In this episode of On the Record, brought to you by Associated Equipment Distributors, we take a look at the Fed’s decision to hold interest rates and what to expect for the remainder of the year. In the Technology Corner, Noah Newman checks in from the Iowa State Strip-Till Field Day with some perspective on the correlation between technology advancements and increased strip-till adoption. Also in this episode, farmer sentiment drops again, dealers say incentive plans from the OEMs are slowing month-over-month and Kubota reports its results for the first half of 2025.

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TRANSCRIPT

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Interest Rate Watch: Could We See Cuts Yet This Year?

The Federal Open Market Committee met on July 30-31 and decided to maintain the target range for the federal funds rate at 4.25-4.5%.

During the Dealership Minds Summit in Iowa City last week, Greg Roberg, vice president of sales at AgDirect, shared some perspective on the Fed’s announcement as well as what he thinks we can expect in terms of potential rate cuts by year end. 

He says holding at the current level was good news. The Fed meets next in September. 

"They're about 65%, we could see a quarter. So September today, what we know is looking likely we could see a quarter, at least a quarter, that'd be my guess in September. We get out, then they meet in October and December. October's like 87% chance and December's like a 99% chance. So there's some good news. We look like we're going to get at least one quarter rate exception, or I'm sorry, rate decrease this year."

"December looks like roughly a 50/50, maybe a little bit better chance of getting a second one. It looks like we're going to get at least one rate cut before the end of the year, better than a 50/50 chance of two. For those of you that are paying floor plan interest, that's some good news. For producers, that's some good news on our operating lines. I do think you'll see fixed rates come down a little sooner than operating rates. And so, for those of you that talk about interest rates with your producers, I think that's some good news. So I think you'll see that first the market is recognizing inflation's coming down. So I don't know that we're going to get any good news today, but I do think as we look out over the next four months or so, we'll get a little more better news on the interest rate front."

Dealers on the Move

This week’s Dealers on the Move are Premier Equipment and AgWest.  

Ontario-based John Deere dealership Premier Equipment announced it has come to an agreement to purchase Green Tractors Inc. The addition of the 9 Green Tractors locations will bring Premier’s total locations to 20. 

Manitoba-based AGCO and Claas dealer AgWest announced on August 6 that its delayed expansion plans for new dealership buildings in Russell and Brandon are now underway. 

Strip-Till Adoption on the Rise as Precision Technology Improves

I attended Iowa State Extension’s Strip-Till Field Day ahead of the 2025 National Strip-Tillage Conference in Iowa City last week. 

The “who’s who” of strip-till manufacturers were all there, as attendees got an up-close look at 11 different toolbars. I caught up with Levi Powell, who’s with the ISU Digital Ag Innovation Group. He points to technology advancements as a major catalyst for strip-till adoption in the Corn Belt. 

“We see it growing in a lot of different hot pockets. You’ll get a couple guys start into it, neighbors see it, it’s being successful for them. They might do some custom work for some neighbors, and it grows from there. We’re getting more questions about it every year. We’ve been doing strip-till in Ames in our research programs since 2016, so we’ve been at it almost 10 years in our plots. It’s neat to see it more broadly adopted. As input costs are changing, and different environmental regulations changing, you get more people starting to look at it I think. 

We’ve got an interview with them coming to the Farm Equipment YouTube page soon. 

Tracking Crop Prices 

As of August 7, corn prices were $3.79 down 19 cents from our last episode. Soybeans closed at $9.65, down 41 cents. And wheat closed at $5.08, down 32 cents. 

Tracking Crop Prices.jpg

Farm Capital Index Falls 7 Points

Purdue University and the CME Group released the July Ag Economy Barometer on August 5. The index fell for the second time in a row, down 11 points from June’s reading. Michael Langemeier and Jame Mintert with Purdue’s Center for Commercial Agriculture say the decline was “fueled by U.S. farmers’ weaker perceptions regarding both current conditions and their expectations for the future.

Ag Barometer.jpg

They say weaker income prospects in 2025 were largely responsible for farmers’ weaker appraisal of current conditions. However, producer sentiment remains much more positive than at this time last year, with nearly three-quarters of July’s survey respondents reporting that the U.S. is headed “in the right direction.”

Concerns about weak income prospects in 2025 were evident in the July survey as the Farm Financial Performance Index fell 14 points compared to a month earlier. This month’s decline left the index at a reading of 90, indicating that more farmers expect weaker rather than stronger income in 2025 compared to 2024. In turn, the decline in farmers’ income prospects helped push the Farm Capital Investment Index down.

James Mintert: "The Farm Capital Investment Index fell seven points to 53, but that was still 15 points higher than a year earlier. So the investment index, you know, if there’s one that kind of surprises me is that maybe the strength we’ve seen in the investment index. And now it’s not back to the levels we saw in 2020 and early 2021, when the index was above 90 for a period of time. But it’s still quite a bit stronger than it was a year ago."

"And if you look at the responses to the question, that index is based on, the percentage this month reporting it's a good time to make Investments did fall to 20% from 24%. Um, a year ago that good time was percentage was 13% and the percentage reporting bad times rose to 67% from 64% in June. But it, it’s interesting that we’re getting, 20% of the people saying that it’s a good time to make investments. You know, when historically going back, we were hovering around 10% or not too long ago, a little over a year ago. Explain that for me."

Michael Langemeier: "The only thing I can think of is, we’ve got some livestock producers in there that are primarily livestock. Maybe they have some crops too. There’s a lot of diversified farms in the Western Corn Belt, uh, that, that perhaps think this is a good time. That's the only, maybe that’s stretching a bit, but that’s the only thing I can think of that might be propping this up a little bit."

James Mintert: "Well that, yeah, that’s a pretty good explanation I think, and it probably is a supporting factor."

Dealers Forecast 12% Sales Decline for 2025

While our latest Dealer Sentiments & Business Conditions Report show that dealers sales forecast for 2025 remained unchanged in June at down 12%, some dealers are considering lowering their outlook. 

Dealers Forecast 12% Sales Decline for 2025-1.jpg

At the start of the year, dealers were forecasting sales to be down 10% this year, which had been the case looking back to the fourth quarter of 2024. Since February, however, that forecast has held steady at down 12%. 

In the latest survey, however, one dealer said: "Early order program price increases were higher than we expected compounded with less discounts and mitigated funds has pretty much halted any momentum that we started to see. We are now considering lowering our full year outlook on new and used sales if something does change on pricing.”

Another dealer noted that Case IH continues to raise prices and cut discounts across equipment and said “it is putting more pressure on equipment sales in an already depressed market.” 

One Deere dealer noted that the OEM continues to match the dealership’s pool funds, “ primarily to help dealers move used inventory.” 

Dealers Forecast 12% Sales Decline for 2025-2.jpg

Overall, commentary suggests incentive programs appear to be slowing month-over-month across OEMs despite depressed farmer sentiment. Early order programs are showing pricing up about 3.5% year-over-year. Dealers who responded to the survey suggest that tariff related price increases are likely baked into model year 2026 pricing. 

Kubota’s Farm & Industrial Machinery Revenue Drops 10% in First Half of 2025

Kubota reported its earnings for the first half of 2025 on August 5. For the first 6 months of the year, the company’s total revenues were down 7.9%. 

Kubota 2025 Results.jpg

During the first half of the year, Kubota’s Farm & Industrial Machinery segment revenues declined 9.7% year-over-year. 

Overseas revenue for the segment was down 12.4% vs. last year, and the company says in North America its CE sales were down because of “backlash of the inventory replenishment in the previous year.” Sales of tractors were also down due to the slowdown in both the residential and ag markets. 

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