Dealers: Farm equipment sales steady despite pandemic
The farm economy has tightened over the last five years. Dairy farmers have experienced a continued milk price trough, with many getting paid prices below their cost of production year after year. Crop producers have also seen tight margins. In reaction farmers have taken a hard look at big ticket items, often putting off those purchases and making do with their older equipment until times improve.
Some Wisconsin dealers told us that things had not changed at all over the last few years, while others said that repairs and sales of parts are up at the same time sales of “big iron” have been soft for a couple of years.
And now the COVID-19 pandemic has affected everything, including agricultural prices.
However, according to recent data from the Association of Equipment Manufacturers, unit sales of farm tractors and self-propelled combines in April 2020 rose in the United States, putting total unit sales roughly the same as in 2019.
In April, total farm tractor sales were up 12.3 percent (over 2019 levels) but combine sales were up only 4.1 percent. The data from the AEM also showed that sales in the category of heavy duty tractors – 100-horsepower articulated four-wheel drive models – had declined in unit sales.
Factoring in that category puts total sales of all farm tractors down about a percentage point compared to last year, during the same period. Combines were down 10.1 percent in that same period.
Curt Blades, senior vice president of agriculture services at the Association of Equipment Manufacturers, said that the data show two months of sales that were about what could be expected “given the current situation.
“The COVID-19 crisis is certainly causing some uncertainty in farm income and ag equipment purchases for the balance of the year,” he added. The international trade group represents off-road equipment manufacturers and suppliers, including more than 1,000 companies and more than 200 product lines in the agriculture and construction industry sectors.
Alex Hoffman, director of communications and marketing with another trade group, the Equipment Dealers Association, told Wisconsin State Farmer that their staff had recently surveyed association members who are dealers in agriculture and outdoor power equipment – lawn and garden equipment, mowers, ATVs etc. The first survey, done around April 1, was intended to “take the temperature” of the membership and determine how they were faring in the era of COVID-19.
“In most cases they were considered ‘essential’ in terms of the shutdowns many states imposed, so most of them were able to stay open for business. Some had gone to curbside service only,” she told us in a telephone interview.
Most of the members said their sales were down but the sale of parts was up and service work was the same or up, according to the survey. Most of her members said that the impact of the coronavirus outbreak caused them to see business drop 10 to 25 percent overall. They also noted that there had been “some” impact on their supply chains as a result of the pandemic versus “no impact” or “severe impact” on that survey question. Most respondents said it was somewhere in the middle as to the effect on their supply chain.
Also, most of her association’s members said they did not have any employees test positive for the virus. The EDA is based in St. Louis, Missouri. Her colleague Joe Dykes added that overall, sales started dropping off in 2015 and began to recover in late 2016 through early 2018.
The general consensus with regard to the impact of COVID-19 on their dealer/members, Dykes added, is that while whole goods sales may have been off compared to the previous year, revenues were reported to be neutral or even better for many dealers due to increased parts and service sales.
Jeff Neumann, a sales rep with Mid-State Equipment in Sauk City agreed with those assessments from the trade group. “That’s exactly what we’re seeing. Sales of big iron are still soft and they’ve been soft for a couple of years. Farmers aren’t buying and replacing. They’re repairing.”
Farmers are still buying things like skid steers, mixers and spreaders – things they need every day, he said, but bigger ticket items like combines and choppers are still soft and the coronavirus pandemic didn’t do anything to help that.
At his dealership, Neumann said sales of parts and repairs are up, which kept the business on a fairly level plain. “We are seeing that but repairs can rack up. In some cases farmers are spending a fortune repairing something when they might be better off replacing it, but that’s where we are today.”
According to Bloomberg, purchases of farm equipment plunged by $900 million in the first quarter of 2019 thanks to falling commodity prices and collateral damage from trade wars. Sales of both 4 wheel-drive as well as 2 wheel-drive tractors were down.
Dairy farm needs
But in some areas of America’s Dairyland, the sales of “big iron” haven’t changed much. Travis Haelfrisch, a sales rep with Riesterer and Schnell in Chilton, said this year as dairy producers saw higher milk prices in their checks, sales were good on big items like choppers and tractors. “We are in a huge dairy area and sales of things like choppers are steady.”
The sales rep said sales slowed a little bit in April and May but it wasn’t clear if that was because farmers were busy out in the fields or because of some reaction to the coronavirus and its impact on farm prices.
He agreed that the company’s parts and service side is “always busy” and has also seen cases where farmers spent a lot to repair older equipment when they may have been money ahead to buy something new. “It may be something that their lender is telling them to do,” he said.
Dusty Stuczynski, a sales rep with who works for Swiderski Implement in Waupaca said their “big iron” sales have been very positive and they have done a lot more on leasing those items than ever. “It has gotten better every year,” he told us.
The dealership has five locations and certain stores have done better than others but he doesn’t believe the market has decreased and the dealership has not experienced a dip since the coronavirus outbreak began.
If anything, Stuczynski said sales of smaller tractors – 100 horsepower and down – “have been absolutely booming. We couldn’t keep them in stock.”
These utility tractors, which people use for things like food plots for deer and doing tasks on hobby farms, have been selling at the rate of 15 to 20 per week. “It’s been unreal. I never would have expected it to have been like this,” he said. “I would have expected it to be completely the opposite.”
The sales rep said he believes the sales of these kinds of utility tractors have been hot because companies have instituted zero-percent, or low-interest rates along with financing packages so attractive that people who have been wanting these kinds of tractors have finally taken the plunge and purchased them.
Swiderski, he said, has two main lines of equipment -- New Holland and AgCo tractors but deals in “everything – compacts, tillage, grain carts. For us, you go in one direction and it’s heavily dairy, in another direction we have a lot of vegetable growers and in another there are a lot of grain producers, so we cover a lot of different forms of agriculture,” Stuczynski said.
At Bohn Equipment in Berlin, sales manager Cary Eckstein said they have been cutting back on farm equipment due to diminishing numbers of farmers and are dealing more in ATVs, compact tractors and lawn and garden equipment. Sales of those kinds of items have been “booming,” he said.
Lawn and garden sales have been particularly strong. “Anything that cuts grass, people are buying. People have time on their hands and they are putting that time into making their lawns and gardens look good.” Eckstein said sales are also strong for products like ATVs and so-called side-by-side utility vehicles – the kind that are often used on trails and back roads.
“It’s been good but it’s kind of strange. I just think that maybe people had saved money for taking a trip and then they decided there’s not going to be a vacation so ‘let’s buy a toy.’ People have got money and want to spend it on something,” he added.
Company promotion programs for sales of these non-agricultural products have been advantageous and he agrees that that has helped move these kinds of products.
Equipment financing surveys
In a report released July 16, the Equipment Leasing and Finance Foundation gave its assessment of prevailing business conditions and expectations for the future, based on reports from key executives in the $900 billion equipment finance sector. The report showed that confidence in the equipment finance market is steady – on par with the June index.
The Foundation is a non-profit organization, funded by private donations, that conducts programs for the equipment finance sector and its people. It also released highlights of a COVID-19 impact survey of the equipment finance industry collected from July 1-11. From 77 survey responses, 95 percent of equipment finance companies have offered payment deferrals.
The survey also showed that more than three-quarters (77 percent) of companies expect that the default rate will be greater in 2020 than in 2019. A majority (83 percent) of companies have not furloughed or laid-off employees.
The respondents include a wide cross-section of industry executives, including large-ticket, middle-market and small-ticket banks, independents and captive equipment finance companies. The foundation uses the same pool of 50 organization leaders to respond monthly to ensure the survey’s integrity. Since the same organizations provide the data from month to month, the foundation believes this offers a consistent barometer of the industry's confidence.
The survey includes seven questions and an area for comments, asking these industry executives about current business conditions, expected product demand over the next four months, access to capital, future employment conditions, evaluation of current U.S. economic conditions and predictions for the economy over the next six months.
Michael Romanowski, president of Farm Credit Leasing, responded to the survey that his company “continues to find solutions for our customers as they traverse through the COVID-19 crisis. In some cases, we are providing leasing solutions to customers who have not considered leasing in the past. We expect these new relationships to continue to grow even after the pandemic has moved on.”
When asked to assess their business conditions over the next four months, one-fifth of the executives surveyed said they believe business conditions will improve over the next four months. That response was down from June. About half believed business conditions will remain the same over the next four months, an increase from June. Almost 30 percent said they believe business conditions will worsen.
About 10 percent of the executives in the survey expect more access to capital to fund equipment acquisitions over the next four months, and over three-fourths of them said they expect to see “the same” access to capital to fund business.
Only 7 percent of the executives reported that they expect to hire more employees over the next four months; 75 percent said they expect no change in their employee numbers.
None of the leaders in the survey evaluated the current U.S. economy as “excellent,” unchanged from the previous month. About 40 percent said the current U.S. economy is “fair” and 61 percent called it “poor.”
The monthly confidence survey results are posted on the foundation’s website at https://bit.ly/39jxdQ5.
More on the COVID-19 survey is available at https://bit.ly/3eN2Vqb.