My last 5 business days were productive. Before and after a 26-hour conference in Colorado, I had two interviews for “Our Dealer Story,” attended a Far West Equipment Dealers Assn. board event, toured two suppliers and met with a farm machinery analyst. The road miles showed things growing again, albeit the corn was only ankle high.
If the definition of the word “dynamic” means “in constant change,” you can say that ours is a dynamic industry. Even if those changes are not exactly welcomed.
Out west, I’d heard some unsettling things and unintended consequences affecting dealers on the west coast (and moving east, they fear), including technicians’ tool rules, wages and litigation, and to no one’s surprise, Right to Repair. Of course, the uncertainty in trade is paralyzing many, and then the weather had some wondering if it was time to build the ark.
You can only kick the cat so many times, so interview and flight time was spent considering what isn’t unchanging in the doctrine of the farm equipment business. “What it is, what it was and what it shall be.”
- It’s a service business. The performance of the equipment is important, but most customers are paying for steadfast standby support, not iron.
- You can process or “tech things” up all you want, but a company is only as good as the ones wearing your shirts. Unless corporate-style stores one day redefine expectations, farmers want to do business with and be taken care of by other people — with decisions made in the now.
- Ingenious applications of technology and a better way can still attract an audience. There is no “one size fits all.”
- There’s always something you can sell. Quality used pieces, specialty brands, parts, repairs and training.
- If a better business model existed than going through the dealer, it would’ve arrived by now. I recently took a call about a company looking to circumvent the dealer, and the most recent example I came up with of anyone having any luck going direct was Hagie, which gave up and sold to Deere in 2016.
A lot of businesses (ours included) can look back at the valleys to find defining moments and growth in their histories. After several down years and some psyches rattled, don’t let your people stop looking.
On Another Note
The week’s most positive note came at a meeting at our offices with Baird’s Mig Dobre, a prolific analyst on the farm machinery business. “It’s going to get better,” he says, commenting the corn and beans that aren’t getting in this year because of the weather. “A bad crop can be a tragedy for an individual farmer, but a bad crop can also be good for farmers on average.”
He spoke about the difficult planting years of 1983, 1985 and mid-90s. “Corn yields were 10-20% lower than the normal trend. Pressure on yields means pressure on production, particularly in a year when planted acres will be lower than expected.”
This carries over to ending stocks, he says, supporting higher corn prices for the rest of 2019 but into 2020, he says. “As we see it, every 1% reduction in yields and production will result in roughly 2.5% higher farm average corn prices.
“So, a 10-15% downside in yields could still bring average farm pricing 30% higher than the USDA’s estimates.” Because machinery demand lags changes in corn prices by about 1 year, he sees a magnitude of change in coming — not only due to corn prices but also the vibrant replacement demand cycle that is already here.
“Those two factors could shape up for a strong 2020,” he says. If Dobre is right, one of those days, that mud will dry and flake off your boots, and you’ll be high stepping once again.
Happy Independence Day to you and your families; take the time to enjoy it. (I’ll be a remote Manitoba outpost celebrating Canada Day and the Fourth of July with my dad, sons, nephews and brother in law with a boat full of walleye) ... And I look forward to rolling up the sleeves with you at the Dealership Minds Summit later the month!
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