In the past few weeks I’ve read and spoken with people who closely follow the ag equipment business. Their outlook for 2017 ranges from “Replacement cycle may be forming, although its timing and magnitude remain uncertain” and “With stubbornly elevated used equipment inventories industry-wide, we anticipate an eventual recovery for the sector to be gradual, driven predominantly by large farmers' replacing the machines purchased in the last years of the prior upturn” to “After 3 years of sales downturn, we look for declines to narrow in F17, but acknowledge there is no evidence the operating environment may be stabilizing or bottoming.”
So what do “you” think? Do you see a bottoming out in 2017 for ag equipment sales? We would like to hear from you. [Click] on this link and let us know. It’s a simple “Yes” or “No” survey.
We’ll let you know the results in the first E-Watch of 2017, but with this being the last E-Watch newsletter for this year, maybe we can end the year with one of the more positive outlooks we’ve seen in recent weeks, and which we covered in the December issue of Ag Equipment Intelligence last week.
According to a Dec. 13 report in Agrimoney.com, MetLife thinks the official estimates for this year’s U.S. harvest may be too large and that there will be a global production “pullback,” that could result in the new year being a “turning point” for grain prices.
“The insurance giant, whose agriculture division is one of North America’s top farm mortgage lenders, said that market ideas of this year’s record corn and soybean harvests appear ‘too high,’” and questions USDA assumptions. The ag agency estimated this year’s corn yield at a record 175.3 bushels per acre, and soybeans at a record 52.5 bushels per acre, “We view that smaller-sized ears and pods could trim final yields,” MetLife said. Downgrades could “bring the size of the 2016 harvest only slightly above the 2015 record.”
MetLife also sees lower acreage as playing a part in higher grain prices, forecasting U.S. plantings “should pull back in 2017 leading to lower excess supplies of major crops.”
The Agrimoney.com report says MetLife is forecasting corn acreage to decline by 3.5 million acres next year after rising to 94.5 million acres in 2016, according to USDA estimates.
MetLife added that an acreage pullback is unlikely to be an isolated U.S. event. “Other major crop producing countries … are also likely to pull back on planted acres … after 4 successive years of supply increases, next year could prove to be the turning point with a global supply pullback leading to improved pricing.” Agrimoney.com said, “The group forecast that grain and oilseed [prices] will start to recover in 2017.”
Unfortunately, the report’s forecast for livestock and dairy isn’t quite as rosy. MetLife sees the beef cow herd increasing by 8.3% to 31.5 million head by 2018 with cattle prices entering a “cyclical low through 2020.”
It goes on to suggest that U.S. milk production will continue to increase and U.S. dairy producers will gain market share, but without “significant price increases in 2017.”
Here we are with much of the same as we’ve had throughout the year: a lot of uncertainty mixed with a bit of optimism and a dose of reality. It’s pretty much the same as agricultural has always been.
Nonetheless, all of us at Farm Equipment wish our readers a Blessed Christmas and a Prosperous New Year!