Quiet Optimism Rules the Show

Jim Patrico
By  Jim Patrico , Progressive Farmer Senior Editor
The National Farm Machinery Show provides an annual opportunity to take the pulse of buyers and sellers. (DTN/The Progressive Farmer photo by Jim Patrico)

I survived another National Farm Machinery Show (NFMS) in Louisville, Kentucky,held in mid-February. I say "survived" because the Kentucky Exposition Center, which is the site of the show, covers 1.2 million square feet, most of it concrete. By the end of a day walking the show, dodging the crowds and eating fair food, a hotel bed looks pretty inviting.

My two goals at each NFMS (this was my 18th) are to take the pulse of the farm equipment industry and to learn about new product rollouts.

About the former, I can report that nearly every exhibitor I interviewed initially was excited about the prospects for the products they brought to the show. Understand, the exhibitors are sales and marketing people, and adrenalin is what gets them up in the morning and carries them through client dinners at night.

After that initial loud enthusiasm tamped down, most exhibitors I interviewed were quietly optimistic about prospects for 2017. To a person, I heard the same thing: The industry has finally hit bottom, and an increase in sales is on the horizon. Predictions leaned toward a flat to slightly upward trend in 2017 with a stronger upswing in 2018.

The major manufacturers have been saying something like that for a few months now. Used equipment inventories are finally under control, they say. That means dealers who had previously turned down trade-ins were now making more deals, even if those deals meant acquiring a piece of equipment with some hours on it.

Manufacturers also feel their customers have recovered from the hangover caused by extraordinarily high commodity prices that marked the early part of this decade. They are learning to accept a new normal. Whatever that normal is, many farmers feel they can deal with it as long as there aren't any new violent market swings. They can now begin to factor in lower prices as part of the environment and can make buying decisions in a rational way. There is a feeling of stability to the market.

A third factor in this guarded optimism relates to the age of equipment farmers bought during that buying frenzy of a few years ago. That equipment is far from old, but a new feature or a good price might get a farmer to visit a dealership soon.

A cloud on the horizon is an uncertainty about the nation's trade policies. The Trump administration has sent some mixed signals that have left some observers confused about its direction and worried about how the industry will be affected. For instance, the administration floated the idea of a 20% import fee on products U.S. companies source in a foreign country then bring here for sale. All the major manufacturers and numerous short-liners do that. Threats of import fees undoubtedly have created a stir in boardrooms.

Foreign companies also are unsure of pending trade policy. Bill Larsen, who is co-owner of the Australian tillage equipment manufacturer K-Line, admits to being "nervous" about President Donald Trump's trade policy. He is unsure how the U.S. withdrawal from the Trans-Pacific Partnership will affect his U.S. sales, and he is concerned about "nasty surprises" that might pop up. To protect his company, he has started shipping components from Australia to the U.S. for assembly in North Dakota and Iowa. "It will help if we can put 'Made in America' on our products," Larsen says.

About my second goal at NFMS -- to scout out new products -- I did find a few treasures. I'll pass those on in future blogs.



Jim Patrico