On The Record: May 30, 2014
SWA and CWEDA Move Forward
With Dealer Association Merger
In today’s newscast we discuss the merger of the SouthWestern Assn. and Canada West Equipment Dealers Assn., the impact railcar delays are having on grain bagging system sales, dealer sentiments turn negative, Raven’s first quarter results and farmland values for the first quarter.
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The joint boards of the SouthWestern Association and Canada West Equipment Dealers Association have voted to merge and form the new Western Equipment Dealers Association.
Members will be voting in June and July to approve the merger.
The decision to merge was prompted by the amount of dealer consolidation happening in the industry, according to Jeff Flora, CEO of the SouthWestern Association.
These new larger dealerships require a higher level of service and advocacy he says.
“The larger we are, the larger the voice we’re going to have and the more influence we’ll be able to have and again with the financial backing we have by the combined two associations the more services that we’re going to be able to provide our dealers."
The new Western Equipment Dealers Association will continue to be an affiliate of the North American Equipment Dealers Association.
Flora says they hope this will be first step in continued consolidation at the association level.
The merger is expected to be effective September 1, 2014.
Railcar Backlog Impacting Grain Sales
Railcar delays that began this winter are continuing to be a problem for farmers in the Northern Plains and Western Canada, who have not been able to move their grain as a result.
The situation is likely to negatively impact farmer income and deter some farmers from making equipment purchases.
Craig Yeager, owner of Grain Bag Systems, says in Canada the amount of grain being left on the farm is 30-40% higher than usual.
In addition, Canadian farms had 20% higher yields than normal, which has put a lot of pressure on elevators and railroad to move the product.
He says the situation is similar in the Dakotas and Minnesota.
As result, more farmers are investing in grain bagging systems to store the grain on the farm.
Yeager says sales for Grain Bag Systems have been 40-50% higher than normal this year.
“It’s keeping the farm mobile. We’ve got a lot of guys up here, the big farms up here are actually really going toward this system in a big way because they rent to own the land. They don’t want to have that capital purchase of $1 million worth of bins. They’d rather buy two grain bagging systems. They can get in and out of every field, labor costs are low. It makes a big financial gain to their farm.”
Dealer Sentiment Turns Negative in April
After a one-month upturn in March, the Ag Equipment Intelligence Dealer Optimism Index did an about-face and fell in April to a net 9% of dealers who were less optimistic about the outlook for sales in 2014.
This compares to a net 3% of dealers who were more optimistic in the previous month.
The May 2014 “Dealer Business Sentiments & Business Conditions Update” survey also revealed that on average North American farm equipment dealers saw a 4% drop in sales for April vs. a 2% decline in the previous month.
For the full year, dealers are expecting a 4% fall off in equipment sales.
Raven Sales Fall in Q1
On May 21, Raven Industries, a manufacturer of GPS products and information management systems, reported that its net sales decreased during the first quarter vs. the same period last year, coming in at $102.5 million vs. $103.7 million in the first quarter of 2013.
The company saw a 10% decrease in its Applied Technology sales, dropping to $46.3 million this quarter.
Raven’s President and CEO, Dan Rykhus, said that while “the underlying business in Applied Technology is in good shape and performing well… the continued softness in the North American agricultural equipment market” hurt sales.
Looking ahead into the next quarter, Raven expects to see continued solid growth in Engineered Films.
The company also expects its purchase of SBG, which is based in Middenmeer, Netherlands, to play a significant role in its new product strategy for its Applied Technology Division.
SBG designs and manufactures advanced GPS steering systems.
Farmland Values Held Back by Falling Grain Prices
The Chicago Federal Reserve reports farmland values increased by 1% year-over-year so far in 2014.
But, compared to the 4th quarter of 2013, values were down 1% in the first quarter of 2014.
The slowdown in the rising values of farmland is expected to impact cash rent values, which fell 2% year-over-year. Cash rents typically follow farmland value and grain prices.
The drop likely reflects lower expectations for profits in 2014 after crop prices began falling last fall, according to the Federal Reserve.
While farm income is expected to be lower for crop operations in 2014 due to the lower outlook for grain prices, bankers surveyed are confident that farmland values will remain stable or increase through the second quarter, according to the Chicago Fed.
Pastureland values, on the other hand, were up 2.6% due to improved profitability of livestock operations thanks to high cattle and hog prices and low feed costs, according to a report by Agrimoney.com.
And now from the Ag Equipment Archives…
In 1926 Stihl introduces the first electric-powered chain saw, a 140-pound “cross-cutting chain saw.”
The saw’s bulk required it to be operated by two people, and its reliance on an electric motor limited its portability to areas where a power source was available.
Today the company sells farm and ranch saws as light as 6 pounds.
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