In this space during the past month or so I’ve written about a lot of the positive news that we’ve been getting and hearing about, from the USDA’s outlook for improving net farm income for 2017, to our own survey of dealers. According to the recently completed 2018 Dealer Business Outlook & Trends survey, nearly 47% of dealers expect revenues from the sale of new equipment to increase. This compares to less than half that (22.4%) in the 2017 survey.
Three weeks ago we ran down many of the positive comments we were getting through our monthly Dealer Sentiments & Business Conditions Update survey. I’m happy to report nothing much has changed in the most recent Dealer Sentiments survey just completed last week.
For the first time this year, we asked dealers about their outlook for 2018. According to their responses, dealers are calling for 1% growth with a net 28% of contacts expecting growth in 2018 vs. 1% who expected growth 12 months earlier. A sampling of dealer comments from the October report indicates continuing enthusiasm as we near the end of harvest in the Midwest.
- Strong sales continued in September. It is a rare year when sales are stronger in August and September than in June and July.
- We are selling more new and used equipment than expected considering the low commodity prices.
- I thought August was an anomaly but the strong sales trends continued in September. We are hoping for a strong October.
- We saw a surge in used equipment demand in the month, which was surprising after several months of inactivity.
- The used equipment market was strong for us in September. New equipment sales were challenged, likely due to weak corn prices.
Of course, the positive comments and attitudes are more than a little welcome, especially when it comes from boots on the ground. Yet, I can’t help but wonder what’s driving the confident outlook when sales numbers (especially with row-crop tractors; down 20% in September).
My best guess is that we are managing our expectations on both ends of our business levels much better. New and used equipment inventories are in much better shape than they were 12 months ago. So, while still concerning, these aren’t worrying us like they were over the past 3 years. We’ve also remained more disciplined when it comes to trades than we were a few years ago.
In Machinery Pete’s Quarterly Used Values Index for the third quarter of 2017, Greg Peterson offered a good example of this. “Dealers are reporting increased farmer buying interest in new planters, but it’s difficult for deals to happen given that dealers are not able to put as much into the farmer’s traded-in used planter as the farmer would like. Farmers want the latest technology for increased efficiency in this tight profit environment.”
In general, Peterson adds, “Dealers [are] reporting success with discounted price offers on used equipment. It’s difficult/painful, but the positive thing is that iron is moving. When the price is right folks are buying. The Machinery Pete ‘Black Friday’ August event we put on was hard proof of this. Dealers participated by selectively listing used equipment items they wanted to move, priced them aggressively for this short window timed event. Dealers reported success moving [these] items. It could be painful, but it moved used iron.”
So, it appears many more dealers are coming to grips with the realities of the current market for ag machinery, and it shows with growing confidence based on managed expectations.