In today’s newscast we look at results from Ag Equipment Intelligence’s “2015 Dealer Business Outlook & Trends” survey, September unit retail sales from the Assn. of Equipment Manufacturers, irrigation’s strong earnings, USDA’s weekly crop progress report and how precision technology will help increase farm equipment speed in the future.
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Hi I’m Jaime Elftman, assistant editor, sitting in for Kim Schmidt, who is on maternity leave.
Welcome to On the Record. Here’s a look at what’s currently impacting the ag equipment industry.
Sales Decline Slows
The Assn. of Equipment Manufacturers reported on October 10th that North American large ag equipment retail sales declines slowed in September. Mig Dobre, analyst with RW Baird, said in a note to investors that mid-range tractors continue to show relative strength, increasing 28.1% year-over-year compared to up 8.7% last month.
U.S. and Canada large tractor and combine retail sales posted a year-over-year drop of 6%, but improved from the 17% decrease in August. U.S. sales dropped 10% year-over-year, while Canadian sales rose 23%.
Combine retail sales also fell, posting an 11.4% year-over-year decrease in September following a 24.3% decrease the previous month, and row-crop tractor sales posted a 2.4% year-over-year decline, up from the 9.3% decrease observed in August. 4WD tractor sales declined 13.8% year-over-year in September compared to a 36.8% decrease last month.
AEM’s Ag Executive Advisor newsletter reports that the declines in the farm machinery industry are being strongly impacted by the downturn in net farm income. The revised 2014 net farm income is set to be $113.2 billion, down 13.8% from 2013. This makes this year’s net farm income the lowest since 2010, but still $25 billion above the 10-year average.
Dealers Slow Facility Expansion
Nearly 1/3 of the 300 dealers who responded to Ag Equipment Intelligence’s “2015 Dealer Business Outlook and Trends” survey either expanded or built a new facility in 2014. 11.3% of dealers say they built a completely new facility this year and 19.4% say they expanded their existing facility.
But next year, 10% fewer dealers will be investing in facility expansion, with 8.1% planning to build a new facility and 11.3% looking to expand.
The slowdown in dealership expansion for the year ahead is likely due to dealers’ concerns about slowing sales. Overall, 50% of dealers expect revenue from new equipment to decrease by 2% or more. This is only the second time in the 10-year history of the survey where more dealers have expected revenue decreases than increases.
Irrigation’s Strong Earnings
Irrigation equipment manufacturers are posting better earnings than anticipated based on strong demand for replacement parts and equipment. Lindsay posted fourth quarter sales results of $148 million, which beat analysts’ estimates by $25 million.
C. Schon Williams, analyst for BB&T Capital Markets, said in a report to investors that Lindsay’s stronger-than-expected sales and revenue numbers are primarily due to growth in U.S. irrigation, which increased 31.2% year-over-year in the period, after three consecutive quarters of negative year-over-year growth.
Williams says, “U.S. irrigation sales were notably strong in the period, primarily due to storm related replacement demand of $15-$20 million. Severe damage from spring and summer storms helped to accelerate replacement sales within irrigation and partially offset the negative impact of weaker commodity prices.”
Lindsay’s strong showing prompted BB&T to update their estimates for Valmont’s earnings as well to reflect the likelihood of accelerated irrigation sales for the company. Williams said they believe Valmont will benefit from similar trends in replacement demand, which resulted in Lindsay’s higher-than-expected sales revenues. BB&T now estimates Valmont will see a 4.1% increase in revenues in the third quarter.
Corn & Soybean Harvests Lag 5-Year Average
The gap between this year’s harvest progress and the five-year average continue to widen according to USDA’s latest weekly crop progress report, from October 14. While 74% of corn was rated to be in “good” or “excellent” condition, and corn maturity was reported at 87%, only 2% behind the five-year average, only 24% of the U.S. crop had been harvested as of October 12. This is 19% behind the five-year average.
The Farmland Forecast report from Colvin & Co. attributes the slow harvest to wet weather, resulting in high moisture content in corn.
USDA reported a similar story for soybeans. 73% of the crop is reported in “good” or “excellent” condition, and 91% of soybeans were reported to be dropping leaves. Soybean harvest was reported at 40%, a 20% increase from last week, but 13% behind the five-year average.
Need for Speed
One of the ongoing debates in agriculture is how farmers will continue to increase yield, on less land using fewer inputs.
In the September issue of Farm Equipment Magazine, editors examined the trend of manufacturers producing faster machinery, and whether this is the pathway to improving farm productivity.
According to industry experts, speed is only one piece of the puzzle. John Fulton, associate professor and extension specialist of Biosystems Engineering at Auburn Univ., suggests that precision technology will be instrumental in increasing the capacity of farm equipment in the future.
Fulton focuses on machinery automation and precision farming and says, that as equipment increases in size, so too will the emphasis on automated functionality to improve field performance.
However, Fulton also notes that machinery is maxing out in terms of size and during the next decade, there could be a movement toward smaller tractors and implements to more quickly perform field operations.
“I really think when we see the automation occur on the large machines that’s moving us in the direction of really having autonomous type machinery, but ultimately, we’ll probably see that as a smaller scale initially from a purely autonomous, probably at a robot level doing some of the field assessment initially, and we’ll start to see machines thereafter, smaller tractors possibly being robots, doing some of the field functions, maybe cultivating, or some of the planting functionality that we do today.”
Robots patrolling the farm fields might seem far fetched. But Fulton says it’s a distinct possibility that in the next 10 years, we’ll see ground scouting and weed detection being done by robotic machinery weaving in between corn rows, collecting data that can be used to improve efficiency.
Ag Equipment Archives: Brillion Produces First Soil Pulverizer
In 1902, Brillion Iron Works, Brillion, Wis., which is today owned by Landoll Corp., produces the first soil pulverizer to produce smooth seedbeds for planting.
Its smooth roller wheels broke clods to provide a finer and firmer seedbed as compared to finishing a seedbed with a drag or harrow. Features of later models of the pulverizer are still used on today’s models.
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