After more than 40 years in the farm equipment business, Charles Glass, president of the Glass Management Group (GMG), says the he’s found a way to calculate the annual unit sales of tractors in the U.S.

According to Glass, he’s maintained a database of tractor sales based on data generated from the Assn. of Equipment Manufacturers (AEM) monthly unit sales reports.

"For the past several months I have been working on a set of calculations that would indicate the final tractor sales numbers for 2009," he says.

“While AEM’s reports are very valuable, forecasters of agricultural equipment sales need something more. In order to build a reasonable forecast, it was necessary to determine what future tractor shipments, dealer tractor inventory and retail tractor sales would be. This was the impetus for building my forecast model.

“Dealer inventory is a vitally important part of these calculations. Trending inventory levels also provides important data in terms of which way the future is headed,” Glass explains.

Glass says that he’s determined that when both unit shipments and tractor inventory are both declining, this is a strong indicator that retail sales numbers are actually larger than the shipments being reported.

“The classic method of calculating retail activity is to add the beginning inventory to the shipments and subtract the ending inventory. This actually yields a ‘relative change’ in inventory but, in our case, it’s actually the retail sales at the dealer level,” says Glass.

He adds that there are only 3 factors that can affect dealer’s inventory. One is true retail sales. The second is lost or stolen merchandise. In most cases, dealers are insured against such losses so that then becomes a retail sale to the insurance company. The third factor is the return of the merchandise to the manufacturer and that’s reflected in the following month’s shipment reports

Glass says that getting a true picture of tractor retail sales is important because they dictate the sale of other agricultural equipment. When past equipment sales is compared to past tractor sales, a definite pattern appears. Understanding that pattern greatly benefits sales planning by all manufacturers,” Glass says.

“When comparing shipments, inventory levels and the calculated retail sales number, it is very possible to discern a pattern of activity that will assist in making informed decisions about future sales.”

Using the less-than-40-horsepower tractor category as an example, he points out that this equipment hit its peak inventory levels in April 2006 and began a decline that has continued through the latest report of October 2009.

“Shipments, calculated on a 12-month basis, reached their apex in April 2005 and began a long, slow fall. Retail sales surpassed shipments as both inventory and shipment numbers declined. This indicates a draw down of the dealer’s inventory,” Glass explains.

Based on this and other GMG proprietary calculations, his forecast for total tractor sales for all of 2009 is shown in the following table.

Tractor Shipment, Inventory and Retail Sales Summary

2009 Forecast
Category             Shipment           Inventory         Retail Sales
<40HP                  78,351             44,823            94,840
40 - 99 HP            51,307             22,341            62,142
100+ HP               23,460               8,204            21,763
4WD                       4,722               1,122            4,293

Change from 2008 to 2009
Category            Shipment            Inventory         Retail Sales
<40HP                -19,758              -12,030               334
40 - 99 HP          -17,291              -10,836           -5,462
100+ HP               -2,928                 1,697           -4,461
4WD                         277                    429              -380

AEM is the source of Tractor Shipment and Inventory data.

Statistical deviation is +/- 3.5%