Despite the "high times" the ag equipment business is enjoying these days, one shortline equipment manufacturer told Ag Equipment Intelligence that he’s seeing signals that indicate a slowdown isn’t too far down the road.
This executive says farmers’ equipment purchases in the last couple of years have put them well beyond satisfying "needs," and growers are deep into their "wants." He believes with high farm incomes and the depreciation advantages of recent years, farmers who planned to reinvest in machinery and equipment have already done so. Even if the good times continue, he sees equipment investments waning, as the luxury-type (want) equipment purchases have already been met. Real estate, he says, will likely be the next place farmers put the cash they’re accumulating.
He also says recent developments, like the growth of natural gas fueling stations, will have "macro-level impacts" on the industry. As fleet operations and consumers capitalize on the record lows of natural-gas fuels, the overall demand for biofuels feedstocks, such as soybeans, will decline.
On the equipment manufacturing side, he shared recent dialog with suppliers that reveal how far things have changed in the suppliers’ view of the ag markets. For example, with the many foundry closures over the last decade, coupled with higher overall demand and work returning from offshore, metalcasters are operating at a very high capacity not seen in many years.
Several casting suppliers who were hungry for ag work just a year or two ago now have chosen not to quote on new work for farm equipment manufacturers and/or are relinquishing current farm equipment jobs. At the same time, lead-times are at unheard-of levels, he said, with some foundries quoting up to 28 weeks for deliveries.
One of his iron casting suppliers is deliberately reducing its exposure to agriculture by 5% this year so as not to be exposed should the market turn down as the foundry believes has already started. He also reported that major manufacturers are paying above-market price just to gain capacity, as these same foundries are getting busy producing parts for the rebounding truck markets.