Canadian, Midwest ag dealers feel tariff-related inventory strain

Ag dealers are facing tariff-related inventory problems, resulting in a strained market and reduced financial performance. 

Farmers spent heavily on equipment to reduce taxes and upgrade fleets between 2021 and 2023, driving about five years’ worth of sales into just two and a half years. But now, the surge is straining the market with excess trade-ins and inventory, particularly in the upper Midwest and Canada, Marc Johnson, principal for equipment dealers at consulting firm Pinion Global, said during a Sept. 10 webinar hosted by Associated Equipment Distributors (AED). 

“In the United States … there’s just a host of big equipment surpluses up in North Dakota, Minnesota and Michigan. That’s the area we’ve got to cycle through before the ag guys get back to normal.” — Marc Johnson, principal for equipment dealers at consulting firm Pinion Global

Dealers face declining revenue, in addition to shrinking margins and weak used equipment values, forcing them to protect profitability amid rising tariff-driven costs by adjusting sales strategies, rentals and auctions, Johnson said. 

There’s some hope that by dealers and AED pushing Congress and the Trump administration, the tariff environment can improve, alleviating some of the pressure on ag dealers, Daniel Fisher, senior vice president, government and external affairs at AED, said during the webinar. 

Section 232 tariffs are imposed on products deemed to threaten the national security of the U.S., according to U.S. Customs and Border Protection. 

The tariffs “really contradict a lot of what the administration is trying to do in terms of supporting the ag sector, in terms of critical minerals and those things,” Fisher said. “It doesn’t help to drive up the cost substantially on the equipment needed to do these projects that the administration is prioritizing in the United States.” 

Titan Machinery feels impact 

Titan Machinery, one of the largest Midwestern equipment dealers, reported equipment inventory of $1.1 billion, up 2.8% year over year, while its agriculture segment revenue dropped 18.5% YoY to $345.8 million during its second quarter, which ended July 31. 

Although the domestic agriculture segment performed as expected in the quarter, low commodity prices keep farmer sentiment cautious, with equipment demand hinging on uncertain federal aid. However, improved crop conditions and the return of 100% bonus depreciation offer some support to the outlook, Titan Machinery President and Chief Executive Bryan Knutson said during the Q2 earnings call. 

“We continue to expect industry volumes for large ag equipment to be at levels slightly lower than the trough of the prior downcycle,” Knutson said. “However, we remain very engaged with our customers and are poised to capture opportunities that may arise as the year progresses.” 

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