What a year, huh? What started off to be a promising year for the farm equipment industry turned out to be one full of uncertainty. Throughout 2018, manufacturers, dealers and industry analysts all touted the fact that we were in a replacement cycle — good news for equipment sales. So, while net farm income was still projected to be down the sheer need for new equipment was influencing farmers’ purchasing decisions.
In the spring, President Donald Trump knocked down the glimmer of positivity in the ag industry when he introduced tariffs on steel and aluminum. You could almost hear the collective gasp coming from manufacturers and dealers alike. We all know what happened next. Retaliatory tariffs on U.S. commodities came from a number of countries, most notably China, putting more pressure on already low farm income.
Manufacturers were open with the fact price increases would be likely, and that some of that was going to have to be passed down. In Ag Equipment Intelligence’s 2019 Dealer Business Outlook & Trends Report, 55.6% of dealers said they were expecting a price increase of 4-6% in 2019. Another 5.4% of dealers said they’d see an increase in price of 7% or more.
That anticipation for price increases helped with early orders, though. According to the Ag Equipment Intelligence report, 22% of dealers said early orders were up.
Purdue University’s Center for Commercial Agriculture releases a monthly Ag Economy Barometer report, which measures sentiment among producers. One question regularly asked has to do with whether farmers plan to make large investments in equipment. In the latest report, authors James Mintert and Michael Langemeier say, “Producers’ perspective on making large investments has ebbed and flowed this year. Producers were most favorably inclined toward making large investments early in the year when the Large Farm Investment Index peaked at a reading of 74. The index weakened in late winter and early spring before rebounding in late spring, just before trade disruptions hit the agricultural sector.
“By late summer the index was more than 30 points below its January peak, bottoming out at a reading of 42 in September. However, since September producers’ view regarding the advisability of making large investments has improved, rebounding to a reading of 52 in October and improving again to 56 in November.”
Dealer sentiment was all over the board the first 10 months of 2018. After ending 2017 on a high note of a net 9% of dealers being more optimistic compared to the previous month (28% more optimistic; 53% about the same; 19% less optimistic), in January only a net 1% of dealers reported being more optimistic. Over the next 9 months, that number would fluctuate between being more optimistic and less optimistic. The low point of the year came in September when a net 18% of dealers reported being less optimistic.
Over the summer, passage of the Farm Bill was looking promising, with both the House of Representatives and Senate passing their versions of the law. And while (as of Dec. 5) the House and Senate Agriculture Committee had “reached an agreement in principle” on the 2018 Farm Bill, nothing had been delivered to President Trump yet to sign. So, more uncertainty as the year ends.
While it’s been a challenging year, we appreciate the openness you’ve shared with us about how these challenges have impacted your business and how we can tackle them. Here’s to a less uncertain 2019.