Today's newscast marks our 50th episode of On the Record! In it, we take a look at how tractor and combine retail sales finished up in 2015, speculation on what corn prices may do this year, whether this El Niño event could be followed by drought, the top takeaways from the Precision Farming Dealer Summit and Buhler Industries' outlook for the year ahead.
In case you missed it, our video production team put together a blooper reel from the first 50 episodes. See bloopers >>
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I'm managing editor Kim Schmidt, happy New Year and welcome to our 50th episode of On the Record! Here's a look at what's currently impacting the ag equipment industry.
2015 Equipment Sales
The Assn. of Equipment Manufacturers released its December tractor and combine sales numbers this week. While sales declines moderated in December, it wasn’t enough to improve the full year results.
North American large tractor and combine retail sales were down 23% year-over-year in December.
AFN: $29.17 –3.98
In the U.S., total farm tractor sales in 2015 were down 1.5% compared to 2014 while combine sales were down 32.5%. The biggest decline for tractors came from 4WD tractors, which saw a 39%% drop vs. 2014 sales. The only category seeing sales growth were tractors under 40 horsepower, which jumped 8% compared to 2014.
In Canada, total tractor sales declined 13.9% for the year compared to 2014. Combines saw a similar drop at 13.2%. 4WD tractors sales also saw the biggest drop in Canada with sales down 28.4%% in 2015. On a positive note, for the month of December combine sales in Canada were up 17.3% compared to the same period of 2014.
Dealers on the Move
Dealers on the move this week include Kingline Equipment and Bane-Welker Equipment.
New Holland dealer Kingline Equipment recently acquired Northside New Holland in Dothan, Ala. This brings Kingline’s total locations to 4. The dealership was recognized in 2010 as Rural Lifestyle Dealer’s Dealership of the Year. Kingline serves southern Alabama and the Florida panhandle.
Indiana based Case IH dealer Bane-Welker has purchased Twin Valley Equipment in Eaton, Ohio. The acquisition brings the dealership’s total locations to 13, with 10 stores in Indiana and 3 in Ohio.
Top Takeaways from the Precision Farming Dealer Summit
Having returned from the first-ever Precision Farming Dealer Summit last week in Indianapolis, I’ve had a chance to partially digest the depth and diversity of knowledge shared at the event.
The sold-out conference drew nearly 200 attendees including representatives from more than 50 dealerships throughout North America. With a theme of Profitable Precision Strategies, the program featured sessions on best practices for employee retention, how to effectively bill for precision support and entry points for delivery of data management service.
Here are 3 of the top takeaways from speaker sessions at the Summit:
Don’t give away precision margin. Set profitable and attainable sales goals, two recurring points of emphasis overheard throughout the event.
“We strive to maintain at the end of the year a margin of over 25%. If we don’t make over 25%, we’re going to start to lose money. I think it’s often tempting to offer a 5% discount to drive business. Well don’t do it unless you are making at least 25% after that 5% has been knocked off.” — Tim Norris CEO & Founder, Ag Info Tech
Bridge the gap between hardware and agronomy, whether this involves a third-party partnership or hiring agronomic experts to deliver another layer of precision service to customers.
“It really became our eureka moment that virtually every agronomic decision your customers are going to make is going to be carried out through a piece of equipment.” — Devin Dubois, Vice President of Integrated Solutions, Western Sales
Have a candid conversation with new precision employees, set expectations and explain advancement opportunities based on performance.
“You need to be honest and realistic with him and don’t sugarcoat the job. Tell him exactly how it is. Be completely honest with him. Tell him upfront, this job might entail 17 hours a day.” — Ken Diller, Precision Farming Manager, Hoober Inc.
Look for extended coverage of these takeaways and more from the Summit in the March edition of Farm Equipment magazine.
What Will Follow this El Niño?
This winter’s El Niño is garnering attention and comparisons to the system that hit in 1997-98.
Elwynn Taylor, a professor of ag meteorology at Iowa State University, says over the last 50 years, two out of the three strongest El Niño systems, which includes 1997, were followed by La Niña systems that resulted in devastating droughts. So, there’s a good chance dry weather could be coming to much of the U.S., likely driving up commodity prices. However, Taylor says forecasting when this El Niño event will end is challenging, and currently there’s no good outlook for when that may be.
But, according to Klaus Wolter with the National Oceanic & Atmospheric Administration, El Niño conditions are guaranteed to persist through the next few months, most likely at strong levels, if slightly weaker than in 1983 or 1998.
The current El Niño has been good news for California, which has finally gotten snowpack in the Sierra Nevada. As of Jan. 9, snowpack had climbed to 13 inches. While that is just slightly above normal for this time of year, it is higher than at any other point over the last 2 years.
Meteorologists with Planalytics note, however, that while it looks like there will be some improvements in drought conditions in California, we should not expect a total reversal of the long-standing drought in a single season.
2016 Corn Prices — Up or Down?
With 2015 behind us, there’s been a lot of speculation on commodity prices for 2016. So far there is no clear consensus and projections are all over the board.
Monsanto is predicting corn prices to rebound to $4.50-$5 a bushel within the next 12-18 months, according to a report in Barron’s. The seed and chemical company is basing this outlook on the length of past downturns, acres that have switched away from corn and the pace at which farms are working through feedstocks.
UBS expects corn prices to rise over the next 6 months and anticipates a shift back to corn acreage, driven by the decline in soybean prices last year due to good U.S. and South American production and weaker demand from China.
During the 5 years from 2011 to 2015, corn prices dropped by 38% per year on average from $6.02 per bushel in 2011 to $3.71 in 2015. UBS says it is likely these prices will revert in 2016 amid lower corn inventories during the year.
On the other side of the spectrum is Gary Schnitkey with the University of Illinois’ department of agricultural and consumer economics. He says based on historical changes between projected and harvest prices, there’s a 20% chance of harvest prices for corn to be less than $3.00 per bushel.
USDA’s January World Agricultural Supply and Demand Estimate lowered the season average corn price by 5 cents on each side to $3.30 to $3.90 per bushel for the 2015-16 marketing year, reflecting weakness in export demand and recent declines in cash and futures prices.
One question remains though. How much stock are farmers sitting on, and what will prompt them to sell it? The answer to that could have a big impact in either direction on corn prices.
Buhler 2015 Sales Down vs. 2014
Buhler Industries, manufacturer of Versatile and Farm King equipment, released its year-end financial results for 2015 on Dec. 29.
Revenues for the year came in at $245.7 million, down 24.5% from 2014. The company attributes the drop to weak commodity prices and the unstable political environment in Eastern Europe. Canadian sales were flat, while U.S. and Eastern European sales were down significantly.
Looking ahead, Buhler doesn’t see any significant growth in the ag market in 2016. Buhler President Dmitry Lyubimov, says, “There are many factors affecting the demand on the market and some of them are not predictable. We believe it is going to be very slow but steady growth back to the levels of 2013 and 2014.
“There is no doubt that 2016 is not going to be easier than 2015 and that we will continue suffering from low demand in ag equipment. But with the current business model we have confidence in the company’s recovery during the year.”
Implement & Tractor Archives
In 1913, the Walsh and Clark Victoria engine was used in the first cable-plowing tractor in the UK to replace steam-powered cable-plowing equipment. Cable plowing usually involves a pair of engines working on opposite sides of the field, using their winding drums to pull a plow or cultivator backward and forward between them.
The main advantage was the weight of the engine didn’t damage the soil. The Victoria engines could sustain a 3,500-pound pull on the cable and a pair of engines could cover up to 10 acres per day. Production of the Victoria engines ended in the early 1920s as more efficient tractor power made cable work obsolete.
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