While equipment manufacturers will continue pressuring dealers to push early order programs, falling overseas sales and the uncertainty in the North American market in 2009 will give them less leverage to force dealers and farmers to order big equipment 12 or 18 months early.

Speculation last year that equipment shortages experienced by North American dealers resulted from increased overseas sales had some basis in fact. And with an expected major slowdown in overseas sales throughout 2009, farm equipment dealers in the U.S. and Canada should have no problem getting all the equipment they need.

The longer-term question is without the leverage of rising overseas sales, will equipment manufacturers be able to continue pressuring dealers to push "early order sales" as they have they past few years?

By any measure, sales of ag equipment were exceptional in 2008.While manufacturers are hopeful of another solid year in 2009, the continuing deterioration of overseas economies will likely stunt profit growth the equipment makers saw last year.

Recapping 2008's farm equipment sales by the full-line manufacturers — AGCO, CNH and John Deere — shows that each of their overseas sales rose dramatically last year, aided in large part by very favorable foreign exchange (FX),which added significantly to each company's bottom line last year.

Ag Equipment Intelligence (AEI) analyzed the 2008 fiscal performance of the three major manufacturers and it showed that their composite overseas sales rose by 24.6% when compared to 2007. Each of the majors registered solid growth in both North American and overseas markets, but FX raised the profitability of sales outside of the U.S. and Canada more significantly.

Together, total net sales of farm equipment by AGCO, CNH and John Deere amounted to nearly $38 billion in 2008.This was an increase of 23.8% compared with total net sales for ag machinery of nearly $29 billion in 2007.

Last year, sales to markets outside of the U.S. and Canada totaled $21.6 billion, up from $15.7 billion in the previous year, an increase of about 27%.

AGCO in 2008. Overall, AGCO's net sales rose in 2008 to $8.4 billion, up from $6.8 billion in 2007. North American net sales grew to nearly $1.8 billion from $1.5 billion in '07, or 17%. At the same time, net sales to markets outside of the U.S. and Canada rose to $6.6 billion from $5.3 billion in the previous year, or by 19%.

This isn't surprising as AGCO has always been much stronger overseas and even dominant in some markets.

In 2007, net sales to North American markets comprised only 22% of the company's total. This dropped only slightly last year to 21%.

CNH in 2008. Net sales of Case IH and New Holland farm equipment in 2008 totaled $12.9 billion vs. $9.9 billion in the previous 12 months, a 23% increase year-over-year. During the same period, CNH sales to overseas markets grew by nearly 26% — $8.2 billion in '08 vs. $6.1 billion '07.

Last year, sales of ag machinery overseas comprised nearly 64% of CNH's total, compared with 61% in 2007.

Deere in 2008. Because John Deere doesn't segment sales of its overseas markets, it's difficult to pinpoint how much of the growth the company experienced in 2008 can be attributed to ag equipment.

In any case, 64% of Deere's total net sales of equipment in 2008 ($25.8 billion) came from sales of farm machinery. This compares with 56% of total net sales of equipment in '07 ($21. 5 billion).

Total net sales of Deere equipment to markets outside of the U.S. and Canada in 2008 rose to $10.7 billion from nearly $7.7 billion during the previous year, a healthy increase of 28%. Assuming the same percentages of North American farm machinery sold in North America applies to overseas shipments (64% in '08 and 56% in '07), the company's sales of ag equipment outside the U.S. and Canada are estimated at $6.8 billion in 2008 and $4.3 billion during 2007.

Outlook for '09. While overseas markets proved to be a boon for farm equipment makers in 2008, their yearend reports project that most markets outside of North America will be down — some dramatically — in 2009.

Looking ahead, Ann Duignan, analyst for JP Morgan, says that FX, which benefited the ag machinery group last year, "has turned from a tailwind into a headwind."

AGCO's 2009 outlook calls for net sales drop to $7.5-$7.8 billion. The company says that as much as $800-$900 million of the decline will result from the impact of unfavorable currency translation.

CNH expects equipment operations net sales for full year 2009 to be down 10 to 20% from 2008 as "some first-half strength in North American high-horsepower tractors and combines is offset by declines in all other agricultural equipment markets and further weakness in construction equipment sales."

Overall, CNH is anticipating during the first quarter that worldwide industry retail unit sales of over-40 horsepower tractors will decline 10-15% and industry retail unit sales of combines to be down 20-25%.

Deere, which reported its first-quarter 2009 financials on February 18, saw ag equipment sales rise by 18% compared with the same period in 2008. For the year, the company expects industry sales to be flat to up 5% for the year in the U.S. and Canada. Worldwide, it is forecasting a 2% decrease for the full year, including a negative effect of 7% for FX.

In comparing the prospects of ag equipment to other machinery groups, Duignan says, "Ag machinery faces a potentially greater FX headwind. In ag machinery, currency contributed on average 3.1% to revenue growth from 2006-2008. This compares to 1.9% for construction and 2.0% for diversified industrials. FX revenue growth contribution peaked at 9% when the dollar troughed vs. the euro. In the latest quarter, currency represented a greater headwind for the ag sector (-9.6%) than for construction (-5.1%) and diversified industrials (-5.5%)."