Making Precision Profitable
In today’s newscast we dig into how the drought in California is impacting farm equipment dealers’ sales, the final installment of Dave Kanicki’s JCB interview, farmers spending plans for precision technology, the ag equipment market in Europe and more.
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I’m managing editor Kim Schmidt, welcome to On the Record. Here’s a look at what’s currently impacting the ag equipment industry.
AFN: $52.09 +2.09
The drought that has plagued the western U.S., particularly California, for the last four years continues to linger. In fact, as of April 1 the snowpack in the Sierra Nevada is the lowest it's been in over 100 years.
The April 1 snowpack measurement came in at 14.8 inches, which is nearly 6 inches less than any other year during the last century. That is just 6% of normal.
Earlier this month the State Water Resources Control Board warned water right holders that rights are likely to be curtailed within key watersheds in the state. According to the board, the warnings were designed to give water right holders advance notice to help them make difficult spring planting decisions.
With the obvious stress put on farmers, I spoke with Steven Kost, executive vice president of the Far West Equipment Dealers Association, to find out how the drought and water restrictions are impacting equipment sales for dealers.
He says while the stories of land going out of production make you think dealers are facing big problems, that hasn’t been the case. The high prices for almonds, pistachios and walnuts have meant that producers — and in turn dealers — are still making money despite the drought.
“Last year was a good year for our dealers and I think the demand for equipment was there, the income for the producer was there, and I’m talking in general terms. I’m sure there were some in those areas that had higher concentration of fallowed land, their sales might have been reduced a bit. But in general and on average, I think sales were good last year because of the high commodity prices. This year, I think we’re going to see high commodity prices yet, but it will be to be determined if they can get a crop out of it with the reduced amount of water that they’ll get.”
Kost says dealers need to watch what their customers are doing in terms of changing crops to make sure they have the right equipment in their inventory. For instance, he says cotton and alfalfa are going out of production because of the lack of water.
The drought is no surprise for people who have been involved in California agriculture, he says, but he warns this could just be the tip of the iceberg. It remains unseen what the future will hold.
Dealers on the Move this week include Hlavinka Equipment Co., Walker Machinery Co. and Reis Equipment.
Hlavinka Equipment Co., headquartered in East Bernard, Texas, is opening a new division, Hlavinka JCB, in Victoria, Texas, where it will sell both new and used JCB agricultural and construction equipment.
Walker Machinery Co. announced plans to open a new Agri-Business division at its facility in Nitro, W.Va. Walker primarily sells and leases heavy earth-moving equipment from Caterpillar, but will now offer Massey Ferguson farm tractors and Hesston hay equipment at the Nitro location.
Reis Equipment of Carp, Ont., acquired Case IH dealer, John A. Burnett Ltd. in Renfrew, Ont. This will be the fourth store for Reis Equipment.
As JCB pushes forward in growing its ag business, the manufacturer has been working to expand its dealer network to include dedicated ag equipment dealers.
Executive Editor Dave Kanicki sat down with Dan Schmidt, vice president of agriculture, and Rob Marringa, general manager of dealer development, to learn more about JCB’s plans.
Schmidt says that because JCB operates in somewhat of a niche, there is little concern on their part about dealers carrying another tractor line as well. He adds, that might not be the case for the other OEMs however.
Heading into 2015, dealers knew it would be difficult to replicate the success they’ve enjoyed in recent years selling precision farming technology. Lower commodity prices are prompting farmers to be more judicious with where they plan to spend their money in the coming year.
This forecast is reinforced by the results of No-Till Farmer’s 7th annual Benchmark Study, as respondents project a year-over-year reduction in their precision farming investment.
According to the survey results, no-till farmers plan to spend about $2,600 ($2,674) in 2015 on precision farming products, compared to more than $3,400 ($3,468) last year.
While many of the survey respondents are considered early adopters of emerging technologies, the 2015 projection continues a 5-year decline in precision farming expenditures.
In 2013, no-tillers estimated spending about $4,100 ($4,180) on precision farming equipment, well below the approximately $6,800 ($6,839) they invested in 2012 and the more than $8,800 ($8,864) they spent in 2011.
Although overall spending on precision may be declining, the percentage of no-tillers utilizing advanced precision systems remained largely unchanged year-over-year according to the 2015 No-Till Farmer study.
GPS and tractor auto-steer remained the most commonly used technology with more than 48% of no-tillers utilizing the systems. About 41% of no-tillers plan to use lightbars for GPS guidance this year, a 3% increase over 2014, the largest percentage jump year-over-year.
Rounding out the top five most utilized precision tools in 2015 are yield monitor data analysis at 41%, field mapping at 39% and variable-rate fertilizing at about 32%.
According to Reuters and The Wall Street Journal, GE is in talks with Wells Fargo and others about selling its $74 billion U.S. commercial lending and leasing portfolio to the bank. However, GE could not confirm.
It’s also possible that GE will sell the division piecemeal and may break the business up. Earlier this month GE announced plans to sell off the bulk of GE Capital over the next few years to focus on industrial manufacturing.
According to The Wall Street Journal, GE Capital has more than 260,000 customers, including equipment dealers.
The current decline in ag equipment sales isn’t limited to North America. CEMA, a European association for the ag equipment industry, released its April Business Barometer report last week.
According to the report, 49% of survey respondents described their current business to be either unfavorable or very unfavorable vs. 45% for the same period last year. Just 16% described it as good, a 6% improvement from last year, and none reported their business condition to be very good.
According to a report, the overall market for arable farm equipment in the EU is expected to decline about 7% in 2015, following a 5% decline in 2014.
In Italy, unit sales for tractors dropped 9.4% during the first quarter vs. the same period last year, while combines were down 12.5%, according to the Italian Agricultural Machinery Manufacturers Federation.
International Harvester’s early self-rake reapers featured a rake that swept across the platform at regular intervals, regardless of how much grain was on the platform. A crew of four or five people was required to do the binding. In 1890, the introduction of the McCormick Folding Daisy reaper solved the problem. The Folding Daisy featured an adjustable latch for regulating bundle size and a foot lever that could be used to actuate delivery at any time. Production of the Folding Daisy reaper continued until 1905.
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