Michael Ellis, publisher of Rural Lifestyle Dealer, made a guest appearance on the latest webcast of On the Record. He offered a few insights and trends from the Rural Lifestyle Dealer Business Trends & Outlook Report. The full report will be published in the Winter 2015 issue of Rural Lifestyle Dealer being mailed in late January.
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Current Ag Equipment Fleet is Youngest in 30 Years
I’m managing editor Kim Schmidt, welcome to On the Record. Here’s a look at what’s currently impacting the ag equipment industry.
Rural Lifestyle Dealers Forecast Revenue Gains in 2015
AFN: $53.10 −2.64
AGCO: $44.39 +0.76
AJX: $0.53 −0.10
ALG: $46.70 −2.34
ARTW: $4.90 −0.10
BLT: $15.99 −0.53
BUI: $5.94 +0.19
CAT: $86.83 −1.88
CNHI: $7.79 +0.16
DE: $89.53 +3.04
KUBTY: $74.47 +3.67
LNN: $85.67 +0.70
RAVN: $23.27 +0.17
TWI: $9.70 −0.62
TRMB: $25.47 −0.20
VMI: $120.26 −5.00
CVL: $19.60 +0.00
RME: $8.83 −0.35
TITN: $13.30 +0.84
TSCO: $79.74 −1.18
Closing Stocks as of 1/22/15 (Compared to Close on 1/8/15)
After a solid pick up in revenues in 2014, 47% of North American dealers see sales revenues from their rural lifestyle and large property owner segments increasing again in the year ahead. Another 37% of dealers believe their revenues from equipment sales will be at least as good in 2015 as they experienced in the past year.
Based on this year’s response, rural dealers expect 2015 to be another strong year. All told, 84% of the equipment retailers polled anticipate business levels to be as good or better this year than they were last year.
This is down from last year, when 91% of dealers had the same outlook but still an overwhelmingly positive outlook toward the coming year.
Only 16% of dealers are projecting a drop-off in sales for 2015, and the number of dealers expecting growth of 8% or more, increased to 8.1% from last year’s 7%.
— Michael Ellis, Rural Lifestyle Dealer
The survey asked dealers to rank 26 product categories for their potential for growth. For the second year in a row, more than half of dealers, 55.9%, expect zero-turn mower sales to grow 2-8% or more. Last year, 64.9% of dealers forecasted similar growth.
Tractors under 40 horsepower, tractors in the 40-100 horsepower range, rotary cutters and utility vehicles rounded out the list of the top 5 products dealers expect to show the most growth in 2015.
A full outlook can be found in the Winter 2015 issue of Rural Lifestyle Dealer, which will be in the mail next week.
Dealers on the Move
Dealers on the move acquiring new locations, new lines and upgrading facilities this week included:
— Altorfer Ag Products was selected to be a retail dealership for MacDon FlexDraper products, which include specialized harvesting and hay equipment. The dealership will represent MacDon FlexDraper products throughout southeast Iowa, northeast Missouri, Illinois and northwest Indiana.
— Kubota dealer, Marion Equipment Co., of Marion, N.C., has announced it will go out of business by the end of January. The dealership, opened in the early 1950s by Frank Queen, is looking to sell, but if that doesn’t happen by Jan. 30, the business will close for good.
— Bane-Welker’s La Crosse, Ind., location will now offer the full Case IH line of products, including parts, sales, service and precision farming. The location also will now service H&P customers as a part of a consolidation effort between Bane-Welker and H&P Sales & Services.
And now here’s Technology Editor Jack Zemlicka with the latest from the Technology Corner...
The evolving disparity between the shelf life of farm equipment vs. precision technology is an interesting debate. It’s no surprise that the lifespan of a high horsepower tractor or combine far exceeds that of any in cab monitor, potentially by decades.
But can farmers fully maximize the longevity of a $300,000 piece of machinery, without constantly investing in the latest technology? Probably not, but in the future, it may not be as much of a concern, says Scott Shearer, professor of food, agricultural and biological engineering at Ohio State University.
During a discussion at this year’s National No-Tillage Conference on technology knocking on the door of production agriculture, Shearer says he expects in the no-too-distant future, the lifespan of farm equipment and precision technology will more closely coincide, due to the increase in automated functionality.
“Perhaps, because of automation and some of the technology, we’re reaching a point in time where we might actually see a reversal in the trend of farm equipment size. What I’m really talking about is going to fully autonomous equipment. I think for a long time people thought of automation as a way to replace labor. I don’t think that’s the case. Really what I’m looking at in some respects is the compaction penalty and whether or not reducing gross vehicle weights by going to automated equipment — I’m talking about gross vehicle weights of less than 10,000 pounds — whether there is a sufficient gain in productivity to offset the cost of automation.”
While skeptics say more electronics equals more potential for problems, Shearer suggests the cropping system of the future will include 60-70 horsepower autonomous tractors, weighing less than 10,000 pounds, with adjustable ground clearance, armed with sensing technology and able to work 24 hours, 7 days a week.
2015: Ag Equipment Demand to Drop
Following years of solid growth, demand for large ag equipment began to drop in 2014, while smaller ag equipment continued to grow, says Mig Dobre, analyst with RW Baird.
The next 2 years will continue to be tough for ag equipment sales, according to Dobre.
He says ag equipment sales have grown significantly over the past 7 years, with demand meaningfully above the long-term trend. As a result, we currently have the youngest large ag equipment fleet in three decades. This combined with the steep decline in crop prices is resulting in meaningful declines in equipment sales, he says.
Baird’s outlook for 2015 is generally inline with Deere’s outlook. Dobre says they assume a 40% decline in large ag equipment demand, bringing it below the long-term trend.
2014 Farm Equipment Sales on Track with 5- & 10-year Averages
After the Assn. of Equipment Manufacturers released its December tractor and combine sales report on Jan. 12, John Deere released its Retail Sales Comment. For row-crop tractors, 4WD tractors and combines, Deere’s sales were down more than the industry. For utility tractors, Deere’s sales were up, but wer e less than the industry average.
The farm equipment industry was focused on falling commodity prices and their negative effect on farm machinery sales in 2014.
But, looking at total retail sales for 2014 in comparison with the 5- and 10-year averages in the Jan. 12 Baird Report, it may surprise you just how close the 2014 numbers match up. Tractor sales were all above the 5- or 10-year average and combine sales were only slightly below the 10-year average.
Retail sales of compact tractors under 40 horsepower for 2014 far surpassed both the 5- and 10-year averages, totaling 123,610. That is more than 23,000 above the 5- year average and almost 10,000 more than the 10-year average.
Tractors in the 40-100 horsepower range reached total sales for the year of 68,519, about 10,000 above the 5-year average and on par with the 10-year average.
Retail sales of all 4WD tractors for 2014 fell just below the 5-year average, but just above the 10-year average, at 6,346.
Combine sales came in just under the 5- and 10-year averages, at 10,263. That is only about 600 lower than the 10-year average.
Ag Equipment Archives
In 1991 initial optical sensing research at Oklahoma State University focuses on detecting and spraying weeds. At the same time, James Beck, a Northern California electronics engineer, develops the Patchen technology and in 1992 founds Patchen, currently a subsidiary of NTech.
He then designs a spraying system integrating the technology. This integrated optical sensing becomes the basis for the GreenSeeker variable rate fertilizer application system, and WeedSeeker, which uses similar technology to selectively spot-spray weeds.
As always we welcome your feedback. You can send comments to email@example.com. Thanks for watching; I’ll see you next time.