With calendar year 2015 winding down, many in the farm equipment business have written off the possibility for any significant pick up in sales for this year and are looking at the possibilities for 2016. And it seems much of industry will be watching what Deere & Co. has to say about it when the company reports its fourth-quarter and full-year earnings tomorrow.
Chances are it won’t be much more promising than what we’ve been hearing so far.
As for dealers, the November Dealers Sentiment & Business Conditions Update report will be going out in the next week to Ag Equipment Intelligence subscribers and to the 126 dealers who participated in the survey. The 2015 dealer average sales growth forecast was in line with the previous month’s results at down 14% year-over-year. A net 42% of dealers are forecasting a sales decline for the year, a drop from the 35% forecast in September. Initial 2016 average dealer sales forecasts are for a 9% decline vs. down 6% last month. A net 28% of dealers are forecasting a sales decline for 2016.
|% change y/y||Sept - 14||Oct - 14||Nov - 14||Dec -14||Jan - 15||Feb - 15||Mar - 15||April - 15||May - 15||Jun - 15||Jul - 15||Aug - 15||Sept - 15||Oct - 15|
As reported in the Nov. 23, 2015 issue of the Wall Street Journal, “The Illinois-based company is expected to offer a sales outlook that will set the tone for the farm machinery industry in 2016. Many analysts see a big stepdown in Deere's projection that would signal a prolonged slump for the sector.
"We know that 2016 is not going to be an up year. The question is to what extent will the decline continue," said Mircea Dobre, an analyst for RW Baird & Co. "There's a lot to be cautious about when it comes to agriculture and Deere especially."
Of course the industry is looking for a bottom and speculating whether or not we’ll see it in 2016, but it’s far too early to tell, said Joe O’Dea, according to the WSJ report. The analyst for Vertical Research Partners LLC, added, "Unit sales volume is still not where it's been in prior down periods.”
The number of high-horsepower, 2WD tractors sold in the U.S. and Canada are on track to fall about 13% this year to roughly 28,000 tractors, O'Dea said. While that represents about a 25% drop from 2013's peak, it still exceeds a long-term sales average of about 26,000 tractors a year, he said.
During agriculture's most recent slump in the early 2000s, annual sales of high-horsepower tractors failed to reach 20,000 for years. By this measure, the current market is well off a bottom.
But we’ll just have to wait and see where things go from here and hopefully we’ve hit bottom and see at least a little bounce in the months ahead. Dealer commentary from the most recent Dealer Sentiments report was a bit more positive than we’ve seen recently.
One dealer said, “I’m slightly more optimistic with the strong harvest, it turned out better than we expected.” But others indicate that the excess used equipment backlog will need to be corrected before farmers get excited about upgrading their equipment. He said, “There was a lot of positive activity during the month, but a lot of people passed on making purchases when they saw what their used equipment was being valued at. Used pricing is too soft to convert people to make new machine purchases.”
Post a comment
Report Abusive Comment