In this episode of On the Record, brought to you by Benzi America, we take a look at how much crop damage resulted from the rain and wind brought on by Hurricane Beryl. In the Technology Corner, Noah Newman examines what dealers need to do before hosting drone clinics to ensure they are FAA compliant. Also in this episode, used equipment pricing and inventory continue to challenge the industry and elected officials discuss how policy can impact the equipment manufacturing industry while in Milwaukee for the Republican National Convention.

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This episode of On the Record is brought to you by BENZI.

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Hurricane Beryl Hits Texas in Midst of Corn Harvest 

Hurricane Beryl brought winds over 86 mph and up 10-15 inches of rain to parts of Texas earlier this month. 

Matagorda and Wharton counties were two of the hardest-hit counties from a crop standpoint, according to the Texas A&M AgriLife Extension Service. 

Corrie Bowen, AgriLife Extension agriculture and natural resources agent in Wharton County, said 3-8 inches of moisture fell as the hurricane passed over the county with winds over 86 mph.

“We have extensive crop damage and ongoing damage,” Bowen said. “Nobody can remember a time when all 235,000 acres of crops were still in the field and susceptible to a hurricane or tropical storm. This was an early storm. Corn harvest had barely begun, and only about 30% of the grain sorghum had been harvested. And all our rice was still out there, along with soybeans and cotton.”

While time will tell on the full extent of the damage, he said most producers in the area are estimating 20-30% losses in corn. Some fields have plants leaning 45 degrees that could still be harvestable, but in other fields the corn is lying flat. It’s estimated 50% of the sorghum crop in those counties is damaged. 

Terry Hlavinka, president of Hlavinka Equipment in East Bernard, Texas, said farmers are trying to restart harvest now. 

He says, “I think the crop loss will be 15% to 100% for corn, rice, and cotton.  I estimate this average to be 25%.  The remaining sorghum loss is probably 40-100%.  The forecast calls for more rain in the next several days which could significantly increase the damage since a large portion of the crop is leaning or on the ground.” 

Dealers on the Move

This week’s dealers on the move include Atlantic & Southern Equipment and Florida Coast Equipment.

AGCO dealer Atlantic & Southern Equipment has acquired the operating assets of Bridges Equipment in Brinson, Ga. Atlantic & Southern now has 10 stores. 

Kubota dealer Florida Coast Equipment has acquired Polk Tractor Co. in Winter Haven, Fla., and now has 14 stores across the state. 

Check All Boxes Before Hosting Drone Clinics

A large drone dealer in Florida can no longer fly drones over 55 pounds after allegedly violating multiple FAA regulations. Here’s what reportedly happened — FAA officials showed up at a training session hosted by the dealer and learned the pilot in command allegedly didn’t have registration for the drone, and he was flying it too close to a non-participating farmer. For some perspective, we reached out to Adam Gittins, president of Harlan, Iowa-based drone dealer HTS Ag. Gittins says this case serves as a harsh reminder for dealers to make sure all their boxes are checked before operating drones.

“We configured an actual corn planter to plant wheat with to get it on 30-inch centers in a twin row. That way we can get the soybeans growing in between it in the spring. We come in and we plant our winter wheat in the fall. It got late on us, and so we stopped, and then it got extremely wet, and so that turned into well, why don’t we do an experiment and let’s grow some oats — which we knew we could plant spring oats on the rest of the field. So that back corner was left fallow for the winter with the intention of coming back. But it seemed like every 3 weeks we’d get 6 inches of rain. And it was — long story short — we never finished the experiment, so now we’ve got full season soybeans planted in 30-inch rows and soybeans planted in intercrop wheat in 30-inch rows, and they were planted within a day of each other. So, that’s enough of an experiment in and of itself. Anything can turn into an experiment if you try hard enough.”

“So there’s our soybeans. They’re kind of thirsty for some water. But research shows us if we keep the soybean plant under stress until it starts to go into its reproductive mode, then it tends to put on more yield and so we are intentionally not running this irrigation. But you look at this and it’s hard to turn your back on a withered up soybean plant.”

Click here for more information on the case and more key takeaways from Gittins.  

Used Equipment Prices Continue to Drop with Inventories Building Up

The used equipment market continues to face challenges across all equipment types.

In Stifel’s July Used Equipment Update, managing director Stanley Elliot says auction pricing trends for used equipment continued to face pressure in June given tough comps due to supply chain challenges and an overall tight equipment market last year. 

However, he adds, asking prices for used equipment are more mixed as some categories continue to see pricing growth and others are starting to follow auction pricing declines. 

Elliot says, “In our view, asking prices are a better reflection of trends for most of the used equipment market.”

Auction prices are important to monitor though as they often precede trends for asking prices. Auction prices for ag equipment are still down year-over-year in all equipment types except for combines, he says. 

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According to Stifel’s report, auction pricing for tractors over 300 horsepower are down 6.4% year-over-year. At this time a year ago, auction prices were up 10.1% year-over-year. In the 175-299 horsepower range, auction prices are down 7.6% year-over-year and the 100-174 horsepower prices are down 3.6%. 

Stifel says auction pricing for used equipment tends to be the most volatile and forwarded-looking portion of the used equipment market. Elliot says “In our view, trends in the used equipment market often proceed or glean additional visibility into trends on the new equipment side.”

According to Iron Solutions, the market hasn’t yet reached the bottom of this downturn and the timing of the market bottom will depend on the number of machines sent to auction over the next 12-18 months.

Manufacturing Industry Policy Makers Give Insight at RNC

In the wake of the RNC taking place here in Milwaukee, Komatsu and the Association of Equipment Manufactures held a press conference at the Komatsu South Harbor Milwaukee campus on July 15. 

Komatsu North America CEO Rod Schrader, AEM Vice President Kate Fox, and AEM Senior Vice President Kip Eideberg were joined by three elected officials to discuss policy making in the world of equipment manufacturing.

The panelists included  Ryan Steil, US Representative for the 1st Congressional District of Wisconsin, Bill Haggerty, US Senator from Tennessee and Glenn Youngkin, governor of Virginia. 

Starting things off, Schrader said, “We will need our elected officials to advance pro-manufacturing policies that strengthen American manufacturing, competitiveness and national security. That's why we are here today, to hear from this very distinguished group of lawmakers about what should be done to unleash the full power of American equipment manufacturing.”

Youngkin emphasized Virginia’s role in the manufacturing world, citing CNBC’s #1 ranking of Virginia in education, and recent $5 billion dollars in tax relief. He said there’s been $74 billion in capital invested in Virginia.

Haggerty focused on foreign investments and regulatory practices by the federal government. Haggerty said Tennessee’s GDP and wage growth was below the national average and unemployment was higher than the average. Opening up direct foreign investment into Tennessee industries like manufacturing has allowed the state to soar in terms of economic growth. 

However, he also noted the threat regulatory practices can put on the manufacturing industry saying,

“The regulatory burden, the regulatory costs that we've seen just in the past three and a half years. The regulations that agencies have added, the present value of $1.6 trillion. 13.5% of the GDP of the manufacturing component of America is taken up by regulatory compliance. That is a tax that is unseen by the average American. It's significant, it's real, we have to address it.”

Steil was asked what the future holds for the equipment manufacturing industry in Wisconsin. Manufacturing contributes over $70 million to the state's economy yearly, about 20% of its economic output.

“Because the policies both at the federal and the state level have real-world consequences, in particular in the manufacturing space, We could look at the Trump-Ryan tax cuts that had a huge impact that will be on the table as we look out through the next year in post-election. In particular, if we think about two pieces of that, the R&D tax credit and accelerated depreciation.”

He also emphasized education’s role in the industry. He said there’s “not really a federal answer because each state, as we would all know, is very different on what those workforce needs are.”

When asked by Fox on how to decrease the negative impact taxes and regulations on the industry, Steil had this to say:

“After Chevron deference has now been overruled, we as legislators, in particular, in the Senate and the House, have a huge opportunity to rightsize this. We've seen, for example, the EPA really run roughshod over congressional intent. The Supreme Court is finally shifting that back to elected officials to have a say in that matter. Grabbing that lifeline that the Supreme Court has given elected officials in the House and in the Senate, is going to be absolutely essential as we go forward. Because the burden that is placed on businesses from a regulatory standpoint is stifling. In particular, a period of time when inflation is hot, when costs are going up and it's harder for families to afford the things that they need. We need to be focused in on Washington on policies that bring costs and inflation down. The number one focus of that should be rightsizing a lot of the regulatory state.”

Overall, the speakers highlighted the importance of unity in the nation’s politics, particularly after the attempted assassination of Donald Trump just days prior. 

DataPoint: Owner-Operators & Cash-Rent Farmers Lead Cover Crop Adoption 

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Cash-renters and owner-operators adopt cover crops at rates higher than share-renters. Researchers with USDA’s Economic Research Service (ERS) explored whether adopting cover crops differed between farmers who owned the land they farmed and those who were renters, whether under a cash- or share-rent agreement. They found that owner-operated cotton fields had the highest rates of cover crop adoption for owned land, with 22% of owner-operated cotton fields having cover crops in 2019. Owner-operated fields nominally led cash-rented fields in cover cropping for cotton, corn, and sorghum, but trailed cash-rented fields for soybeans and barley. Owner-operated fields exceeded share-rented fields in cover crop adoption for all five commodity crops surveyed. 

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