Farm equipment sales are still in overdrive, a welcome sign for equipment manufacturers.
Commercial tractor sales in the 100+ horsepower category are up 38.2% year-to-date since July 2020 and combine sales are also up 19.2%.
Soundbite: “You look at commodity prices and farmer attitudes and that gives you a pretty good indication of where ag is. I think this (sales trend) is real and not pandemic driven,” noted Curt Blades of the Association of Equipment Manufacturers.
Builders feel it too: “The demand is red hot as our farmers are finally making some money again,” Eric Hansotia, CEO of AGCO, said. “We’re seeing the farmer making money now, (and) they’re refreshing their fleet.”
But supply chain snafus haven’t gone anywhere. “Fortunately, since ag is considered an essential business, a lot of those disruptions we’ve been able to plan for, but it doesn’t make it any easier,” Blades said.
Total tractor inventory has decreased by more than 37% at the end of the second quarter of 2021 compared to 2020.
Time to open the tool chest and hire an in-house mechanic.
Thanks to an executive order that will soon be signed by President Biden, farmers may be making fewer trips to the dealership for repairs.
The rundown: On Tuesday, The White House announced the president would soon be directing the Federal Trade Commission to establish new “right to repair” rules.
If implemented, farmers would likely have more options for repairing their own equipment.
A bit more context: Various equipment manufacturers essentially require some repairs to be completed at dealerships or authorized repair companies who use proprietary software, parts, and tools.
White House Press Secretary Jen Psaki stated new rules would increase competition in the industry and “give farmers the right to repair their own equipment how they like.”
But equipment manufacturers, most notably Deere & Company, responded.
A soundbite: “When customers buy from John Deere, they own the equipment and can choose to personally maintain or repair the product… John Deere does not support the right to modify embedded software due to risks associated with [safety], emissions compliance, and engine performance,” noted a Deere & Co. company statement.
The green tractor folks stated they lead the industry in providing the tools and resources needed for repairs and maintenance. They also noted less than 2% of repairs require software updates, so a majority of repairs can be made by farmers themselves.
Where this goes: The details of the rules are still to be determined by the FTC. So change may be on the horizon, but hiring a new mechanic over the weekend may be a little premature.
Farm equipment makers have whiplash trying to scale production back up from pandemic cuts and supply chain disruptions to meet seasonably high sales spikes.
Rewind: This time last year, the havoc COVID-19 would wreak on the global economy and supply chains everywhere was just beginning.
Were you thinking about purchasing farm equipment amidst all that chaos? Many equipment makers didn’t think so, leading to production slowdowns.
However, epic commodity prices and better financial outlooks have farmers wanting to soup up their aging fleets with improved technology.
By the numbers:
- Tractor sales shot up 81% in March compared to the same time last year
- More than 62,000 tractors from all categories have sold in 2021, a 52% increase
- Combine sales increased 17% in the first three months of 2021
So what exactly is the holdup?
Farm equipment companies are at full throttle to keep up with demand but are cinched by the tightest supply in North America in 18 years.
AGCO, one of the largest farm machinery makers, has their procurement team pulling a Dave Ramsey to get their 30-week emergency supply of semiconductor chips, steel and plastics stocked. All to keep tractors and other heavy equipment rolling off the lot.
Their version of beans and rice. Equipment makers are moving production away from some U.S. locations due to headcount restrictions and shipping supplies to plants that are normally sourced locally (ex: sending tires to Brazil because of their rubber shortage).