During Ag Equipment Intelligence's 2025 Executive Briefing Dec. 10-11, Marc Johnson, principal with Pinion, provided an economic outlook for the ag equipment industry.
Johnson emphasized several primary factors dealers will want to look out for in the coming year, including: bonus depreciation, interest rate reduction, corn prices, and manufacturer response.
“I think there are a few things that they need to be looking for. And if they happen, things will go well. And if they don't, they'll be challenging.”
“I think that one of the things we need to watch for is what does the government do with bonus depreciation? That could actually be fixed in the lame duck session of Congress here. If we get back to a bonus depreciation fix, that's 100%, everybody's going to be excited to buy equipment again and get that write off that farmers so desire. That's a key one.”
“Interest rate, for that reduction to continue going down. If we could get another half a point, or even another quarter point, that gets us to that point where we're down 1%, and the banks have always offered this whole thing out there about, "If your mortgage is down by 1%, it's time to refinance." That's one of those things that maybe we could get some refinancing going on and free up some cashflow. So if we get another quarter point or more on interest rate that will certainly impact things.”
“I think the last thing would be to watch corn prices. Obviously, we'd like to see those get closer to five. I don't know that we're going to see $5 corn in the next few months, but we could maybe by next summer see that if some of this demand with exports continues to happen. If tariffs get in the way and block that and we get kind of stuck in $4.30 to $4.50 corn, I think that's better than where we're at now. So, we'll see at least a stabilization. But if we see corn prices go back down underneath $4.20 or down under $4, we're going to be maybe moving towards an Ag economic recession if we keep seeing corn prices there. I'm hopeful that corn prices are going to increase, but I don't know that we're going to get back to five bucks.”
“Those are really the three big things that are going to impact our dealers.”
The last thing Johnson says dealers will need to pay attention to is how manufacturers respond to these other 3 factors as it will likely impact the dealers’ business.
“I don't want to make this be a manufacturer versus distributor thing, because we have got to get along. We have to appreciate that the manufacturers are pulling back on production, because that's going to stabilize use. But at some point when they come back, how they come back — and what they're going to do with that demand, how they're going to spread out that equipment — that's going to be really key to not just what happens to us as far as margins go, but what happens to our cashflow and our equity? And that's my biggest concern for dealers right now is that cashflow and their equity.”
Watch the full version of this episode of On The Record
