While ag equipment sales continue to be soft, both farmers and dealers seem to be feeling a bit more positive about things than they have over the last few years. Ag Equipment Intelligence’s latest Dealer Sentiment survey, revealed that farm equipment dealers are forecasting 2017 sales to be down 2%, an improvement from the down 4% forecast the previous month. Back in September 2016, dealers forecast for 2017 sales was for a drop of 8%. Low commodity prices continue to be a concern, but commentary in the survey suggests they aren’t a total deterrent for equipment purchases.
One dealer commented, “Customers are interested in pre-sale planters for next year even with high new equipment prices and soft used equipment values. We believe new product technology is attracting customers despite a soft economy.”
Another dealer added, “We continue to be very optimistic about sales growth in 2017. The market is steady and the overall ag economy in our area is healthy. The used export market is especially strong for us and has contributed to increased new equipment sales.”
Looking at the Dealer Optimism Index, a net 1% of dealers report being less optimistic (19% more optimistic, 61% about the same, 20% less optimistic) in May compared to the month before. The uptick in dealer optimism and outlook mirrors an improvement in producer sentiment. According to Purdue University’s Center for Commercial Agriculture’s latest Ag Economy Barometer, producers feel their farm operations’ financial positions are stronger now than a year ago.
The reports authors, James Mintert, David Widmar and Michael Langemeier, say the attitude improvement is reflective of a few factors. They say: “First, revenues on many farms increased as a result of record, or near record, crop yields in 2016. The revenue improvement was further supported by the fact that corn and soybean futures prices strengthened from late summer through early winter. Second, production costs moderated for most crop operations compared to the prior year.
Fertilizer prices in particular were weaker than a year earlier, helping to improve margins. Third, as the long-term adjustment to tighter crop operating margins continues, farmland rental rates continue to adjust downward, helping to brighten the financial picture for many farm operations.”
The Purdue survey was of 400 U.S. agricultural producers. Does this seem to match up to what you’re seeing with your own customers? How have the attitudes of your customers changed over the last several months, and how have those changes impacted your own outlook? In my own conversations with dealers, it seems like things are getting better out there. But sometimes acceptance of the current state can easily be confused with improvement. Are things getting better or are we just getting more used to the “new normal” that Dave Kanicki wrote about last week?