While smaller tractor sales are up, all other size tractor as well as combine sales saw double-digit declines in the April compared to last year, according to the Association of Equipment Manufacturers (AEM). The results of the most recent AEM report is no surprise as farmers continue to deal with profitability concerns with lower commodity prices.
U.S. retail sales for farm tractors under 40-hp were 7.8% higher compared to last April. But sales for two-wheel-drive tractors of 40- to 100-horsepower (hp) decreased 15.3% in April compared to last year. Sales of two-wheel-drive tractors over 100-hp fell 16%.
Sale numbers for four-wheel-drive tractors for April 2016 show a decline of 10.4% as well. Also, combine sales in this period dropped 45.5% for April compared to the same time period last year.
"We certainly have seen some negative numbers and monthly fluctuations in some categories as markets remain uncertain," Charlie O'Brien, AEM senior vice president, said.
Aided by this higher sales report for small tractors, the total two-wheel-drive tractor sales number showed a slight decline from last year, down 0.6%. Total farm tractors, which include both two-wheel- and four-wheel-drive tractors, also showed a slight decline at 0.7%.
Despite the grim sale report, O'Brien said today's situation differs from earlier downturns in the ag economy, specifically the 1980s when the capital structure of the ag market collapsed. Several factors, such as a massive accumulation of farm debt in the 1970s, an unfavorable economic climate and high interest rates combined at a time when demand collapsed, bringing down commodity prices, he said.
"Today, the drop in commodity prices may in the long run be more of a market adjustment with production temporarily outrunning demand," he said.
We have been seeing these types of tractor and combine sales numbers for some time now as farmers deal with lower commodity prices. I remember writing a blog similar to this last year, and the report had major sales declines in it. I hear reports from across the country of equipment dealers with an excess of used equipment sitting on their lots. I am sure that is the case in some places, but in my home area, I don't really see much equipment on dealer lots.
Maybe it is a case of changing times. Our two local John Deere dealers, a Case IH dealer and an AGCO dealer have all been sold into large companies with many dealer locations over the last 10-15 years or so.
The one John Deere dealer, where we have done business for many years and three generations of my family, is a good example.
Today we go to their facility and there are some tractors, combines and implements on the lot but not an overwhelming amount of iron. To me, the dealership as a family owned, independent dealership 20-30 years ago seemed to have more much machinery on the lot than they have today.
I would guess the ability of spreading machinery over 30 different dealership locations might have something to do with it. Maybe a company this size has other ways of eliminating used equipment -- from utilizing local consignment farm equipment auctions to using the internet -- so you don't notice it when you go to the business.
You wouldn't know there is a lot of used farm machinery on the market by making a parts run to one of my local implement dealers with me.
Russ Quinn can be reached at email@example.com
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