Three members of the Farm Equipment dealer advisory board — Casey Seymour, vice president of sales, 21st Century Equipment; Tom Rosztoczy, president, Stotz Equipment; and Brian Carpenter, general manager, Champlain Valley Equipment — got together view video conference to discuss the impacts the coronavirus is having on their business and the industry.
Farm Equipment: On April 17, Sonny Purdue and USDA introduced the Food Assistance Program. From your standpoint, what impact will the program have on your customers and when do you think you might to see that translate to business for your dealership?
Casey Seymour: I do appreciate what they're doing, but I don't know that it's going have an overwhelming affect. So much of our agriculture-based products go into fueling the restaurant business. Until that opens back up, we're going to continue to have this problem. It's a packaging issue, it's all kinds of supply chain issues that are a whole different side of the thing. A lot of milk gets processed into 5 pound cheese bags. That's why we're having the issues that we're having. I think there's going to be some things there, when we look at how they're going to spread that out across the different aspects of the business. It'll help keep some guys, not making them whole by any means, but closer to it and maybe prolong a little bit of this pain that they're feeling.
There's still going to be a lot of failures if things continue down the same path they're going. If they keep talking about August and September being when this really kind of opens everything back up, it'll be 6 months before we really see a big impact in the overall economy getting things rolling back again. My opinion is, it's going to help some, but it's going to be a very short-term pass for a longer-term problem.
Tom Rosztoczy: The issue that's the most sensitive for us is dairy because beef or dairies are our primary ag customers across our territory. The dairy program was a big disappointment. There's limits on how much money an individual dairy can collect, and individuals can collect. Basically, it's not going to be much to help the people who really actually produce the milk in the country. There are a little over 9 million milk cows in the country. They're going to spend $2.9 billion in support payments, supposedly, for the dairy industry. You could buy 2 million of those dairy cows and send them to slaughter for $2.9 billion and you would solve the problem, not permanently but for years.
But that's not what we're doing. We're just going to throw money at people. We're not limiting milk production, we're not doing anything to change the dynamics of the marketplace. So it's just going to prolong the problem. All we're going to do is subsidize people so they can keep producing too much milk, which ultimately doesn't make any sense.
Brian Carpenter: We’ve got major structural issues going on right now. I think what I read was the max that any dairy can get is $175,000. With that limitation, our midsize or larger dairies that are probably the dairies of the future, aren't going to get much of an additive when you look at it across the board.
Even our vegetable and fruit growers are suffering. We can't have farmer's markets. The supply chain is getting busted. If people, long-term for the next couple years, eat out a lot less, can we adapt to it? I don't know.
I've been on a conference call with economist Peter Anderson and he’s projecting we're not going to fully recover from this for 3 years, which is not surprising given how busted a number of things are becoming in pretty short order. I think it'll change people's buying habits and investment habits for at least a period until there's a sustained recovery.
Our supply chain could be even more threatened if we have a second wave. I was reading a CDC report, predicting that we're going to have a second wave in the late fall that could even be worse than this first wave.
How much money can the government hand out to stabilize our economy before our dollar devalues tremendously? I don't know how much more they can do to support the agricultural markets and every other market that they're trying to support. It's a lot of money.
Rosztoczy: From our perspective, we're thinking business might feel relatively normal for the next few months, and feels relatively normal now. Our year starts Oct. 1. When we're looking at planning for 2021, right now I think we're going to be looking at planning for a really hard year. Our dairy customers are really struggling. The price of hay is headed down. The processing facilities for potato growers up in Idaho cut their contracts by 30% about a week ago.
We don't have a customer base that is not going to be significantly, economically harmed by what's happening. Even golf courses are closing, and when they allow the golf courses to reopen, they're limiting play, and they're spacing them out, trying to be socially distant. So their revenues are going to be way off. Government agencies, cities, schools, counties, states, those guys are all going to be way short of money for fiscal 2021 because they're losing all the sales tax revenue, and they're having to pay out all this unemployment money.
When I think about our fiscal 2021, we're going to be looking at a pretty dead equipment market. So, our own approach is basically between this season and the next one, we’ve got to get our balance sheet as clean as possible. We're looking to have a nice, tight balance sheet by the end of September. Then hopefully we're in a good spot to get through whatever the next challenging year is.
Carpenter: We sell a lot to municipalities, schools and a number of colleges. Already, I have three colleges that are talking about whether they close down. These are state colleges, and they're so hard hit by not having a resident spring semester, and not having their summer school, which is pretty lucrative. We have many different markets we sell into, and usually when one market's down, you can make it up in other markets. There isn't a market, like Tom said, that isn't getting impacted. That speaks for a lengthy long-term recovery.
We had a lot of excavator sales canceled by contractors who were looking to get new equipment when starting the season. However, most of our contractors got shut down during our Stay Home order. They just were reopened this week, but they can only work with two-man crews. Basically it's owner-operator, and another guy. They're not productive enough. They're not looking to buy equipment right now.
Farm Equipment: On the ag side of the business, does it seem like everyone is going ahead with planting as planned and doing what they had intended to do?
Seymour: All our guys are. No one has any intention of not doing anything they didn't already have planned to do. Most people I've talked to around the country said the same thing. You can't really change your crop mix up. You've already bought your seed, you've already done all that. Everyone that I've talked to, and all our customers that I've talked with, are still planning on doing the same thing they do every spring.
Rosztoczy: In our case, the one that was most interesting to me was when the potato processing plants surprised everyone one weekend and cut back their contracts 30%. My impression is most of those growers are planning on planting that 30% anyway and gambling on the open market for potatoes. Back to Casey's point, I think everybody had their plans, and they're just executing their plans, and crossing their fingers.
Farm Equipment: From the dealership's standpoint, have any opportunities come up as a result of COVID-19 restrictions in how you are running certain aspects of the business or new processes you have put in place that you think will continue when the restrictions are lifted?
Seymour: For us, the biggest thing that has come out of this is the ability for people to work from home and how effective it's been. We haven't really missed a beat. Some things we had to rebuilt the process a little bit to make it work, but overwhelmingly, so much of our work was done through Salesforce and it's so automated that it just worked. Certain roles might be more of a distance-working workforce approach to some of this stuff. I know the people we work with are all chomping at the bit to get back to the office. That could be the only thing I could see happening out of it.
Our salespeople are spending a lot more time in the field now than they ever have. We kicked them out of the office — they can't be in the office. We should've done that 10 years ago, but for the most part, remote work is what we're going to gain the most.
Rosztoczy: We’ve had that same experience as Casey. But in addition to it, we had some good fortune getting some stuff going on our website, helping consumers buy equipment from us over the internet. It came together just by luck at the right time. We can do online credit applications now. We can do online signatures on documents, stuff like that. We've actually had a significant surge in business that we're doing online, selling small tractors online, that kind of stuff, that historically we didn't do much of.
I think another impact will be that a lot more business will be done through the computer as opposed to in person as a result of all this. It's forced us to ramp up our ability to do that. Speed it up, be ready. I think when this is all over, the people who can do business that way ... society, in general, is moving more in that direction. This just sped up the process. I don't think we'll go back.
Carpenter: As a leader, it’s trying to understand how I can get my intent across to impact people. I've had to be more creative. I've used YouTube videos and shared them so even the employees who are working through childcare issues, or they are high-risk for infection, so they are at home allows them to stay a part of the team. It's been effective.
We'll probably do more with technology than what we have and will continue to do that. It's actually forced us to rationalize some positions. I think we'll run a little bit leaner moving forward.
Seymour: I had a customer tell me the other day that he hopes we maintains curbside pick up for parts, because he gets more done in a day instead of having to come inside and talk to somebody for 30 minutes. That kind of stuff, actually might stick around.
Farm Equipment: We’ve heard from dealership marketing managers in the last several weeks say they’ve been pushing for years for adoption of online-lead management and web tools that their dealerships have now been forced into using. There’s been good acceptance of it. Is that something you're seeing from both customers and employees?
Rosztoczy: I think so, for us. We've seen a big spike in customers buying parts online or calling ahead to order parts and picking them up curbside at the dealership. It’s a more customer-driven thing than it is employee-driven. But, there’s been overall acceptance from some of our salespeople who have not wanted to venture down that eCommerce pathway and have relented some, and are more open to doing more online business.
We had been taking all the online leads we get for equipment and routing them to the local salesperson at each store. But as springtime has hit and salespeople are getting busy, they aren't being responsive enough to those online leads. We just centralized how we process those leads so we can respond to them fast, no matter what. They still wind up eventually getting handled by the local salesperson, but we had to change our process because it was changing so fast how many were coming in. Our responsiveness wasn't as good as it should be.
Carpenter: It's a little different mindset, working with somebody on email vs. knowing our customer and working with them face-to-face initially. We find it takes a little different skillset. The salesperson needs to be a good writer and communicate that way. Because some customers don't even want us to call them. They just want to email back and forth. We're seeing a lot of that going on.
It'll be some time, I think, before we'll know if that's a long-term shift, but I like what Tom is doing, centralizing some of that initial process. You can pick your guys that are stronger at that, and hold them accountable for it.
Seymour: I have an idea of building, kind of like what Tom was talking about, more of an inside sales team we’re going to have tied in with our marketing group. We're going to send out a marketing piece to a group of people on whatever product or initiative we've got going on and have someone follow up with that to see if they got the information, any questions and build that drive from inside a little bit, and focus that to some international stuff and those kind of things, but having more of that inside sales approach, building leads, generating leads and qualifying those leads to send back to our in-territory sales force to follow up on.
I feel there's a need for that right now more than I ever. I've had the idea for a while, but I never really thought we ever needed it. Now, with the way things are right now, we could absolutely be using this, kind of a phone campaign or email campaign, text campaign type stuff, and directing it back to an inside salesperson that can qualify that lead generation. I think that's a huge part of our business that I'm going to try to capitalize on moving forward.