Due to falling crop prices, farm equipment sellers are left with a surplus of unsold tractors and combines. To deal with this surplus, dealers are reducing machine prices, suspending new orders and even selling equipment at auction at reduced prices.
The slowdown in equipment sales is the result of falling corn and soybean prices to their lowest level in more than three years, the collapse of farm incomes in the United States and the fact that Equipment manufacturers and dealers are being forced to make a rapid change of direction after a period of booming business.
Reuters surveyed ten equipment dealers, mostly in the Midwest, as well as farmers and analysts, who said low crop prices, combined with continued high interest rates, are deterring farmers from buying machinery . As farmers buy less, equipment inventories rise, reducing profits for dealers and large manufacturers.
Manufacturers Deere and CNH Industrial struggled to meet strong demand for tractors in 2022, when farm incomes hit a record high and pandemic aid allowed farmers to upgrade their fleets. They now expect the slowdown in sales to impact their bottom line this year.
Josh Gruett, manager of the Waupun Equipment dealership in Waupun, Wis., which sells agricultural, construction and other equipment, said his inventory has increased 30 to 35 percent since the end of 2023.
The excess of unsold machines has prompted Mr. Gruett to halt new orders from companies such as CNH, AGCO and Polaris in hopes of balancing supply and demand, he said.
In April, inventory levels of high-horsepower tractors (300 and above) in the United States jumped nearly 107% year-over-year, with combine harvester inventories seeing a 17.63% increase, according to Sandhills Global , a market research company specializing in used inventory tracking for industrial manufacturers.
BREAK PRICES
Chris Tanner, a fourth-generation farmer, said some dealers in his town of Norton, Kan., have cut prices as much as 30 percent, with an added incentive of zero percent interest, in order to sell off the machines. of their lots.
“They’re heavily discounting combines and tractors, but after going through a drought and experiencing low prices, we don’t have any money to spend,” Mr Tanner said.
The pain has also extended to those who sell spare parts.
Guy Robinson is the parts manager at Dekalb Implement Company, which sells Deere equipment in Dekalb, Illinois.
During the peak years of the pandemic, Robinson says, the combination of supply chain problems and rising demand made getting parts and equipment to farmers “a nightmare.” .
Then demand started to fall at the end of 2022.
About 30 miles south of Mr. Robinson’s dealership, Aaron Rogers, branch manager of AHW, another Deere dealership in Somonauk, Ill., said zero- or low-percentage financing was a popular way to attract customers.
“If you can get a good interest rate, that’s what’s driving the market right now,” he said. Offering lower financing rates to sell inventory can result in a loss for dealers, but holding on to unsold machines can be more costly.
Manufacturers give dealers free financing on equipment for a limited period while they sell it, but when that period expires, dealers must pay interest on their unsold inventory to manufacturers.
With fewer sales forecasts, equipment dealers feel pressured to auction their equipment “right away” to preserve margins, said Casey Seymour, a sales consultant for dealers.
“Some of the equipment put up for auction is because dealers do not have the means to maintain their work plan,” explains Mr. Seymour. “They can’t keep inventory worth millions of dollars on a stock plan [avec] an interest rate of 7.5%.
Inventory levels are of particular concern in the Midwest grain belt, according to Ryan Dolezal, director of TractorHouse, a sales site for new and used farm equipment.
“We don’t have the same inventory issues as we do in the Midwest markets,” he said.
Inventories of used agricultural machinery, which makes up the bulk of machinery sold in the United States, are steadily increasing, forcing dealers to auction equipment at a lower price, said Mitch Helman, director of agricultural machinery. sales at Sandhills Global.
“There is a 70% gap between auctions and retail sales, and it’s insane. A gap this high hasn’t been seen since May 2015,” he said, referring to at a time when the overabundance of cereal supplies weighed on farmers’ incomes.
Deere will release its results on May 16. In February, the company announced plans to cut production and warned shareholders that inflation would make farmers reluctant to finance equipment purchases.
Texas farmer Scott Born said that because of his tighter budget, he is foregoing purchasing new or used equipment for the rest of the year.
“We have to try to get by without doing major repairs – it’s difficult, especially since (equipment and fertilizer) have increased so much in a few years.”
