The Big Question

Can You Afford Not to Upgrade Information Technology?

Dan Miller
By  Dan Miller , Progressive Farmer Senior Editor
With even modest prodding from grain markets, equipment manufacturers believe farmers will want to remain current on technology. (Progressive Farmer photo by Jim Patrico)

Farm-equipment manufacturers are certainly aware of the challenges facing customers today, but Robert Crain doesn't believe U.S. farmers are ready to throw in the towel.

"The larger guys are cautiously optimistic," said AGCO's senior vice president and general manager, Americas. He believes, however, there is positive news on the horizon for equipment manufacturers. The U.S. farming fleet is generally as old as it's been in 10 years. "We think that presents opportunities," he added.

FLEET REPLACEMENT AHEAD

The September 2019 equipment sales report from the Association of Equipment Manufacturers paints a mixed picture. Tractor sales were actually up through September for both 4WD and 2WD models (100-plus horsepower), 9.4% and 3.4% respectively, compared to the same period in 2018. Sales of 2WD tractors (100-plus hp) were up sharply in September by more than 19%. Sales of 4WD tractors for September were down 5%.

Combine sales through September were reported up 1.8%. But in September sales rose more than 12%.

AGCO's Crain is optimistic. "We have customers who sold [corn] over $4 and booked sales over $4. They are going to want to see what goes into the bin and what government payments [will be before making decisions on equipment]."

With 200 dealerships, AGCO is working to get its Fendt line into large-equipment markets. Its IDEAL combine has a season's worth of experience behind it, and the newly designed 900 series tractors target the large-tractor segment of the Midwest Corn Belt.

MIXED 2019 NET SALES

While financial reports from the major farm-equipment manufacturers don't reveal numbers to be excited about, they don't show a disaster either. A cleaner planting window in 2020 and resolution of trade issues could improve the outlook for equipment. Claas sees a fairly flat, but recovering equipment market -- assuming a return to more normal weather in 2020.

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AGCO reported six-month sales in 2019 of $4.4 billion, a year-over-year decrease of 2.8%. Net sales in North America, however, grew by 1.7%. Increased sales of application equipment, as well as high-horsepower tractors, were offset by lower utility tractor sales.

Kubota is making a big bet on 2020. It unveiled earlier this year its largest row crop tractor series, the M8. Sold with either a 190 hp or 210 hp, 6.7-liter Cummins engine the M8 will be available as farmers head to the field for planting. Kubota's M8 targets farmers looking for "usability" and "simplicity."

John Deere reported earnings in the quarter ending July at $899 million, down $11 million from same quarter, 2018. Net sales declined 3.4%. The company forecast a 4% increase in sales for the fiscal year.

Case IH and New Holland parent CNH Industrial announced revenues of $7.5 billion in the second quarter, down 6% from 2018. Ag net sales were off 7% because of lower volume in Europe and other regions. CNH's quarterly report strikes a positive note, however: "Cyclical replacement demands remain stable, with used-equipment inventories at low levels supporting new equipment sales in North America."

TECHNOLOGY AND IRON

With even modest prodding from grain markets, manufacturers believe farmers will want to remain current on technology.

"Data is opportunity," agreed Matt Olson, product marketing manager, John Deere Precision Ag. "Technology is already benefiting [our customers]." Machine intelligence, he noted, are bringing farmers into a new world of data.

TRACK THE JOURNEY

Olson explained at its most basic level, technology is a way to document "the journey of growing that crop" while considering all the possible management combinations and their outcomes. It allows managers to "take on risk."

"What combination of all those layers helps me understand what works and what doesn't work?" he asked. "What drives profitability and yield? Are you actually getting that yield? What works on your farm?"

Scott Harris, vice president of North America for Case IH, is another industry executive pointing a marketing arm at technology. Using words like "better," "more" and "targeted," he said the company is hanging technology on all its tools.

"Our engines and transmissions, our iron, is as good as it's ever been. But we're not done. We're putting technology into our tillage equipment ... to produce, for example, the optimal seedbed."

Harris stressed efficiency is productivity, and the goal is to address challenges "such as the difficulty in finding skilled labor with the functional automation of the machine, the sensors reading soil conditions, crop conditions, machinery conditions and making adjustments on the fly.

"Dealers and producers are operating in a difficult environment and looking for stability, anywhere they can get stability," Harris said. "Technology will improve the bottom line. It's money in the bank."

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Editor's Note: Technology and innovation are opening new pathways to financial success in farming. See related stories from Progressive Farmer's special section called "Plot a Course For Opportunity" at https://www.dtnpf.com/…

Dan Miller can be reached at dan.miller@dtn.com

Follow him on Twitter @DMillerPF

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Dan Miller