Dealers of agricultural equipment are bracing for a continued downturn in the market as their farming customers pull back spending.
H&R Agri-Power is evaluating how far the downturn might go, President Steve Hunt said at Equipment Finance Connect 2024 this week in Nashville, Tenn., and noted he expects it to be in the range of 15% to 25%.
Yields from commodities directly affect farmers’ ability to finance equipment, and if prices continue to drop, the potential farmers will enter into new agreements will also lessen, Hunt noted.
But “if you have a yield, you’ll have a good year,” he said. “The price might be not so good, but you’ll have the cash.”
Hunt said that the agricultural sector should get a sense of its yield projections for the remainder of this year by mid-July. The U.S. Department of Agriculture forecasts a 25.5% year-over-year drop in commodity prices in 2024.
Inventory levels of agricultural equipment are up across the board, while asking and auction values continue to fall. An uptick in new models on dealer lots has pushed values higher, according to April data from Sandhills Global.
BY THE NUMBERS:
- Inventory levels of used tractors 100 horsepower or more rose 58.3% YoY in April.
- Some 55% of tractors over 100 horsepower are either new or at maximum 5 years old.
- Asking values for tractors 100 horsepower or greater were up 5.18% YoY in April, while auction values were down 2.02% YoY.
- Inventory for tractors 300 horsepower or greater are up 106.93% YoY.
- Inventory levels of used planters increased 41.59% YoY in April.
- Asking values for used planting equipment were 7.73% higher YoY. Auction values were 11.42% lower YoY.
- Used-combine inventory levels rose 17.63% YoY in April.
- Asking values for used combines were up 8.27% YoY, while auction values decreased 0.56% YoY.
- Inventory levels of used compact and utility tractors were up 15.6% YoY.
- Asking values for used compact and utility tractors were 1.79% lower YoY, while auction values were down 3.79%.
Pricing strains equipment budgets
Commodity prices are “the livelihood of these farmers, and if commodity prices are low, their net income is obviously extremely lower,” Sandhills’ Equipment Lease and Finance Manager Jim Ryan told Equipment Finance News.
Ryan said that smaller farms are likely to be hardest hit.
“Some of these bigger operations are doing OK and able to handle a lower year or two of commodity prices,” he said. “It’s going to hurt but they can sustain it. Generational farmers [are] going away and you’re seeing a lot of these corporate farms come in and buy up land.”
H&R Agri-Power sells new and used equipment from brands including Case, Echo, Kubota and New Holland. The company has tightened its spending to endure the market softness, Hunt said.
“We did pull back on the selling. … Actually, the farmers, the customers, did that for us so there were not as many purchases,” he said.
Manufacturers are increasingly offering attractive financing options to sell new equipment, which further strains dealers.
“I think OEMs will definitely have to come to the table more,” Hunt said.
When asked if he expects discounts from manufacturers to help with offloading equipment, Hunt said he wasn’t sure.
“What’s going to hurt us is going to be used equipment, though,” he said. “That’s going to affect my cost. … Our used equipment is a risk. Our used equipment has to sit there very long and it ties up cash.”
