Last week I was on the road traveling in western Minnesota visiting dealers, manufacturers, service providers and even an impromptu stop at Alexandria Technical & Community College to check out the diesel mechanic program. Despite the hard year that North American farmers — and thus farm equipment dealers — have been having, nearly everyone I visited with seemed upbeat and relatively positive. Harvest is going to be a race against time this year. The average first frost date in some parts of Minnesota is Oct. 1-10, and one dealer said it will be at least Oct. 1 before anyone is in the field to combine. On top of that, it’s still very wet in that area. It’s going to be tricky to say the least.
But, as Chris Lund, president of Lund Implement an AGCO dealer in Madison, Minn., told me, “You’ve got to be an optimist to be in this business.”
Despite the generally positive attitudes I came across on my visits, the latest Dealer Sentiments & Business Conditions Update survey from Ag Equipment Intelligence shows dealers optimism is pretty low. The Dealer Optimism Index measures sentiment vs. the previous month. In the latest update, which looks at how dealers were feeling in August, a net 20% of dealers were feeling less optimistic (13% more optimistic, 54% about the same, 33% less optimistic.) And dealers have shifted their 2019 sales forecast to being down 4% compared to a forecast of down 2% the previous month.
One dealer from the Lake States/Northern Plains region commented, “Farmers are going to have to recover from this disastrous year. They will have to get out of debt before they can buy equipment.”
One bright spot in the sales outlook is Kubota dealerships who on average are anticipating 20% sales growth. Shortline-only dealers are also positive, expecting 6% growth. We’re in the process of reviewing the results of the Dealer Business Outlook & Trends survey right now, and will have the results in the October/November issue of Farm Equipment.
Overall, North American dealers aren’t quite as optimistic going into 2020 as they were last year at this time. A year ago, nearly half (49.4%) of dealers were expecting ag equipment sales to improve over 2018 levels. This year, just under 42% are expecting sales of farm machinery to pick up. At the same time, nearly 88% of dealers said they will be profitable in 2019. This is down only 1% from the previous year when 89% of U.S. and Canadian dealers reported being profitable in 2018.
A quick side note on Alexandria Technical & Community College. Knowing so many dealers are struggling to fill service tech positions, I asked Chris Thompson the instructor we met with if they were having trouble filling spots in the diesel tech program. The program has just 48 spots each year, and they had 156 applicants for this school year.
Granted that is down from about 250 applicants 5 years ago, but they still have to turn away two-thirds of the kids who are interested in the program. Now, all these students aren’t going into farm equipment dealerships. Some go on to construction or trucking jobs. “We can’t keep up with how many people are needed,” Thompson says.