During the Farm Equipment Manufacturers Association Fall Convention in New Orleans, Patrick Luce and Jeremy Bess, principal economists with Stantec, provided an economic outlook for 2027, breaking down some of the trends they are seeing in markets that impact the farm equipment manufacturing industry.

They are calling for “muted growth” in the year ahead. 

Jeremy Bess: “This is kind of how the economic trend goes about. I know some folks are looking at this and we're going, "Okay, yeah, but that's broad manufacturing. What's the industry doing?" On this line, black line, I'm now looking at farm equipment manufacturing. Once again, it's a volume-based metric on a year-over-year basis. Well, just like the overall manufacturing trends in the US, we are in expansion, we're in the green phase, right? 9.2%, but I do not want us to look at this and say, "Oh man, next year's going to be fantastic." No, I'm giving you insights right now that if I do that same kind of strategy where I take the interest rates, move them forward by 24 months, flip it up on its axis, what is it suggesting? It's suggesting, again, some muted levels of growth in the industry. I will be very clear, generally speaking, we peak and we come down.”

“We don't just move flat for that long. So likely what it means is as we head into 2027, just like broader manufacturing trends, we're going to be experiencing decelerating growth. Everyone, it is still growth. I just want us to keep in mind if you're starting to plan for next year, what you did this year might not be the opportunity for next year. It still means growth. Patrick's talking about making investments in your business. Absolutely. If you don't, you're going to miss any level of growth. We still want to look at this and say, "Okay, put it in context. It just means downside pressure. It's not the great recession timeframe." Give us a little bit more of that evidence though.”

Patrick Lewis: “Yeah. We need to also think about the demand for farm growth. We need to think about your customers, and there's some great survey data that comes out of Purdue and CME group on the ag side that measures the sentiment of the agricultural climate and environment. We have two speedometers there. The orange one, that is the farm capital investment index, meaning do farmers, do your buyers expect or think right now is a good time to be making capital investments? Anytime that number is below 100, it means they don't. Anytime it's above 100, they do. But look at the other barometer, the one in black, that is just the broader perspective on agricultural production. Anytime that barometer is above 100, that means there's positive sentiment about agricultural production. There's this kind of triangulation that happens here that says, "Well, gosh, farmers aren't keen on making investments right now.”

“They don't think it's the right time to invest in it, but they do think that we're going to have to produce more next year." We can talk about things like corn prices and soybean prices, which are actually in acceleration right now. Those have a lead of about three months to the farm equipment manufacturing. But if we look at the index on the left, that farm capital investment index, and I know this is one of those charts where we are just spraying a whole fire hose, but the orange line is that index over time in comparison to the farm equipment volume, that production that Jeremy was talking about in the black line. That has about an eight month lead time that is suggesting an upcoming peak in farm equipment production. I want to be very clear about this transition to more of a decelerated growth environment for the industry, but that's just not the end all be all, right?”

Watch the full version of this episode of On The Record