When the U.S. announced tariffs on imported steel, there was a lot of speculation — and maybe even fear — about what it would mean for farm equipment prices. There was little doubt that manufacturers’ costs were going to go up, but what we didn’t know was just how much that was going to impact the dealer and the customer.
Now that the dust has settled a bit, we’re starting to get some answers to those questions. Looking ahead to the 2019 model year, John Deere anticipates pricing to be more than just offsetting inflation, according to a Wall Street Journal report. Chairman and Chief Executive Samuel Allen said the company would cut costs and raise prices to protect profit, according the WSJ.
Other manufacturers have begun letting their dealers know what to expect. A New Holland dealer recently sent me this note from his OEM. “Many of you have asked how much is the steel surcharge going to be? Well we don’t know for sure. What we do know is that there will be a pricing increase of about 3% for model year 2019 and then on top of that there will be the steel surcharge. So If I had to guess you could be looking at a total price increase next year as high as 10%.”
Commentary in Ag Equipment Intelligence’s May Dealer Sentiments & Business Conditions Update survey suggests steel pricing has driven nearly all of the ag equipment manufacturers to raise price anywhere from 2-5%. On dealers commented, “We get a new notice of price increases on new product orders almost every other day. The rumors of looming steel surcharges are adding caution to the mix.” Another dealer commented that they’ve received mid-year price increases from 4 different manufactures all in the range of 3-5%. One respondent said the price increases, along with bad weather, interest rate increases and low commodity prices are all indicating a slowdown in sales this year.
What have you been hearing from your manufacturers? When the news of the steel and aluminum tariffs first broke, we polled Farm-Equipment.com readers to get your take on how the tariffs would impact the farm machinery business. At the time, overwhelming (83.2%) readers said the benefits of the tariffs did not outweigh their concerns for what it meant for the machinery business. Now that we’re starting to see what some of the price increases will be, has your mind changed at all? As you are preparing for the rest of the year — and looking to 2019 — how are you responding to the price increases coming from your manufacturers? Manufacturers and dealers both have said farmers who have been holding off on new purchases the last few years are to the point now where equipment needs to be replaced. With farm income still expected to be down and now prices increases going into effect, how are new equipment sales going to be impacted? Will traditionally new equipment buyers turn to used?