By Steve Adler
Source: Ag Alert by the California Farm Bureau Federation
January 18, 2012 — Farmers aren't the only ones looking at the skies and wondering about the lack of moisture. Farm equipment dealers also feel the impact that dry conditions can have on agricultural production.
While farmers and ranchers generally did very well in 2011, water continues to be the item of greatest concern, according to farm equipment dealers from around California.
"Right now we are so dry that the biggest thing is, and possibly always will be, the water situation. This is something that we've heard before and will continue to hear, and my grandchildren will be saying the same thing. Water is the most valuable commodity that we have," said Tom Schneider of South Kern Machinery in Buttonwillow.
Tom Sieper, division manager for Kubota Tractor Corp. in Lodi, agreed.
"As if the economy wasn't enough to worry about, first December was dry and now January is starting out dry. Someone told me that it looks like the weather cycle is two months behind. I hope it's true, which means January is our previous November and February and March will be when we get all our moisture," Sieper said.
Not all farmers are holding back on equipment purchases, however, and dealers are reporting very strong sales in December. Bill Garton of Garton Tractor Inc., in Stockton, notes that "this past December was probably the busiest I have ever seen it for all lines of equipment. I think 2012, if it matches 2011, will be a good accomplishment."
"When the farmers do well, we do well," he said. "The markets that are good are the orchard markets and the vineyard markets. They are our core. The dairy business is important too, but input costs of dairies are high. All across the board it has been good."
Garton observed that agriculture frequently bucks the trend when it comes to the economy.
"When other parts of our economy are bad, agriculture can be good, and when agriculture is depressed, other parts can be good. Sometimes that is how history goes," he said.
Schneider noted that in his area of the southern San Joaquin Valley, equipment sales are strongest for permanent crops such as almonds and pistachios. He said sales of cotton equipment have lagged somewhat despite the increase in acreage in 2011. The reason, he explained, is that there was an abundance of cotton equipment that had been sitting idle during the decline in planted acreage and that equipment was put back into production in 2011.
"Typically farmers don't spend money just to be spending money, they spend the money more out of the need to have the equipment," he said.
A survey by Farm Equipment Magazine indicates that farm equipment dealers nationwide are projecting a 4 percent growth in sales during 2012. Eight out of 11 regions—including the Pacific region with 12 percent—showed positive average monthly sales growth in November 2011.
The survey also indicates that factories are keeping production stable, with 78 percent reporting no change, 11 percent increasing production and 11 percent decreasing production.
The dealers in California stress that it is important for farmers who need equipment to think ahead and allow several months lead time when making equipment purchases, particularly for heavier tractors used in row crop farming.
Steven Kost, executive vice president of Far West Equipment Dealers, said inventories are low on certain categories of tractors and farmers are finding that they frequently have to wait a few months for delivery.
"With equipment that is in high demand, there are some shortages of equipment and farmers are having to wait for the manufacturer to build it," Kost said. "There could be delays of up to six months. So it is a case of farmers having to think ahead of what their needs are so they can be sure to get the equipment when they need it because they aren't going to be able to get the equipment right now for a lot of models."
One option for growers who may have a more pressing need for equipment is to purchase used equipment, including machines that have been returned to dealers after leases have expired. Many of these machines have fewer than 100 hours of operation in them.
Nationally, these inventories are also tight as farmers who have been unable to purchase new equipment turn instead to used machines. According to the survey, the used equipment inventory appears to have decreased, resulting in a slight increase in average prices of 2.1 percent in November from the previous year.
Kost sums it up this way: "On the whole agriculture throughout North America is doing very well right now. There might be some areas that are a bit soft, but overall everyone in agriculture is doing well. And this drives sales of agricultural equipment."
(Steve Adler is associate editor of Ag Alert. He may be contacted at email@example.com.)