Stronger-than-expected growth in the construction and agriculture industries leaves manufacturers feeling positive going into 2022, according to a new survey and study completed by the Association of Equipment Manufacturers (AEM).
More than 80% of AEM members expect rising demand for construction and agriculture equipment over the next year. More, nearly two-thirds believe demand for agricultural equipment will be above normal. AEM counts more than 1,000 construction- and agriculture-industry members in its ranks representing more than 200 product lines.
The report is built on a year that is closing on a strong note as farmers continue to update their older equipment lines. In its November 2021 ag tractor and combine report, AEM reported that total tractor sales were up 8.7% over November 2020. That number includes a 30.9% increase in November 2021 over November 2020 sales of two-wheel-drive tractors of 100 horsepower and more.
Four-wheel-drive tractor sales in November 2021 compared to the same month in 2020 did decline 23%. But that represents a decline of only 46 four-wheel-drive tractor units. For year-to-date 2021, four-wheel-drive sales are up 17.1% compared to January-November 2020.
Combine sales remain very strong. In November 2021, self-propelled combine sales were up 37.8% compared to November 2020. Year-to-date, compared to the same timeframe in 2020, combine sales are up 25%.
While ag and construction manufacturers believe a positive sales trend is in the offing for 2022, AEM has identified several big challenges.
-- Ag equipment manufacturers are having a difficult time filling open positions. Roughly 87% are struggling to fill manufacturing positions, while 70% are struggling to hire office workers.
-- Roughly 95% of manufacturers are being affected by supply chain issues. Nearly three-quarters believe the disruptions are getting worse.
-- Most AEM members think supply chain issues will persist through 2022 (68% for ag, 58% for construction). A small percentage (14% ag, 11% construction) think these issues will persist beyond next year. Semiconductors and variable-frequency drives are among the most sought-after products.
-- Most key construction and agriculture equipment categories held steady from August 2019 to August 2020. Over the past 12 months, however, inflation has reared its head. The overall consumer price index is up by more than 5%. But several equipment categories rose faster than that: parts for farm machinery, up 12.67%; farm plows, harrows, rollers, pulverizers and attachments, up 11%; planting, seeding and fertilizing machinery, up 8.07%.
But on the positive side:
-- Farm buyers are feeling a bit flush -- and are looking to purchase some steel. "Net farm income is estimated to have increased by 19.6% in 2020 and is forecasted to increase another 19.5% in 2021 to $113 billion," said AEM Director of Market Intelligence Benjamin Duyck. "Net farm income is at its highest level since 2013 and is 20% above its 2000-2020 average." American farmers are also seeing their best debt-to-equity and debt-to-asset ratios since around 2004, although they are expected to decrease slightly in the coming months, he added.
-- AEM members tell their manufacturing association that they believe most key ag equipment categories will see growth similar to this year -- and also, attachments for working soil, seeding and fertilizing, and irrigation and sprayers.
-- Forty-four percent of AEM's agricultural members think the global economy will recover within the next year.
-- Roughly 70%-74% (agriculture and construction) think the U.S. economy will recover within the next year.
-- Seventy-five to 80% think their individual companies will recover in a year.
Dan Miller can be reached at email@example.com
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