I talk about the future of the farm equipment business from time-to-time in my blogs and podcast. With automation and autonomy just around the corner, it’s hard not to! Each new piece of technology inches us closer to unmanned machines and robots working in the fields. Venture capital money pours into agriculture, each looking for the next best efficiency as well as ways to combat the lack of farm labor needed to operate farms and ranches.
All of this isn’t an issue for the equipment dealer. Dealers will adapt their business as required, just like always. The question is, what does a shrinking customer base look like, and in turn, what will the industry resemble?
There is nothing I like talking about more than the future! Back to the Future Part II predicted flying cars by 2015 as well as Virtual Reality (V.R.) glasses. One came true, and the other not so much. Flying cars still are in the R&D phase. That was the prediction for 30 years in the future from 1985.
The speed of advancement in technology year-over-year is tremendous. The speed at which technology increases and price comes down is astonishing. The laptop you bought 3 years ago is obsolete. The same money will buy you a new laptop that has two to three times the memory and 10 times faster processing speed, if not more. So what is in store for the next 20-30 years?
I have read articles and listened to presentations talking about the number of farmers that will be farming in the future. Currently in the U.S., there are 2.05 million farms down from the all-time high of 6.8 million in 1935. According to a Nov. 27, 2019, USDA survey, of the 2.05 million farms, 2.7% of U.S. farms accounted for 45.9% of the value of production. Roughly, 55,000 farms account for almost half of the total output.
I have seen estimates that point to a reduction in the number of farms by 40-60% by the year 2040. If this estimate is correct, there would be 820,000–1,230,000 farms in the U.S. and 5% of these farms would account for 75% of total production. Roughly, 41,000–61,500 farms would account for 75% of total farm output. This is a game-changer for the ag equipment industry. What will ag equipment dealers do to adapt?
This is my Back to the Future moment. Manufactures will be selling/leasing direct to end users, and ag equipment dealers will sell support and technology packages.
Due to the limited number of used equipment buyers, dealers will not have the capacity to trade a large number of machines year-over-year or even every 3-5 years.
The cost of equipment will exceed smaller producers’ ability to own used equipment and new equipment will be entirely out of the question. Smaller autonomous machines will lead to large rental fleets and Uberization of equipment will be commonplace. Machine utilization will now be a big deal. No one will be interested in using a combine for 30-60 days a year for it to sit in the shed for the remaining 300-330 days of the year.
For this model to work correctly, machine utilization is 75-80% of the entire year assuring profitability. Thus, manufacturers will sell/lease to the end user. The manufacturer will use its infrastructure around the world to utilize machines profitably. When its harvesttime in South Africa, it is planting season in Nebraska. When the seasons flip, so do the tools. Machine utilization will be by need and not by convenience.
The dealers will not look anything like today’s dealer. Dealers sourced with the repair of machines so technologically advanced they will be pulling graduates from M.I.T. Dealers will employ experts in code writing, artificial intelligence and robotics. Dealers will be competing with the likes of Space X, Blue Origin, Amazon, Tesla, as well as giants that don’t exist yet. Dealers will have to have an understanding of the farm operation, unlike anything today.
Because of the demands of transparency from the consumer, documentation of the food supply chain will be the difference between a producer making a profit and going out of business. The need for efficient use of the land and to be as productive as possible without bypassing sustainability will have real consequences.
More people will move from rural America to metropolitan centers, and there will be less connection to agriculture by lawmakers. The dealer’s interaction with the producer of 2040 will not be recognizable compared to what they know today.
The future is what I think about when I have windshield time between locations. Articles I read or lectures I attend all point to one thing. Nothing will ever be the same, and the better you can predict the future, the better position you are in for a change. If your dealership isn’t thinking about what is over the horizon, you need to be. It will be here before you to know it.