In today’s newscast we look at more consolidations among equipment dealer associations, Jon Kinzenbaw’s contribution to the farm equipment industry during the past 50 years, a surge in farm operating loan volumes, the value of UAVs and the second quarter results from CNH Industrial and AGCO.

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I’m managing editor Kim Schmidt, welcome to On the Record. Here’s a look at what’s currently impacting the ag equipment industry.

Dealer Association Consolidation Continues

The consolidation trend among equipment dealer associations continues. This time around it’s the board of directors of the Mid-America Equipment Retailers Assn. and the Ohio-Michigan Equipment Dealers Assn. who announced they are pursuing a merger.

In a note to MAERA members, Kim Rominger, who already serves as executive vice president and CEO of both dealer groups, said the merger would give the association a greater voice with manufacturers and suppliers as well as state and federal legislative entities.

In addition, he said it will better position the association with members as an increasing number of dealers have locations in areas covered by each association.

The members of MAERA and OMEDA need to approve the merger.

Earlier this summer we reported the Pacific Northwest Assn. and the Western Equipment Dealers Assn. had plans to merge as well.

Dealers on the Move

Dealers on the Move this week include Southern Tractor and Outdoors, Agri-Service and Noble Equipment.

Southern Tractor and Outdoors, a Kubota dealership based in Moultrie, Ga., announced the opening of a second location in Albany, Ga.

Agri-Service, a multi-store AGCO dealership in the Northwest, cut the ribbon on a new 25,000 square-foot dealership near Blackfoot, Idaho July 12. Agri-Service now has 13 locations across Idaho, Oregon, Washington and Utah.

Specialty equipment dealer Noble Equipment in Olds, Alberta, has taken on the JCB line. Noble specializes in equipment for dairy, livestock, poultry and hay and forage.

Our editorial intern James DeGraff recently spoke with Jon Kinzenbaw to discuss Kinze’s 50th anniversary and where Kinzenbaw sees the industry going in the future. Here’s James with more on the story.

Kinzenbaw Reflects on Innovation

Thanks Kim,

Starting off in 1965 as the owner of a small welding shop in Ladora, Iowa, Jon Kinzenbaw has become known for his innovative approach to developing farm equipment over the past 50 years. As his reputation grew, so did his company, Kinze Manufacturing, to become one of the largest shortline companies in the industry.

During that span, Kinze has been able to redefine the industry more than once with its products. Their rear-folding planter, in particular, revolutionized the planting industry back in 1975 and enabled the company to expand significantly.  

I spoke with Jon Kinzenbaw and we discussed the company’s 50th anniversary, as well as his thoughts on the future of the industry. Highlighting the conversation was a focus on autonomous technology, and how it will continue to shape the equipment industry.

Kinzenbaw says the company’s quest to perfect machine automation came after complaints from farmers who claimed they didn’t have enough help in the fields.

“So we jumped in with the autonomous tractor, the ability to drive tractor without a driver, so to speak. And we did that after we planted corn with that about four years ago, we had it coming along. We sat on it when developing it. We even set drivers in the tractor so no one would know what we were doing for about 3 years. But that autonomous has opened up a really big field.”

While certain aspects of the automation, like sensors, still need work, Kinzenbaw says the technology is applicable to multiple machines, including grain carts.

According to Kinzenbaw, the machines are tested in the fields on a regular basis and have continued to progress. The grain cart in particular has made considerable strides, as it can collect grain on its own from the combines without spilling an ounce.

As for the public perception of autonomous technology, Kinzenbaw is optimistic that over time, support for the concept will grow. He added that farmers are always looking for an edge, and if a product can prove its ability to save the farmer time and money, it will essentially sell itself. 

Back to you, Kim

Farm Operating Loan Volumes Surge

Thanks James.

Loan volumes for non-real estate farm loans increased by 5% in the second quarter of this year, according to the July 30th Ag Finance Databook from the Federal Reserve Bank of Kansas City. Much of the increase was driven by a surge in operating loan volumes, which are up 25% from a year ago. This offset an 18% drop in loan volumes for all other non-real estate farm loans.

Nearly all Federal Reserve Districts in the agricultural regions are reporting both farm capital spending and farm income have shown steady declines since late 2013, even as loan volumes have trended higher.

Consistent with national survey data from commercial banks, declines in larger, more capital-intensive purchases in the midst of expanding loan volumes highlight the growing demand for financing to cover input costs and other current operating expenses. Although loan demand has picked up and low loan delinquency rates generally highlight strong loan quality, other measures of agricultural credit conditions have weakened somewhat under the weight of reduced farm income.

Loan repayment rates declined and loan renewals and extensions increased in the first quarter in each of the Federal Reserve Districts located in prime agricultural growing regions. Several bankers also commented that they do not expect loan repayment rates to improve unless crop prices increase.

Now here’s technology editor Jack Zemlicka with the latest from the Technology Corner.

Value of UAVs Still up in the Air in Ag

 Thanks Kim .

As farm equipment dealers look to diversify their product and service offerings, unmanned aerial vehicles have certainly attracted a lot of attention — both positive and negative — during the last year.

While the technology holds promise for field scouting and detailed imagery, many in agriculture still view UAVs as toys rather than tools. Talking with dealers and farmers in recent months, an ongoing obstacle to widespread adoption is the regulatory limitation on commercial use.

Earlier this year, the FAA proposed regulations that would allow commercial drones to fly during daylight at a 500-foot ceiling — so long as the drone was within line of sight of its operator. In June, the FAA reported that it hopes to finalize regulations within the next year.

In the meantime, ag companies are seeking FAA exemptions to operate UAVs for commercial purposes. Idaho-based Empire Unmanned received the first agricultural exemption in January and company partner Robert Blair says it allows the business to legally offer UAV service, rather than try and fly under the regulatory radar and risk liability.

“The one thing that we need to keep in mind as an industry is we need to show the FAA that we can do this safely and that means doing it legally as well. Every time someone is flying a UAV without proper FAA clearance and documentation, that’s putting this brand new industry at risk. So be very diligent in your business and think about the future, instead of just the moment.”

As of the end of July, the FAA has granted more than 900 flight exemptions for UAVs and Blair suggests that until final regulations are approved, agricultural companies will continue to take a cautious approach toward offering UAV service.

Back to you Kim.

CNH & AGCO Sales Drop in 2Q

Thanks Jack.

CNH Industrial announced its second quarter results on July 29. Total revenues for the quarter were down 22% vs. the same period last year. Ag equipment net sales were down nearly 32% compared to the second quarter of 2014.

Worldwide, CNH’s ag tractor sales were down 4% and combines were down 17% for the quarter, with the largest drops coming from the North America and Latin America regions.

On July 28, AGCO reported its second quarter net sales were down 25% vs. the same period last year.

North American net sales for the second quarter were down 17.9% year-over-year. South America saw the biggest decline for the quarter with net sales down 36.3% in the region. Europe/Africa/Middle East sales were down 25.3% and Asia/Pacific saw a 12.8% decline in net sales for the second quarter.

Now from the Ag Equipment Archives…

For thousands of years, laborers used basic tools and their bare hands to tread grain from hulls and stalks, working endless hours in production fields. Craving an innovation, the British Royal Society of Arts offered a prize in 1783 to the inventor of the first successful reaping machine thrasher. After years of failed attempts by aspiring engineers, American designer Cyrus Hall McCormick achieved the breakthrough in 1831.

Using concepts from previously failed models and adding distinct new features including a grain-collection platform, the McCormick reaper was the first model that could successfully sustain improved production rates. With two men and a horse operating the machine, the reaper was capable of harvesting an acre of grain per hour.

While the market for the machine was minimal at the time, the model helped inspire future machinery that would make McCormick a household name in the 1800’s.

We always welcome your feedback. If you have any comments or suggestions you can send them to kschmidt@lesspub.com. Thanks for watching, I’ll see you next time.