A little over 10 years ago, Charlie Glass made a presentation to the Farm Equipment Manufacturers Assn. in which he predicted that by 2013 fewer than 50,000 farms would produce 80% of all the nation's farm commodities. He also projected that fewer than 2,000 mainline farm equipment dealerships would exist in the U.S.
During our conversations with him as we prepared the special report on alternative distribution channels (see pp. 14-31), we revisited his comments from 2003. Since USDA hasn't released all of its 2012 census data yet, it's not yet known if his forecast for the number of farms was on the money, but he points out that in 2007 the number of farms producing 80% of farm commodities had dropped to 80,000 and was still declining.
We do know that his forecast for fewer mainline dealerships was too aggressive. Looking back, Glass says his outlook was largely based on the clear trend toward rapid consolidation at the time. He also recalls attending a meeting with John Deere dealers, most of who were owners of single stores.
He says a Deere bigwig at the podium told the attending dealers to look to their right and look to their left. Then he declared that two of every three dealers at that meeting would not be around in the not-too-distant future. In fact, Glass recalls that Deere exec stating that the goal was for every John Deere dealer to own and operate 3 store locations.
Nearly every dealer reading this magazine knows that 2003 was an entirely different era from today. There are certainly more than 2,000 mainline dealerships. We estimate the total number of North American mainline farm equipment dealer locations at 5,500, down 1,500 from 2005. Today, nearly 200 dealer groups own 5 or more stores, with Deere dealers making up more than one-half of the dealer groups operating 5 stores or more.
There are also an estimated 1,500 independent farm equipment dealerships operating in the U.S. and Canada, for a total of 7,000 dealerships with more than 4,000 operator-owners.
To get a better handle on the numbers, a few years ago Farm Equipment added an additional category to our BPA-audited circulation forms. In addition to each of the 5 major brands, qualifying dealers can self-report as "shortlines only." These are dealers who do not carry any one of the 5 equipment full-line manufacturers.
A review of our 2014 circulation, which is audited by an independent firm, shows a total of 1,048 of Farm Equipment dealer personnel reported their companies as shortline-only dealers. This figure is up by 26% (from 831) in 2011.
What's it all mean? It means that dealers are sensing that a vacuum is developing as the majors continue to force shortline equipment off of their dealers' lots. And as the old idiom goes: Nature abhors a vacuum. If there is a gap, something or someone will fill it.
If independent risk takers sense an opportunity to make some money, they'll always figure out a way to exploit it. As a result, dealers who yield to their major's wishes and/or demands to dump their shortlines may be creating new competition for the farmers' equipment dollars, and in the process get an unfortunate lesson in the law of unintended consequences.
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