We regularly hear from dealers that $4 corn and $10 soybeans represent the psychological threshold for farmers. When corn goes over $4 and beans over $10, most farmer’s outlook improves markedly. Over the last month or so we’ve seen a nice increase in crop prices. I was on the road last week visiting dealers, and one of them mentioned he’s started to notice an improvement in farmer sentiment.
When prices were hovering around $3.50 for corn and $9.50 for beans that was a break-even point for producers. Farmers weren’t likely to make a profit at that level, and as a result most likely weren’t looking to buy much new equipment. But, now that the opportunity for $4.50 corn and $11 soybeans is looking a bit better, farmers have an opportunity to make a profit. The dealer I spoke with said he’s already begun to notice an increase in interest in equipment from farmers. “For example, today we’ve already sold two new tractors and two used balers,” he said.
Thanks to soybean crop losses in Argentina, the export market for U.S. soybeans is looking strong right now. And Brazil’s corn supply is tight, which will also help U.S. exports. If commodity prices can hold at this level — if not continue to improve — the second half of this year could be looing up for a pick up in farm equipment sales. While there’s certainly still time for prices to swing back, overall the market is looking better for growers. And for those who lock in prices at this level, they’ll be in good shape heading into the second half of the year.
It will be interesting to watch how this improvement in commodity prices, and thus farmer sentiment, impacts dealer sentiment. In Ag Equipment Intelligence’s latest Dealer Sentiments & Business Conditions Update, which was released on May 31, a net 11% of dealers reported being less optimistic. This was in line with the previous month, but a significant improvement from the beginning of the year when a net 31% of dealers were less optimistic. The survey was completed prior to this latest uptick in corn and soybean prices though, so it’s likely that we’ll see an improvement again in the June report, which will be out at the end of the month.
In the meantime, keep working at strengthening your relationship with your farm customers. When farmers do start to feel more confident and ready to buy, you want it to be your dealership they are walking into.