In this episode of On the Record, brought to you by Associated Equipment Distributors, PFG America CEO Daniel Cook discusses the company's goals for expanding Deutz-Fahr's North American presence. In the Technology Corner, Noah Newman hits the technology highlights of the 2024 National Farm Machinery Show. Also in this episode, CNH Industrial reports $18.1 billion in 2023 ag sales, fewer dealers plan to build brand new dealerships and Deere dealers' inventory levels are rising.

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

TRANSCRIPT

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• Deutz-Fahr Grows High Horsepower Tractor Business, Dealer Network
• Sights & Sounds from 2024 National Farm Machinery Show
• CNH Ag Sales Up 1% in 2023
• Few Dealers Plan Building Projects in Next 12 Months
• Deere Reports Dealer Inventories Approaching Pre-Pandemic Levels
• DataPoint: Self-Propelled Sprayer Sales

Deutz-Fahr Grows High Horsepower Tractor Business, Dealer Network

At the National Farm Machinery Show last week, we caught up with Daniel Cook, CEO of North American Deutz-Fahr distributor PFG America. Cook said the company has big goals in 2024, including doubling its current dealer network of about 100 dealers. The company is also seeing growth at the top end of its horsepower offering as it onboards more dealers.

Cook said Deutz-Fahr’s higher horsepower offerings in North America, which cap at 340 horsepower, are a small but growing portion of its business, particularly with smaller dealers.

“And if you look at the size of Deutz in America at the moment, we've got enormous growth and enormous opportunity to help some of the smaller dealers pick up a higher quality product line, pick up a 6 cylinder product line that they might not have at the moment, that they don't have access to. And if you look at our product range, that's one of our absolute strengths across North America is that we can offer, unlike most brands, a great high horsepower offering outside of the major manufacturers.”

“At the moment, we're selling about 10-15% of our volume of our high horsepower 6 cylinder tractors. But we're seeing that grow as our dealers are developing more capability, improving. We're working heavily with the dealers on service capability, and as you start to get tractors in the field, those customers that are running the bigger high horsepower tractors are really starting to see that Deutz can look after them and can offer a really great solution.”

Cook added that PFG is aiming to bring in dealers for areas Deutz-Fahr is not represented, including the Southeast and California. Looking ahead, Cook expects the current “shallow trough” in the ag cycle downturn to ease by early next year. However, he says this will depend on what happens with the 2024 election.

“I guess it depends on what happens with the election cycle. An election year, and I haven’t been here for one in America yet, but an election year is always a challenging year in any market. So I would expect that we’re going to see interest rates reducing as the year goes by and the buildup to the election. Elections always cause a bit of uncertainty. So my pick would be in the first quarter of next year as we’re coming into the spring season again, we’ll start to see a pickup in the market.”

Sights & Sounds from 2024 National Farm Machinery Show

We’re back from the Farm Machinery Show in Louisville, Ky. Let’s check out some sights and sounds from the floor.

First up, we stopped by the Trimble booth, where senior product director Cory Buchs introduced us to the new Bilberry smart spraying system. It’s a camera-based retrofit kit that can save farmers up to 90% on herbicide applications. It’s being tested in 10 countries, and is expected to be available later this year.

The 360 Yield Center booth was full of energy. Company founder Gregg Sauder was on his A-game, teaching attendees all about 360 Rain, the autonomous irrigation system, and how it’s boosting yields significantly in test fields. 

Plenty of new technology on display in the AGCO booth, including the new Fendt 30-foot Momentum planter, equipped with SmartFrame technology, a Vertical Contouring Toolbar and Load Logic. 

Also, a couple new aftermarket kits on display, including the Fendt IDEAL Air Blaster. It provides in-cab, one-button removal of debris from the feederhouse.

And then there’s the SimplEbale kit that retrofits onto Massey Ferguson 1800 Series Small Square Balers. The interface provides guidance such as a flake-by-flake indicator that gives immediate feedback so operators can adjust ground speed on the fly.

Finally, the biggest attention-grabbers, the new combines from Case IH and New Holland. Tighter security than the Pentagon around the Case IH AF11 combine. It was roped off, so we couldn’t get too close. 

New Holland was less secretive with its CR11, making its North American debut. It’s equipped with the IntelliSpread radar system that automates the spreading control to ensure full and even residue coverage behind the combine. 

More sights and sounds from the show on PrecisionFarmingDealer.com, including in-depth product videos, and a 20-minute under-the-hood look at that New Holland combine.

CNH Ag Sales Up 1% in 2023

CNH Industrial reported its 2023 fourth quarter and full year results on Feb. 14. Consolidated revenues for the year were up 5% to $24.7 billion. For the quarter, consolidated revenue was down 2% vs. the same period last year to $6.79 billion. 

Agriculture segment net sales for the full year were $18.12 billion, up 1% year-over-year. For the quarter, agriculture net sales were down 8% for the quarter to $4.95 billion, primarily due to lower industry volume, dealer inventory management and unfavorable mix, CNH said.

In a note to investors, Stanley Elliott, managing director, Stifel, wrote, 

“For 2024, CNHI expects industry sales to decline 10-15% in ag and construction to decline 5-10%. CNHI’s segment sales are expected to outperform industry declines and margins are expected to outperform past cycles.”

“We like what the company is doing to reduce product costs through logistics normalization, lean manufacturing principles, and strategic sourcing. With a healthy balance sheet and FCF generation ($1.2-1.4B expected in 2024), the company has ample flexibility to continue focusing on improving operations.”

CNH is expecting to spend $1 billion in R&D expenses in 2024.

CNH estimates ag industry retail sales will be down 10-15% in 2024 compared to 2023 and is forecasting its ag segment net sales to be down 8% and 12% year-over-year  currency translation effects. 

Few Dealers Plan Building Projects in Next 12 Months

While 44% of dealers said they planned to increase capital spending by 1-10% in 2024 according to the 2024 Dealer Business Outlook & Trends Report, a Feb. 19 Farm Equipment text poll reveals only 12.5% of dealers plan to build a completely new dealership in the next 12 months. 

The Outlook & Trends survey also showed nearly 39% of dealers planned to invest in their showrooms and retail space, while nearly 63% of dealers said they would be investing in the service shop in 2024 — both up from 2023 plans. 

Deere Reports Dealer Inventories Approaching Pre-Pandemic Levels

In its first quarter 2024 earnings, John Deere reported that, as a percentage of trailing 12 month retail sales, its dealers inventories of over 100 horsepower tractors and combines were back to pre-pandemic levels.

Deere dealers’ inventories in January represented 30% of trailing 12 month retail sales as reported to AEM, up from 25% one year ago. This comes in just below the 32% of 12-month sales that John Deere reported in its first quarter earnings for 2020.

For combines, Deere dealers’ inventories are representing 16% of trailing 12-month retail sales, in line with the first quarter of 2023. However, this is above the 15% Deere reported for January of 2020.

Addressing dealer inventories during the earnings call, Josh Beal, director of investor relations at Deere, said:

“As we noted last quarter, we entered the year well positioned from a field inventory standpoint. And Q1 levels are consistent with normal seasonal changes, comparable with inventory-to-sales ratios from a year ago. With nearly 90% of orders sourced through our combine, sprayer and planter early order programs, we have significant visibility into the balance of the year for those product lines.”

Beal added that Deere is taking orders into the third quarter for row-crop tractors, while 4WD tractors are full through the balance of the third quarter.

Looking at net sales, John Deere reported $12.2 billion for the first quarter, down 4% year-over-year. In Deere’s Production & Precision Ag segment, net sales for the first quarter came in at $4.9 billion, down 7% year-over-year. Deere attributed this to lower shipment volumes, partially offset by price realization. 

For its fiscal year 2024, John Deere is forecasting Production & Precision Ag net sales down around 20%.

DataPoint: Self-Propelled Sprayer Sales

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 self-propelled sprayer sales for the year rose slightly for 2024 to 26.5%, according to the latest Dealer Business Outlook & Trends report. This percentage peaked in the last 5 years when 37.2% of dealers were forecasting unit sales growth for 2022.

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