Almost since the sales of farm machinery began its slide in late 2013 and early 2014, used ag equipment headlines have dominated the industry’s headlines. And rightfully so. Many of the best dealers in North America have said it, “The one thing that will destroy a dealer’s business faster than anything else is an uncontrolled inventory of used equipment.”
Some industry analysts have begun to say the used situation appears to be getting better. In a note to investors prior to Deere’s second quarter earnings report on May 19, Mircea (Mig) Dobre, senior research analyst for RW Baird, said, “Used equipment values are stabilizing providing support to new equipment demand (easier to value trade-ins); stabilizing used equipment values render lease return impact on JDFS manageable in our view.”
We’ve been reporting this based on the results of our monthly Dealer Sentiments & Business Conditions Update survey for several months now.
So now we’re taking a look at new equipment inventories, which according to our May survey are starting to improve somewhat, as well. That survey shows that a net 29% of dealers reported new equipment inventories “too high” (41% too high, 47% about right, 12% too low), better than the 35% in the previous month. New inventory levels have been elevated for over 3 years, but have come down over the past 6 months. (See chart below.)
But what really got me thinking about new was a recent email conversation I had with a veteran farm equipment dealer who’s getting a bit tired of his major manufacturer beating him up to take on more new equipment. He says for the past couple of years his major has been pushing for him to order lots of new inventory.
“The company doesn’t seem to want to cut production even though sales have been slow. Old timers like me have a hard time playing this game because we know out trade areas much better than our major. We know what we need to order and don’t need the company telling us how much we should order,” he says.
After sharing his experience of days long gone when equipment reps would wine and dine dealers to “encourage” dealers to order a lot of inventory, he’s wondering if he’s alone in this feeling this pressure.
“The long and short of it is, I was wondering if you would look into this situation across the country,” he says. “I’d like to know if this situation is the same everywhere or if our area is unique?”
I told him we’d bounce the question off of our dealer readers and see what we come up with. So here’s my request to you dealers out there. Please take about 2 minutes and respond to this online survey. Is your major pushing you to order more inventory than you’re comfortable doing? And then tell us your story of what you’re going through and how you’re responding?
Both of us old timers appreciate your feedback.
P.S. All responses will be held in strict confidence with no mention of individuals, dealerships or even states.
If you are having trouble viewing the survey on your device, click here.