Numbers can give you give you a pretty good look at the big picture, but it’s the boots on the ground’ views and commentary that help to explain the numbers.

Over the past few months, a few topics have been mentioned repeatedly. Dealer comments on these topics provide a clearer picture of how they’re impacting equipment sales. The following comments have been mentioned prominently in the last few Dealer Sentiments & Business Conditions surveys, emails we’ve received and conversations with dealers. Most center on customer profitability, used equipment pricing and backlogs, equipment leases and credit concerns.

Customer profitability: While the recent run up in grain pricing makes it appear that things are improving for row-crop growers, ranchers and dairymen, comparing average prices received for the first 4 months of 2016 vs. the same period a year ago, according to USDA data, pricing remains below what we saw a year ago. The same holds true for cattle and hogs, but milk prices received remain on a downward trend. For the record: corn $3.60 per bushel year-to-date vs. $3.79 year-to-date 2015; soybeans $7.96 vs. $9.94; wheat $4.58 vs. $5.82. For livestock: cattle $134/cwt. so far this year vs. $163.25 a year ago; hogs $48.93 vs. $52.15; and milk $15.53 vs. $16.88.

Dealer Comments

“Farmers have to make money to spend money, and a lot are producing below cost at this price level.”

“Prices are just at a level that is difficult for players to be profitable.”

“It is a difficult profitability environment for our customers with low crop prices and input costs that haven’t seen a meaningful reduction.”

 “Even though cattle prices remain relatively high, the pullback has reduced intentions to buy new equipment.”

“The dairy market has really hurt business. The only commodities that are doing well are fresh vegetables and dry hay.”

“We’ve seen more interest in forage cash crops like alfalfa, triticale and silage corn.”

“Milk prices remain extremely low; our customers are feeling the pain.”

“Very pessimistic overall with my primary end market being the dairy industry. Our customers are not going to be profitable now or through the rest of this year.”

Used Equipment: Still a tough go for a lot of dealers, but some commentary indicates that things might be getting a little better or at least more manageable. But manageable doesn’t mean profitable.

Dealer Comments

“Sales are up for us in total because we’ve been giving away equipment at fire sale prices. Farm auctions have dragged pricing to the ground and we’re worried about getting stuck with inventory.”

“It doesn’t seem like we are near a bottom in used equipment pricing. I suspect it will continue to be difficult to handle used inventory and have been extremely cautious about taking trade-ins.”

“There is too much used hay equipment on the market.”

“There remains too much inventory on the lots and in the fields. There is always a dealer in the area that needs to unload a piece at no profit just to get it off their books.”

“We’re seeing auction prices starting to stabilize. We took equipment to a Ritchie Bros. auction and were able to get our asking price on almost all the iron we brought.”

“We’re seeing a lot of used balers and combines sitting in inventory.”

Leases: We addressed the issue of short-term equipment leases a month ago in this space. While that report focused on John Deere, it would seem that the Case IH dealers are finding themselves in the same boat when it comes to equipment leases.

Dealer Comments

“Case dealer incentives are currently tied toward ordering new equipment or require purchasing lease returns that are sitting on Case’s books to qualify.”

“Deere has introduced some new lease programs, but they are requiring dealer participation to get the best rate. If used incorrectly this could spell trouble for dealerships.”

“Competitive dealerships have sold a lot of leases putting used inventory on the market and off the lot, which has helped stabilize trade-in values in the near-term. As this unravels we could see pricing pressure pick up again.”

Weather: What can you say? Weather is the biggest year-to-year variable impacting crop prices. Like all years, through the first 4 months of 2016, it’s been a lot of speculation, as well as the normal ups and downs as usual.

Dealer Comments

“We haven’t seen the ‘good weather rush’ in our area, but remain hopeful that April could be different. Last year farmers’ hope for better crop prices and strong yields was able to overcome low grain prices in the spring. There is a lot less hope in the air today, however.”

“The first half of the month was dead for our business, but as the weather improved we did see a bit of a pick-up. It is hard to tell if it’ll stick but at least we have some foot traffic.”

Tight Credit: We’ve also covered this issue on different occasions during the past several months.As farmland values have dropped, bankers have sharpened their pencils and their scrutiny of loan applications. We’re told they’re looking past balance sheets and focusing on things like cashflow much more.

“Customers aren’t able to meet the high credit standards finance companies are asking for, it has become a significant problem in our area.”

“The banks in Iowa are tightening up on farmers, particularly those farmers that expanded over the past 5 years.”

On a Positive Note: In a June 20 note, Igor Maryasis, analyst with Avondale Partners, writes: “While it may be too early to call an inflection in NAFTA ag machinery demand, the recent appreciation in commodity prices, if sustainable, has a potential to meaningfully enhance the near-term farm equipment industry outlook, in our view. With prices of corn and soybeans at current levels and grain export demand running above expectations year-to-date, U.S. farmers may be able to sell their stored crop from last year in addition to this year's harvest.”

Our comment

“This is good news if commodity pricing holds up during the next several months. But we know that much of the recent pick up in prices is based on speculation (South American weather, etc.). Nonetheless, we’ll take good news wherever we can get it.”