In this episode of On the Record, brought to you by Benzi America, Greg Robert, vice president of sales for AgDirect, shares his expectations for potential rate cuts yet this year based on the FOMC’s comments in late July. In the Technology Corner, Noah Newman highlights the upcoming Precision Specialist Week. Also in this episode, one manufacturer who supplies a number of OEMs says “Ag is on the fastest roller coaster ride down in a quarter-century” and TractorZoom’s Andy Campbell provides an outlook on the used equipment market for the remainder of 2024. 

BENZI

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

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TRANSCRIPT

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Interest Rate Cuts Likely Coming in Fall

The Federal Open Market Committee (FOMC) – the policy setting arm of the Federal Reserve – voted unanimously to hold interest rates unchanged at their current 5.25% – 5.5% target in July.

Diane Swonk, chief economist and managing director with KPMG Economics, said the statement following the decision was more hawkish than many market participants hoped. There were only minor edits to the language regarding progress on inflation and the prospects for rate cuts.

Greg Roberg, vice president of sales at AgDirect, says he expects we’ll see two cuts by the end of the year, totalling about half a percent. 

"I'd say Chairman Powell and the Federal Reserve in general have been very methodical and saying we're going to just wait and see what the data tells us. So now we've had a few months where job reports have been a little bit less than expected. We've seen inflation start to slow down a little bit, and so AgDirect and our parent company — Farm Credit Services of America — was not surprised that they decided to hold steady. It was some good news that he said there is a chance, we'll take a look at it in ‘24 maybe when we get together in September. So we'll take August off. They meet 8 times a year. So it'll meet in September and then November, December. Right now there's an 83% chance that they'll cut rates in September, which will drive the prime interest rate, which is operating within."

"Also, you should see fixed rates go down — 83% chance is what all the economists right now put it at. Well, it'll be a quarter, it'll be a half. I would put the money on a quarter and then that gives them a little opportunity, whether in November, most likely December to go down another quarter as a company, we're saying somewhere between 2-3 rate cuts conservatively by December of 2025. I take the over on that personally, but I think we'll get at least one, if not two cuts by the end of 2024, maybe half a percent in total. So that's good news. I think all of us would probably rather have $5.50 corn and $15 beans, but that's not on the horizon. But if we can get half a percent or so on interest rates, start getting rates back in maybe the low sixes, dare I say, in the high fives, I think that would just create some very positive vibes in the market, particularly for farmers maybe thinking about upgrading equipment."

The Ag Economy Barometer from Purdue released August 6 shows that rising interest rates, while still a concern for farmers, did see a drop in the percent of farmers who ranked it their biggest concern.

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hing those post harvest late in the year to see if they continue to drop at this fast of a rate

Dealers on the Move

This week’s Dealer on the Move in Parallel Ag, 

The AGCO dealership, which has stores across the Midwest and Southern Plains, announced it has expanded and is now offering the full Fendt and Massey Ferguson lines. The established locations in Marshall and in Montgomery City, Mo.,  will each feature the full line of AGCO agricultural products.Parallel Ag will also expand its coverage from Northern Illinois into southern and southwestern Wisconsin.

Precision Specialists Come to the Rescue 

It’s once again time to celebrate the hard work of those making today’s precision farming systems possible during the 2nd annual Precision Specialist Week. It’s coming up August 11th. Lessiter Media president and Farm Equipment editor Mike Lessiter shares some perspective on why it’s an important week. 

We’ve been serving farmers for more than 50 years here with our publications, and since we got into the Precision Farming Dealer space many years ago, we’ve come to learn the success stories and how that precision specialist saved a planting or harvesting season, was there on call in the middle of the night and went well and beyond to keep that farmer moving. As we learned of these, we wanted a chance to celebrate the precision farming specialist, who’s really the go-to for many farmers at their key point of year. They simply couldn’t get it done without these guys and gals, who put their life on hold to make sure that farmer can keep going.

“It is sometimes a thankless job, long hours during planting, spring and harvest. But this is our way of recognizing those behind the scenes really making agriculture go.”

If you want to honor your precision specialist, head to Farm-Equipment.com/PSWeek. 

Ag Industry on 'Fastest Roller Coaster Ride Down in a Quarter-Century'

A manufacturer who provides OEM work to other farm equipment manufacturers told AEI that “Ag is on the fastest roller coaster ride down in a quarter-century” and that a handful of its OEMs reduced their schedules in the first week of August.

“I’ve never seen this sort of panic in a 10-day period,” he says. “Usually, the OEMs are dialed in to their needs by July. Now they’re wanting us to provide them inventory terms well beyond the 8-week firm zone when historically can’t just cancel orders. In our business, we need to plan for their needs 6 months ahead of time.”

The executive pointed to 4 reasons for the increased concern, beyond what’s normal in an election year:

  1. “Equipment dealerships are so big now that they don’t have to stock to make things happen anymore. When 5-store dealerships were typical, before the huge consolidated dealer groups, a farmer would go to a couple of different stores, get the price, and buy and be done with it. That doesn’t happen anymore; they don’t have the stocking units nor the motivation that it brings.”

  2. “Today’s salesman at the dealership is just a ‘middle man.’ If the finance guy doesn’t want to approve a farmer for the sale it doesn’t happen. It used to be that the salesperson would push and negotiate and do whatever it takes to get the deal done, including discussing future trades. That doesn’t happen anymore.”

  3. “Grain prices fell faster than any of us expected. We thought we’d see a rally by June or July. Guys are selling their 2025 crop now thinking the commodity pricing could get worse.”

  4. “Most farms currently don’t need the new equipment; they can run with what they have.”

Used Equipment Inventory Eases, But Still Too Much Pressure on the Market

Used equipment inventories remain elevated. And while they are not as high as they were in 2023 and early 2024, Andy Campbell, director of insights for TractorZoom, says it's still too much pressure for this market to take. 

As has been the case, used combines continue to be the biggest problem, Campbell says. 

“We've seen combines drop anywhere from maybe 12% up to 30% in value. And so combines have been the problem from ‘23 now into ‘24. I've been tracking a lot of combines —S780s especially. I think we had 70 sales on TractorZoom just in the month of July alone, just the S780s. But the interesting thing there is from June sales to July sales, we're not seeing those decline from June, July and more or less stair steps. So late ‘23, we saw S780s down a little bit, and then as soon as you move into the springtime, so January, but especially February and March, those sales dropped another 6-8%. Then you have a little bit of a break for planting, and then you had June happen another 6-8% drop in those."

“But at least for those, the S780, they've been consistent from June and July, and I'd expect them to go the same through August. But you're going to have another break at harvest. And so if things go the way they've been going, there's still too much in the market they're going to drop. Again. I don't know if it'll be another five to 8%, but I would expect those class eight combines to continue to drop. So class eights have been the worst.”

But, Campbell says what he’s most worried about is high horsepower 4WD tractors. He says they held their value well late into 2023 and values were still pretty decent in the early part of 2024.

“I think we could see some downward pressure on large four wheel drive tractors. And then in this summer, larger row crop tractors, especially the eight R series from John Deere, we're seeing those week by week just continue to drop. And I just looked at the eight R four tens, the eight R three seventies, and just from June to July, we're seeing six to seven to 8% drop on just those models in that shorter period of time.

The volumes of those are high, but they're still row-crop tractors, so they should sell throughout the season and they're kind of the cornerstone of the market. So they're usually not that high risk of an item. They are a little higher price, but it's just a little concerning that ad auction. We're starting to see those be discounted by that much that quickly.”

DataPoint: Ag Economy’s Impact on Brand Loyalty

This week’s DataPoint is brought to you by Farm Equipment’s NewsIQ quiz. 

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According to Ag Equipment Intelligence’s 2024 Brand Loyalty Report, farmers are split on whether the current ag economy impacts their brand loyalty. Overall, 51.6% of farmers said they would consider other brands in the current ag economy, down from 54% in the 2020 report. Looking at farmers’ primary brands, farmers who identified themselves loyal to Kubota equipment were the least likely to consider another brand given the ag economy, while AGCO farmers were the most likely to consider another brand. The full Brand Loyalty Report is available for purchase on AgEquipmentIntelligence.com.

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