During the 2012 Farm Equipment Manufacturers Assn. (FEMA) Spring Clinic in Biloxi, Miss., on March 28-30, Ag Equipment Intelligence met with executives from the supply chain to gauge their insights into what wholegoods manufacturers’ build schedules look like.
Several of these suppliers, which included steel producers as well as component and finished-assembly suppliers, reported record first-quarters. One cited that 90% of the year’s annual revenue budget was already booked for the year. More than half however, expect business to soften over the second half of 2012, even though all cited that the last couple years presented unusually high demand. Several shared that they’d be pleased just to “stay flat” vs. the high mark of 2011.
Weather Worries. The weather pattern and lack of winter precipitation is keeping suppliers up at night, both with the macro-level scare of severe drought to a much lesser-concern over a further-stretched out lifecycle of wear parts (from lack of use).
“This year is being compared to other weather patterns in history that brought severe drought for farmers,” says one executive.
“We’re seeing forecast numbers of the manufacturers that they have not seen before…”
A tillage equipment (wholegoods) manufacturer told Ag Equipment Intelligence that machine-order cancellations are a done-deal as farmers were “ready to go” with implements not ready with the unusual “early spring.” Plus, he says, the warm, dry weather will cause some farmers to go directly to planting without previously planned pre-plant tillage.
Key Indicators. An iron casting supplier indicated that its demand forecast has always closely aligned with the price-per-bushel of corn, with a 6-month lag. Based on closely monitoring that history and trend, he expects a gradual decline in the ag economy. “We’ve already seen it, and are not working Saturdays for the first time in 18 months,” he says. Still, his company is moving ahead with significant capacity upgrades.
Foreign Supply. As far as metal commodities, one executive shared that “supply out of China is not getting any better, and that anything involving cast metals is terrible.” As echoed several times during the FEMA meeting, China’s growing manufacturing economy is emphasizing internal production, with exports remaining a secondary objective.
Falling Prices Expected. On the finished steel side, one executive shared that even though things seem slower and the urgent/angry “where is my steel?” phone calls of the last 2 years has curtailed, he says, “We’re still shipping. We’re not pressing the mills like we had been when no one had anything. Now, the mills have caught up and they’re increasing capacity. As a result of that capacity, there’ll be announced price decreases in the third quarter.”
Heard it Before. The same feelings of worry over second-half concerns have been voiced at other first-quarter pollings of supply executives. And, in recent years, that conservatism (or pessimism) did not prove true. Still, others continued to report very high demand for the coming 12 months. As one tillage parts manufacturer shared, “We’re seeing forecast numbers of the manufacturers that they have not seen before — we cannot make their parts fast enough.”