues to deal with a shortage of electronic chips and other parts, Rominger noted. “It’s just a mess. The world’s supply chain is a mess. In all my years, I haven’t seen anything like it.”

In the most recent Purdue University/CME Group Ag Economy Barometer, quite a few producers indicated now is not a good time to make investments, including new equipment or buildings, in their operations. Of the farmers who indicated it was not a good time, 46 percent said it was due to increasing prices for farm machinery and new construction. Rising interest rates were cited by 21 percent, up from 14 percent in August. The latest monthly barometer was released Oct. 4.

Producers did show some signs of optimism when it comes to their plans for farm machinery purchases, said James Mintert, director of Purdue’s Center for Commercial Agriculture. “Back in March, 62 percent of the producers in our survey said they planned to reduce their purchases compared to a year earlier,” he said. “This month, just 47 percent said they were going to reduce their purchases.”

Michael Langemeier, the center’s associate director, said the percentage of producers who think this is a good time to buy farm equipment is at an all time low.

“High prices and rising interest rates are impacting that,” he explained. “Typically, higher net income is a good time to buy equipment and buildings, but those higher prices and interest rates are holding at least some people back. I think that would not be the case had we not had a run up in prices and interest rates.”

Rominger said he thinks farm machinery prices have gone up, in general, 5-8 percent over the past year. Under more normal circumstances, depending on the model, prices might increase 2-2 ½ percent in a given year, he noted. Prices on some models might even go down, he added.

Overall, dealerships are profitable, but that is driving some of the consolidation efforts among dealers, Rominger said. “There are a lot of dealers buying dealers. I don’t see that slowing down.”