Farmer Iron
Machinery year makes soft landing

Machinery year makes soft landing

Companies are making moves to cover for shortfalls and hunker down for 2015.

After about five years of go-go sales the farm equipment industry saw a softer sales year in 2014 according to the December2014 Flash Report from the Association of Equipment Manufacturers. Lower crop prices have business farmers stepping back from sales, but when the dust settled 2014 sales were ahead of the five-year average and just below the previous two years.

Looking at the numbers, smaller tractor sales have recovered well after a big slump after the Great Recession in 2008. For 2014 sales of tractors under 40 hp were up 8.7% for the year and for 40 to 100 hp machines sales rose 7.2%. that was the bright spot that kept over two-wheel drive tractor sales up 4% for the year.

Bigger equipment saw softer sales in 2014, but overall sales were still ahead of the five-year average.

That's because sales of tractors above 100 hp were down 13.6% for the year. There was a rise in sales into December (which the chart on this page shows is pretty standard) nothing like a tax reason to buy equipment and the last-minute push on Section 179 expensing may have helped.

For larger equipment sales, the kind bought by larger, business-focused farms the news was worse. Sales of four-wheel drive tractors slid 26% for 2014. Interestingly, though the inventory of those machines is running relatively tight under three months on average. That's a sign the industry is cinching up its manufacturing built to avoid the need to unload new equipment later.

That isn't true for smaller tractors with inventories for under-40 hp and for 40 to 100 hp machines running higher than six months. For 100-plus hp tractors inventory is running at about four months (which is pretty tight for the industry historically).

Combine sales slid more than 25% for the year, but inventories of new machines there are lower than historical averages too.

Tighter new-equipment inventories will allow dealers to hold the line on prices there, however a rising glut of used machines could eventually offer some late-model opportunities for someone in the market this year to do some upgrading. It's still going to happen.

All in all 2014 was off from previous highs, and early indications are sales could be softer in 2015. Major manufacturers have laid off workers to cut costs, and tighter new equipment inventories are a sign of survival as well. It's worth watching.

Machinery year makes soft landing

Source: Association of Equipment Manufacturers

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