Forecasting is often difficult even in the best of circumstances, but projecting what 2013 could look like is an even bigger headache than usual for most dealers. The best part of it is it still looks like it will be a pretty good year.
Last week, Deere & Co. released its earning report for its fourth quarter and full year, as well as its outlook for 2013. If you have money invested in the company, you might not be real happy because its earnings, etc. came in below what analysts expected. But if you’re a dealer there was a lot of really positive data in Deere’s report.
Even at that, it seems the biggest farm equipment manufacturer in the world is still a bit uncertain about what to expect in the year ahead. This is the same thing most dealers told us when we surveyed them for our annual “Dealer Business Outlook & Trends” report.
In that report, which we released a little over a month ago, more than 42% of North American dealers projected new equipment revenue in 2013 would be up compared with 2012. This compares with 55% of dealers who forecast in 2011 that revenues would rise during 2012. At the same time, this year 26% of dealers expect business to fall below 2012 levels in 2013. A year ago, only about 12% expected revenues to fall below the previous year.
In Deere’s outlook for the year ahead, it expects net farm income for all of 2013 to come in at $128.5 billion, somewhat below the $132 billion it’s projecting for 2012.
Deere expects ag and turf sales to rise by 4% in 2013, driven mostly by sales in South America, while industry sales are expected to be flat in the U.S. and Canada with “caution around the U.S. livestock and dairy sectors, which is expected to offset continued strength in demand for large equipment such as high-horsepower tractors.”
But what might really be throwing dealers off when it comes to their outlook for 2013 is what’s happening at the moment, or at least in October.
On November 12, the Assn. of Equipment Manufacturers reported that North American combine, row-crop, four-wheel drive, midrange and compact tractor sales increased 40.5%, 27.9%, 32.7%, 16.8% and 25.1% year-over-year, respectively. U.S. sales (+36% year-over-year) outpaced sales in Canada (+15%). Sales of large tractor and combines increased 32% year-over-year in October, accelerating from the 17% increase in September.
One dealer I spoke with in the last week said October sales were the single highest month in the dealership’s long history, increasing by nearly 70% vs. October of 2011.
But he added that his manufacturer was offering very attractive incentives to move equipment before the end of the year, and they had a good level of inventory to sell. Which, coupled with fears about expiring bonus depreciation tax benefits, added up to a huge month for sales because farmers must take delivery of equipment before January 1, 2013 to take advantage of the existing tax breaks.
The downside, he says, is these “pull-through” sales are likely to hurt 2013 revenue levels. On top of it, he says with the discounts being offered, it could very well hurt used equipment sales. “Trades we made in June didn’t look so good in October.”
On the other hand, coming off a really solid sales year in 2012, even if 2013 proves to be “flat” or falls off a bit, it’s still looks like it’ll be a pretty good year to be hanging around in agriculture.