Taking a Snapshot of What Dealers are Thinking
July 8, 2014
If you were to only look at the unit sales numbers that the Assn. of Equipment Manufacturers makes available each month, you might that think that business for farm equipment dealers is looking pretty dismal at the moment. But as I’ve pointed out many times in the past, things almost always look bad when you compare them to the best years you’ve ever had.
One of the reasons we initiated our monthly Dealer Sentiments & Business Conditions Update survey 4 years ago is to provide a “snapshot” of what dealers are thinking and seeing on an ongoing basis. We’re proactively looking for the little trends that have the potential to turn into big trends.
So while unit sales of farm tractors and combines are currently in decline compared with the best years the industry has ever seen, apparently dealers aren’t as worried about it as you might guess.
Also, if you only listen to the analysts who follow the farm equipment business, you might also come away believing that right now you should get out of the business as quickly as possible. You have to remember that the Street only rewards growth and it takes a dim view of any downturn it sees or suspects is going to take place. And besides, they’re doing their job of keeping investors apprised of what’s happening and advising their customers what they think they should do with their investments.
A good example of why we shouldn’t always share the analysts’ outlook is when they see a company reducing its payroll, they often view it as a positive in that that company is reducing overhead. On the other hand, I would look at it as a negative because its eliminating jobs.
While everyone loves a growing business, anyone who’s been around this industry for more than 2 or 3 years knows that sometimes ag equipment sales slow down. This doesn’t mean it’s time to panic.
If you were to examine the Dealer Sentiment results and some of those “little” trends I referred to earlier, you would see that dealers don’t see the sky falling despite a falloff in unit sales. For example, our Dealer Optimism Index shows that since the end of last year, dealers outlooks have gotten quite a bit better: –30% in December, –23% in January, –1% in February, +3% in March, –9% in April and –5% in May.
When we look at dealer sales vs. expectations, we can also see a steady or improving outlook since the beginning of the year: +1% in January, –4% in February, –5% in March –4% in April and +10% in May.
While there’s no doubt that unit sales of big equipment are down compared to the past couple of years, the fact that it’s happening isn’t really a surprise to most dealers. The only people who are alarmed are those who thought the business levels of the past few years were going to last forever.