If I’ve learned anything in the nearly 14 years I’ve been with Farm Equipment and Ag Equipment Intelligence, it’s to not bet against the dealers who participate in our surveys. This is especially true when it comes to what direction the industry is heading.

For example, via the Ag Equipment Intelligence monthly Dealer Sentiments & Business Conditions Update survey we ask dealers at year-end about their sales forecast for the following year. Their responses have proved to be pretty accurate, particularly in the past few years. Mind you, we ask them for their outlook about 12 months or so before even they know for sure. Generally, we begin asking what they see for the upcoming year starting in October or November of the year before.

Based on the dealers’ responses, we can identify the trend and determine the general course the industry is on. What makes this relevant is comparing it to previous years and how their outlook compared to actual sales. The only “actuals” generally available are the monthly unit sales of tractors and combines from the Assn. of Equipment Manufacturers. Because the dealers are looking at all of their sales, not just tractors and combines, comparing their outlook with the AEM numbers is not exactly an apples-to-apples comparison. Nonetheless, the association shows us if we’re heading in a similar direction.  

At the end of 2013, which was the peak year for sales of high horsepower tractors, dealers said they expected their “overall” business (not just tractors) to decline somewhat in 2014. The AEM numbers showed that the 2014 sale of big tractors, indeed, showed a decline.  The same pattern can be seen in the subsequent years.

So, what are we looking at for 2019?

Through November (our latest data), the dealers see business as essentially flat (+1%) for the year. So far, among the majors, only John Deere has provided their outlook for the upcoming year and it’s similarly conservative (flat to +5%) to what the dealers expect. (The other majors typically provide their views when reporting fourth quarter earnings.)

Recent dealer commentary also appears to back up a “flat to up slightly” scenario. While many say they had a good year in 2018, they’re not so sure about this new year. Typical comments we’re hearing include, “There is still too much uncertainty” … “We are less optimistic on 2019. We don’t see any relief in crop and dairy pricing.”

Our editors also followed up with other dealers after the first of the year. One offered, “2018 will finish strong for us. We expect the first quarter to come in above forecast, but we’re bracing for a turbulent second half of the year.”

Leo Johnson of Johnson Tractor, with 4 Case IH and Kubota locations in Wisconsin and Illinois, says 2018 was a good year for the dealership, but 2019 is iffy, at best.

Summarizing the past year, he says, “2018 was stronger than 2017 in both revenue and net income. The year end turned out to be a carbon copy of 2017 with quite a few deals coming in the last 3 business days of the year. Strong retail incentives along with some profit from well capitalized customers kept the registers ringing right up until we closed New Year’s Eve. December started real good, then got quiet up until Christmas. The week between Christmas and New Year’s was a pleasant surprise to me. 

“Now there are a bunch of reasons to be pessimistic going into 2019, but still land sales and rents are stable to up, equipment prices are up, input costs are stable to up a little,” says Johnson. “The only thing missing in the equation is commodity prices … which suck and show no real potential to improve. Our revenues ended up about 15% over 2017. Profits were up 25% or more over 2017. The high yields helped push a real good October and November.

“All the experts predict at least a flat to up a little industry for 2019. I don’t really see it, but hope they are right.”

If you see something different for 2019, let us know. Until then, I would strongly suggest that you don’t bet against the dealers.