BIRMINGHAM, Ala. (DTN) -- A report of farm machinery sales in March hinted at the possible coming impact of COVID-19 on the industry. The pandemic, some speculated, would bring down the hammer on sales in April. But that did not happen.
Overall tractor sales in April were up 12.3% from April 2019, accounting for more than 3,600 units overall, according to the Association of Equipment Manufacturers (AEM) April 2020 U.S. Ag Tractor and Combine report. Combine sales were up 4.1% from April 2019 or 20 combine units.
Tractor units sold rose on a 16.2% increase in sales of tractors 40 horsepower (HP) and below. The small-tractor category accounts for most tractor units sold in any given month. About three-quarters of all tractors sold in April were 40 HP and below. The year-over-year increase in April for these smaller units was 3,453 tractors.
The strong result in this category might be the result -- and there is some speculation here -- of newly working-from-home weekend hobby farmers investing in equipment to complete long-overdue projects. Curt Blades, senior vice president for agriculture and forestry for AEM, noted that parts purchased for older and smaller pieces of equipment are also selling well. Tractors from 40 to 100 HP also sold well in April, up 6.3% over April 2019.
Major farm equipment manufacturers were not expecting 2020 to be a banner year. But they had no way of knowing that a globe-circling viral pandemic would sweep aside all of their early expectations. AEM released its 2020 industry outlook in mid-February. The agricultural machinery industry grew a better-than-expected 3.2% to $15.6 billion in sales last year. AEM's report projected a brief "tick down" for 2020 before a 1%- to 2%-per-year rise through 2023. Today, every equipment manufacturer has formally withdrawn its financial guidance -- the legally required document that reveals a manufacturer's forecast for revenue and expenses.
Drilling down into the April tractor report, sales numbers are not as rosy for tractors more commonly found on commercial operations. Sales of tractors in the 100-plus HP range fell 9.9% in April. Articulated four-wheel-drive tractor sales declined more than 7%. But as with combines, the actual decline in units sold was fairly small. Twenty-two fewer four-wheel drive units were sold in April 2020 compared to April 2019.
Looking at year-to-date comparisons from 2019 and 2020, AEM's monthly report shows overall tractor sales down just 0.6%. That includes sales numbers ranging from a 0.6% increase in 40 HP and below tractors to a 7.1% decline in articulated four-wheel-drive tractors. Year to date, combine sales are down 10.7%, or 157 machines, from the same period in 2019.
Blades said March equipment numbers may eventually be seen as a pause in an industry adapting to lost capacity and suddenly stressed supply chains. Farm machinery dealerships also struggled to adjust to never-before-seen market conditions brought on by the pandemic. Total farm tractor sales in March were down 15.6% from March 2019. Combine sales declined 11.9% from March 2019 to March 2020.
"When you look at March and April sales together, instead of seeing a month of significant year-over-year declines followed by a month of healthy gains, you should instead see two months that performed as expected given the current situation," said Blades. April is typically a strong month for equipment sales.
That the farm machinery industry may be avoiding the worst of COVID-19 is due to the all-out effort manufacturers and employees have made to keep parts and machinery lines running, Blades said.
Social distancing is a rule on the factory floor. Machinery manufacturers are "zoning" their plants. That means the factory floor operates with a plan detailing human traffic patterns. If there is a COVID-19 incident, it can be isolated quickly.
Manufacturers are also conducting health pre-screening of employees before they enter the plant. The bigger effort is convincing employees they can stay at home if they are sick.
"That's a [human resources] issue where HR convinces employees that it is OK to admit they are sick and that they should stay home," Blades said.
Titan International, an AEM member company and manufacturer of mounted tires and wheel systems for off-highway equipment, told AEM in an online article that it has formed a COVID-19 response team. The team increases awareness of the virus, improves communication and works to ensure employee safety.
"Every day we discuss, and every day we assess," Mary Damitio, Titan's director of compliance, told AEM. "And it's really been key to opening up communication between all of our facilities and, frankly, our employees, too."
Social distancing and telecommuting policies have been implemented. Hand sanitization stations have been installed, and personal protective equipment has been distributed. Mass employee gatherings have also been prohibited. The company set up a hotline to facilitate communication between company leaders and employees.
"We let everyone know the guidelines are in place, but the situation is constantly evolving -- and that the guidelines may be enhanced as we learn more about the virus," Damitio told AEM.
AGCO Corp. has also moved quickly to adapt to the COVID-era. As AGCO saw its European plants close a few weeks ago, it worked mightily to secure its supply chains. Today, AGCO tells DTN/Progressive Farmer that its outlook is much improved.
"All major European factories suspended production in late March through most of April," AGCO told DTN/Progressive Farmer in an emailed statement. Production has currently resumed, with one exception: AGCO's Suolahti, Finland, facility suspended production on April 30, due to a supplier fire. "Plans are being made to pull summer maintenance and vacation shutdown periods forward to increase production capacity for the balance of the year."
While it worked to protect its upstream manufacturing and parts procurement processes, AGCO focused on aftersales support. "Our North American Parts Distribution Centers continue to operate at full capacity and support our dealer network. Our overseas supply base is back, fully online, and we are now focused on replenishing inventories," AGCO told DTN/Progressive Farmer.
Operations are preserved by focusing on employee health. "The safety of our workforce is our top priority," AGCO told DTN/Progressive Farmer. "We have implemented rigorous safety measures, including international and domestic travel restrictions; drastically increased sanitation efforts; use of remote or staggered shifts to follow social-distancing recommendations; and temperature screening of on-site employees before they move to their desks or workstations."
AGCO told DTN/Progressive Farmer it acted quickly in the few instances where employees experienced a COVID-19 positive test. "... A small number of AGCO's team members experienced COVID-19-positive test results, which immediately resulted in appropriate closures of work areas for deep cleaning and sanitization."
Those who tested positive, as well as workers who might have come in contact with them, self-quarantined under physician supervision. "AGCO is happy to report that all U.S. facilities are open, and as of this communication, all AGCO team members who contracted the illness are recovering."
Dan Miller can be reached at email@example.com
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