Farmer Iron

The hits just keep coming

Latest numbers for the farm equipment industry show just how quickly crop prices can impact a market.

The farm equipment market is a nimble environment where the slightest news can make a big difference, and when crop prices started falling so did sales - at least for large equipment. But a quick look at the market shows that on the whole it's been holding its own as commodity prices weakened.

The biggest change in sales comes in the largest equipment - big four-wheel drive tractors and combines. So far for the year, the Association of Equipment Manufacturers reports 4-wd tractor sales are off nearly 23% for the year (the slid nearly 51.6% in November alone). The field inventory reported for this tractor class is about five months (based on current sales) and that's pretty tight for a softening market.

As for combines, sales slipped more than 55% in November and are off just nearly 24% for the year. Based on the latest monthly figure here, the industry has about 5 months of inventory in the field, which is actually pretty good given the speed of market change going on.

The inventory numbers for those two largest classes of equipment are pretty solid. Anytime the industry can keep numbers below 6 months is usually a good sign. It also means manufacturers are resisting the temptation to pump inventory into the field to bolster stock prices. That reality check will help in the future as the market turns back around - as it usually does. The challenge there is knowing when.

The chart below shows overall sales for 2014, which has stuck relatively close to historic norms.

The hits just keep coming

However, with the drop in big-equipment numbers, smaller tractors are holding their own. For the three smaller classes - under-40-hp; for to 100 hp and over 100 hp - sales are up collectively 4.4% for the year so far compared to the same period a year ago. However, there's some weakness in the over-100-hp class with sales off 32.5% in November and down more than 12% compared to the same period a year ago.

Short-term softness in sales is already hitting the stock prices for the majors who trade publicly. However, we in agriculture know that fortunes turn and with some field inventory control and managing resources, the industry can bounce back pretty fast. Of course, you have to know when corn's going to go back up.

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