MachineryLink

Farm machinery dealers are facing higher inventory levels as lower commodity prices in recent months have had a negative effect on sales. But their situation is actually improving, according to a publication, which conducts regular surveys of farm equipment dealers.

Ag Equipment Intelligence, a subscription-based new and used farm equipment newsletter, runs monthly surveys of farm equipment dealers. Among the survey topics are is used equipment inventories and pricing.

Farmers have bought a lot of new farm equipment in recent years due to higher incomes. This type of market activity tends to create high inventories of used farm equipment because most large equipment purchases usually involve a trade-in of used equipment.

This is especially true with used combines. High inventories of used combines and lower commodity prices typically cause a glut of used machinery, which dealers could have a difficult time moving.

This situation could be improving. In December 2013, 30% of dealers responding to its survey said overall used equipment inventories were "too high," Ag Equipment Intelligence reported. This compares well to November when 38% of dealers said inventories were "too high."

Specifically, used combine inventories were better in December than in previous months, the survey pointed out. Forty-nine percent of dealers reported used combine inventories were "too high" in December versus 59% the month earlier.

Pricing for used tractors over 100 horsepower were up less than 1% year-over-year on average in December, which was down just slightly from the previous month. Prices of used tractors under 100 horsepower were up 1.4% year-over-year. Meanwhile used combines values dropped 4.6%, which usually indicates increased supplies versus demand.

The report also stated 46% of dealers reported used combine values were lower in December compared to November. This is down from the 36% who reported used combine values were lower in November than October. So used combine prices are falling.

Another interesting section of the Ag Equipment Intelligence report is the dealer commentary on used equipment inventory levels.

One dealer said the used combine inventory is always up this time of year. Another dealer said combines are dropping in price daily. Still another said combines are too high in terms of inventory levels but everything else is good.

Yet even with reports of higher used equipment levels, many equipment dealers reported the last month of 2013 was pretty fairly good in terms of sales.

One dealer reported year-end sales were higher than he thought they would be. Another one said good crops and prices in his region are bringing buyers in to spend. Yet another said there were no real surprises but year-end tax laws are giant motivators to get farmers to buy equipment.

As for new equipment, 11% of dealers reported new inventory as "too high" in December, which is actually down from 24% the previous month. This was the fifth consecutive month that dealers reported new inventories were "too high."

According to the Ag Equipment Intelligence, 2014 could be a tough year for farm equipment dealers. The newsletter reported dealers are planning for equipment sales to be down 4% in the year.

(AG)

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