Oversupply a red flag for ag dealers

DALLAS – Traffic is building on ag equipment dealer lots.

Dealers at the North American Dealer Conference are nearly uniform in saying that used ag equipment is building to concerning levels, and that bodes poorly for the industry and equipment finance providers.

“The struggles of no new inventory [during the pandemic] turned into no used inventory, turned into too much new inventory, and now it has turned into too much used inventory,” said Russell Ball, territory sales manager at 21st Century Equipment, a Scottsbluff, Neb., ag dealership.

Indeed, recent ag market data points to a market in transition. This change from lack of inventory to surplus inventory has forced ag dealers to change their market approach.

21st Century Equipment did not need to advertise its used equipment two years ago, Ball said.

“I just waited for somebody to show up and write me a check,” he said. “Feels like that’s changing.”

During a panel of manufacturers, including representatives from John Deere and Case IH, dealers asked what the OEMs will do to help them through this period of oversupply, although one OEM representative, Eric Raby, a senior vice president at German ag manufacturer CLAAS, called the market “by and large … stable.”

“It’s important now for us to manage inventory with dealers going forward and taking a look at, you know, what months of supply do you need? What is the seasonality, all those sorts of things?” Raby said. “Because inventory sitting around doesn’t do anyone any good; we want to move inventory.”

Raby said, “we’re getting precariously close to, as an industry, having too much inventory.” He suggested that dealers and OEMs collaborate on finding solutions to this oversupply issue.

There is still demand for ag equipment yet to come because lower interest rates and commodity prices will make equipment more affordable, Raby said.

The OEMs, which facilitate financing for their equipment through the dealerships, did not spell out any specific financial programs for alleviating the oversupply.

Registration is now available for Equipment Finance Connect. The dealer-centric equipment lending and leasing event of the year offers opportunities for dealers to learn new strategies, foster valuable partnerships and emerge with ideas to immediately apply to their businesses. Learn about free dealer registration at EquipmentFinanceConnect.com.