In this episode of On the Record, brought to you by Associated Equipment Distributors, Howard Buffett talks about getting tractors and combines to Ukrainian farmers. In the Technology Corner, Noah Newman examines how the 360 Rain system boosts yields by over 65 bushels per acre. Also in this episode, the potential peak for large ag equipment sales, layoffs at Hutson Inc., 'Made in USA' equipment influence and AGCO's latest earnings report.

Associated Equipment Distributors

This episode of On the Record is brought to you by Associated Equipment Distributors — the leading association in North America strictly dedicated to the equipment distribution industry.  AED offers a wide range of education, events, advocacy and reports for companies of all sizes and all roles within your organization.  Learn more about AED by visiting www.aednet.org/agdealers

 

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Buffett Foundation Ships Equipment to Ukraine

Speaking at the National No-Tillage Conference in Indianapolis last month, philanthropist and no-till advocate Howard Buffett spoke about what he’s been doing to get equipment to Ukrainian farmers.

After having an initial discussion in April 2022 about bringing over 15 combines and 15 tractors, Buffett reached out to manufacturers and ended up bringing well over 100 new machines to Ukraine. Some of these were John Deere combines that had initially been destined for Russia.

“I sent an email off to Mark, who's the international president for International John Deere I've worked with for years, and said, ‘How many combines can I get? Can I get 15?’ And my son, I hate to say this in public, it's very embarrassing, but my son is on the Case- New Holland board, it hurts. It really hurts. Sorry guys, for you out there, the red. But I sent him a text and I said, ‘Get me 15 combines in the next week.’ And he wrote back, ‘Dad.’ I said, ‘I'll find out what I…’ And so he's always a little more pragmatic than I am, but within less than 2 weeks, we had 30 combines bought, and about half-and-half and all of the John Deere combines, this is kind of fun.

“I mean, all the John Deere combines were going to Russia and then John Deere wasn't sending them. So we got a little double whammy there and we got all the Russian combines. Now we're up to 70 combines, 84 tractors, a bunch of cedars and just bought 20 horse cedars. And we've got a bunch of both Kinze and John Deere planters.”

Buffett said through the program they have harvest about 265,000 acres and planted or drilled about 180,000 acres in Ukraine. 

Buffett, through his foundation, worked with the National No-Tillage staff to bring 4 Ukrainian farmers to the conference in Indianapolis.

Dealers on the Move

This week’s Dealers on the Move are Ag-Pro and Lawson Sales. 83-store John Deere dealer Ag-Pro announced Jan. 26 it has acquired Southeast Mower & Saw Shop in Waycross, Ga. Single-store Winnipeg Kubota dealer Lawson Sales announced Feb. 7 it will build a new store at its current location.

360 Rain Boosts Yields by Over 65 Bushels Per Acre

We’re looking forward to seeing a lot of cutting-edge technology at the National Farm Machinery Show next week in Louisville, Ky., including the 360 Rain unit from 360 Yield Center.  

It’s an autonomous irrigation system that’s also capable of applying manure, nitrogen and micronutrients through Y-DROP style hoses. It requires much lower volumes of water than traditional irrigation systems, and 360 Yield Center founder Gregg Sauder tells us it boosted yields by over 65 bushels per acre in some test fields. Sauder explains how it works.

“When we think about what actually happens in the field with a 360 Rain unit. Think of it this way — we’re going to hook to a water source in the center of the field. Wherever we go we’re laying down hose and we’re picking up hose. On this heavy reel that you see in the center of the machine, and the dispenser in the back, that’s where all the secret sauce is. We’re managing that hose. We cut perpendicular across your rows in the center of the field. We turn to the left, and go 1,300 feet to the road, in that same row, we’re going to back up, so going out we’re watering the outer half of the boom. Coming back toward the hydrant now, we’re watering here in front of the unit, so the tires never run in mud. When it gets to the center line of the field it’s going to turn its back end to the hydrant, stop, go to the right, and go down 1,300 feet and back, and it just watered 24 rows. As it turns the 2 nd time now it moves ahead either 80 or 60 feet, turns in left, and it just goes back and forth. In a matter of 5 days, we’re going to put a half inch of water on 160 acres.”

Sauder and his team will be at the National Farm Machinery Show next week, and we will be there, too. We’ll have updates throughout the week on our social media platforms. 

Have Large Ag Equipment Sales Peaked? 

Looking ahead to 2024 and 2025, James Mintert, professor and director of the Center for Commercial Agriculture at Purdue University, says there are positives and negatives. 

Speaking during the North American Equipment Dealers Association Dealer Conference last week in Dallas, Mintert says farmers are entering 2024 with strong working capitaland farm values still remain strong.

He says, “that means farmers’ balance sheets are still strong and likely they remain strong at least for another year. Interest rates might’ve reached their peak. That’s all the talk from the Fed — peaked and the possibility of maybe seeing lower interest rates over the course of 2024.” 

On the negative side, he notes South American production is rebounding and rising, thus providing increasing competition for U.S. exports. He also says crop margins are expected to tighten further in 2024 after tightening in 2023. 

“They're going to tighten again and even more in 2024. And then those weak crop margins down the road could lead to some farmland price weakness. At one point I thought we might see some of that by the end of 2024. But that's when the interest rate environment looks worse than it looks today with expectations for stronger interest rates.”

He says the prospect for weaker farm incomes in 2024 could suggest that sales for farm equipment, particularly tractors, may have peaked. 

If you look at 2WD tractors of 100 horsepower and up compared to deflated net farm income values, Mintert says you can see the correlation between the two and the lag in terms of how quickly it hits. So, he says while it might not hit in early 2024, looking ahead over the next couple of years he says the odds are pretty good that we’ve peaked. 

Layoffs Hit Hutson Inc. 

Industry sources report that Hutson Inc., a John Deere dealer with 32 stores in Kentucky, Tennessee, Indiana and Michigan, recently laid off over 60 employees, about 7.5% of its staff. 

One industry source said, “I don’t think it is tied to the economy, but more to management changing structure and the influence from their owners and New York City analytical group about inventory, cash, etc.” 

On rumors of layoffs from another party: “I think there will be a lot of that this year, especially with Deere dealers. Inventory Book Values and integrations are going to crush cash positions.” 

Hutson was the 2023 Farm Equipment Dealership of the Year and is currently No. 13 on the Farm Equipment Dealer 100 list. In May 2021, the dealership acquired 18 locations in Michigan. 

In discussing dealership consolidation in a recent meeting, Casey Seymour observed that by his estimation 80% of employees who come over in an acquisition end up leaving the dealership after 2 years. 

According to the results of a Jan. 17 Farm Equipment Text Poll, more than one-half (54.2%) of dealers report that within 2 years of a merger, 40% or more of the employees will no longer be with the company. The most commonly reported answer (at just over one-third of respondents) was a loss of 21-40% of staff.

Commenting on the news, Tennessee dealer Tim Brannon of B&G Equipment, said, “Hutson is a mega dealer organization. Layoffs can be proactive or reactionary in any organization. Anyone watching the news and markets can understand the uncertainties we in the machinery business face.

“Good times in this cyclical business allow for some luxuries of peripheral services that are goodwill or non-revenue producing; in tough times these tend to be cut, in tougher times not only the 'fat' but the muscle can suffer as well. Our half century of experience has seen a lot of 'cuts' laying on the floor around the chopping block. It is a painful exercise in management work.” 

We will continue to update this story on Farm-Equipment.com as more information becomes available. 

'Made in USA' Influence has Changed in Last 5 Years

In a recent Farm Equipment text poll, 71% of dealers said they’ve seen the influence "Made in the USA” has on customer buying decisions change in the last 5 years. 

Of that, nearly 39% said it has become more significant to selection, while just over 32% said it’s become less significant. 29% have seen no change in the last 5 years. The poll was conducted following a Jan. 26 announcement from the Federal Trade Commission that Kubota will pay a $2 million civil penalty as a result of an FTC action against Kubota for falsely labeling some of its replacement parts as being “Made in USA."

AGCO Reports $14.4 Billion in 2023 Sales

On Feb. 6, AGCO reported fourth quarter net sales of $3.8 billion, down 2.5% year-over-year. Net sales for the full year 2023 were $14.4 billion, a 14% year-over-year increase.

This was the fourth year in a row AGCO saw a year-over-year increase in net sales for the year. Looking at 2024, AGCO is forecasting net sales of $13.6 billion, reflecting lower sales volumes, modest positive pricing and favorable foreign currency translation. This would represent a roughly 6% year-over-year decline in annual net sales.

2023 North American net sales came in at $3.8 billion, an 18% year-over-year increase. AGCO attributed this increase to positive pricing and increased sales of high–horsepower tractors, application equipment and combines.

AGCO’s net inventories were valued at $3.4 billion as of Dec. 31 of last year, an 8% year-over-year increase and 5-year high. Inventories of finished goods specifically rose 47% to $1.5 billion, also a 5-year high.

Speaking on North American dealer inventories during the earnings call, AGCO Chairman, President and CEO Eric Hansotia said:

“Looking to 2024, we are aggressively managing our company and dealer inventory to match the softening retail demand. Our dealer inventory levels are at or above targeted levels, so some reductions will be required in 2024. Currently, we're expecting around 10% lower production in 2024 vs. 2023. This reduction reflects our 2024 market forecasts, market share growth assumptions as well as targeted reductions to dealer inventory.”

Hansotia also said that orders on track tractors, planters and application equipment were fully booked for model year 2024, which takes the company to the mid- to late-summer period.

DataPoint: 4WD Tractor Sales Forecasts

This week’s DataPoint is brought to you by the 2024 Dealer Success Academy.

The percentage of dealers forecasting sales growth of 2% or more in over 100 horsepower tractor sales for the year ahead dropped for the second year in a row for 2024 to 29.7%, according to the latest Dealer Business Outlook & Trends report. This percentage peaked in the last 5 years when 47.1% of dealers were forecasting unit sales growth for 2022.



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