Although a few more dealers say their early equipment orders are up compared to this time last year, overall, new farm machinery order books continue on a downward slide that began 3 years ago.
Slightly more than 14% of North American ag equipment dealers are reporting early orders are in better shape than they were when Ag Equipment Intelligence conducted its 2016 Dealer Business Outlook & Trends survey in September 2015. This compares with 7% of dealers who reported an increase in early orders 12 months ago and about 10.5% the year before for 2015. These percentages are way down from the more than 27% of dealers who reported in 2014 that their early orders had increased from the previous year.
The small increase in dealers reporting higher early orders for new 2016 equipment is pretty much offset with a larger percentage of dealers reporting decreases in their order books for 2017. This year nearly 70% of dealers say their early orders, or presells, for new 2017 equipment are lower than they were last year, which continues a 3 year run of significant declines.
In 2014, only 28% reported lower order levels than the previous year. This percentage grew to 53% in 2015 and 63% in 2016.
In this year’s survey, which looks ahead to 2017 new equipment sales, nearly 39% of the 225 responding dealers report that their early order levels are down 10% or more vs. 12 months earlier. Another 14% says they have fallen off between 6-10%, and 16% are reporting their order books are off 1-5% vs. the previous year.
Overall, a net 54% of dealers are reporting a lower level of early orders for 2017. This compares with a net 56% for the previous year and 42% two years ago.
Equipment Lead Times
In his analysis of 2017 early orders, Michael Shlisky, analyst with Seaport Global Securities, noted “that early-order programs are less important in recent years, as much less lead time is needed for delivery given the reduced production levels across most heavy ag categories.”
In fact, when Ag Equipment Intelligence and Cleveland Research Co. initiated the monthly Dealer Sentiments & Business Conditions Update survey in April 2011, equipment delivery times were a major issue. In early 2012, dealers were reporting that the average time between when an order was placed and the equipment delivered was over 6 months. In February and March 2012, on average combine lead times were 7.6 months, 4WD tractors were 6.2 months, row-crop tractors 6.5 months and tractors under 100 horsepower 5.1 months.
By the first quarter of 2015, long lead times for equipment deliveries had greatly diminished. With broad availability of all types of large ag equipment, Ag Equipment Intelligence ceased surveying dealers about lead times in April 2015.
Weak Order Books
“Ag dealer survey points to very soft 2017 early orders. Industry publication Ag Equipment Intelligence conducted its annual early order farm dealer survey — we believe this is one of the better surveys in the industry, with about 225 North American ag dealers participating,” said Mircea (Mig) Dobre, senior research analyst with RW Baird.
“The main takeaway is that the early orders received thus far are still posting meaningful declines vs. levels experienced in 2016. Early orders are considered a reliable directional indicator for farmers’ equipment purchase intent for the upcoming year.”