As referenced in the February Farm Equipment Editor's Page ("Where's the Iron?" by Mike Lessiter, p. 6), the editors of Farm Equipment polled equipment manufacturers on the availability issues facing dealers and their customers in 2008. The dialog focused on the following two questions:

1. From your vantage point as a manufacturer, what do you see in the way of the farm equipment supply/demand for 2008? How will it differ from the last 2 years? Is the export market significantly affecting equipment supply for North America?

2. Are dealers and their farm customers beginning to understand that the equipment supply situation has changed? Are you seeing greater acceptance and adherence to early-order programs?

Below is a sampling of the responses from equipment manufacturers on what they see in the way of availability and early-order programs.

1. Right now we are seeing a tremendous demand for product. As a result I think all manufacturers will be challenged to meet the demand. How will it differ from the last 2 years? I believe in the past 2 years there was still an excess of manufacturing capacity and as a result manufacturers were able to respond to the market relatively easily. I think this flexibility is not available at this time. Is the export market significantly affecting equipment supply for North America? I think it is having an impact in regards to tractors, combines, and air seeders, but beyond that I don't think it is significantly impacting other equipment supply.

2. We certainly are seeing a greater acceptance of early order programs this year. I believe we have some excellent Dealers out there and I believe that they see the need to order equipment early in order to insure availability. I am not so sure our customers realize the need yet...

— Don Henry, General Manager, Brandt Agricultural Products LTD., Regina, Saskatchewan

Excellent grain prices the past year will fuel demand for equipment in the upcoming year. Supply is already short with many companies focus on reduced field inventory prior to this year compounding the equipment shortage. If history tells us anything, equipment demand lags behind good grain prices, so we should see stronger demand that we have the last couple of years. Knowing the potential abroad, the weak dollar, and hearing stories of other companies' successes in Eastern Europe and Russia, it too will put additional pressure on supply/demand.

As a general rule yes, although our market segment continues to have many impulse purchases. Dealers are eager to order to secure inventory to cover the impulse buys.

— Jamie Meier, Sales Manager — Ag Division, Landoll Corp., Marysville, Kan.

I see continued strong demand for farm equipment in most regions. The exception is the southeast. The drought there, if it continues, will weaken the demand in that market. The export market has not impacted the U.S. supply of equipment yet. There could, however, be some impact in the more technical products. This is especially true for companies that have previously marketed hard for foreign sales. Those companies are now getting orders due to the weak dollar.

Our experience is that dealers are reviewing their early-order programs with a more conservative mindset. They never want to have too much inventory. With the increase in equipment cost they are really cautious. Some are even beginning to explore strategies (like consignment stocking programs) that have proven successful in other industries. What they order and how much is paramount. Too much inventory of any one implement in not a good thing! The larger farming operations are planning ahead. They tend to have a better understanding of the market as a whole, and the supply and lead time situations. I believe the majority of "sundown farmers" purchase on a "need right now" basis.

— Terry Freeman, Marketing Director, Monroe-Tufline, Columbus, Miss.

Yes, we have been observing that the supply of farm equipment appears to be low. Although I cannot comment on the reasons why, there definitely does seem to be a decline in supplies.

Yes, I believe they are beginning to understand. We certainly saw a bigger response to our early-order programs this year.

— Les Hulicsko, owner, Rite-Way Manufacturing, Imperial, Saskatchewan

1. We see the first half of 2008 continuing where the 2nd half of 2007 left off — strong retail and wholesale demand. How will it differ from the last 2 years? While the industry retail results have increased 20% in 2007, most of that increase occurred in the 2nd half of the year. Additionally, the wholesale increase at the manufacturer's level has been higher since the industry entered this strong retail period with low dealer inventories as wholesale lagged retail in 2006. At some point in 2008, retail and wholesale levels may begin to balance each other. Is the export market significantly affecting equipment supply for North America? Our experience with the export market is that it too is benefiting from high commodity prices, but it is also having a positive impact on US manufacturers due the low value of the dollar in currency exchanges. We have not, however, seen it negatively affect the supply of our equipment to North America.

2. I think they are starting to realize that the supply constraints that have been experienced are not limited to only a handful of manufacturers, but are throughout the industry as it has reduced its capacity and manufacturing footprint during the prior 3-4 years of declining markets. Are you seeing greater acceptance and adherence to early-order programs? We have always been focused on preselling activities to drive the retail sale as it benefits both the dealer and company. We had made several changes to our Early Order programs to enhance the preselling activity before the uptick in 2007 retail sales began and we are seeing positive results of those changes.

— Keith Whitaker, Vice President Sales & Marketing, Krause Corporation, Hutchinson, Kan.

The farming economy has changed drastically in 2007 when comparing the prior year. The outlook for 2008 is looking to be strong despite higher input and operating cost. With net farm income for 2007 being much higher than in 2006 several farmers have updated equipment or purchased equipment to improve their operations and cut cost.

The demand for equipment in 2008 looks to continue to hold steady as farmers make decisions that will improve efficiency, help lower input cost and operating cost. Supply will be challenged with depleted dealer inventory on new and used equipment. Companies are faced to deal with manufacturing products to meet orders from 2007 and orders to be placed in 2008. The struggle for manufacturers will be the raw materials and items that are imported.

The overseas market has grown significantly in past two years with the U.S. dollar down coupled with the increased markets for corn, soybeans, and wheat. New and used equipment is being exported limiting the dealer inventory and equipment available in the U.S.

As far as equipment dealers and farmers understanding the need to purchase early, the acceptance has increased greatly over the last three years. Farmers have realized that to be able to have the equipment when wanted and to be able to receive the best discounts they need to purchase the equipment when companies offer the early order incentives. Farmers look for these programs now.

— Derek Allensworth, A.O.R. Manager, Yetter Manufacturing Co., Colchester, IL 62326

Demand is outstanding and supply from a shortliner that understands their markets can capitalize. Unfortunately, another advantage point for the short liner is many dealers are sold out of their mainline and are relying on their short line products to sell through spring. The dealer that is willing to invest in some core market inventory will a huge opportunity.

How will it differ from the last 2 years? The escalating ag economy and commodity prices over the last two years has placed the consumer in proactive purchasing mode rather than a reserved.

Is the export market significantly affecting equipment supply for North America? It has not affected our business as of today.

— Justin Troudt, Sales & Marketing Manager, Orthman Manufacturing Inc., Lexington, Neb.

1. We have seen a huge amount of early orders for 2008 equipment. We have ceased to take any new orders for certain models because we currently have our entire production sold out for 2008. With this it is important to keep in mind that many of these units are wholesaled and will be available for retail sale on the dealer level. At this time we feel there is a perception in the marketplace that all units are sold for the year and this is correct that all units are spoken for on a wholesale level but there are a great number of units that are available for retail sale. With this said all indications are that we will have a very good year in 2008 and it would seem that there will be more demand for product than there will be supply. So for those considering a purchase for 2008 we would advise that you do your shopping early.

This is a dramatic change from the prior 2 years. In past years we would still have available units at the plant up into the harvest season, this year that will not be the case. Also a big change from 2-years ago is the fact that we have a VERY low field inventory carryover from 2007, 2 years ago this number would have been quite high for field inventory carryover.

We have no effect from the export market as we do not have any export sales on the books at this time. While we have some interest from some export markets we are currently in negotiations at this time, but nothing has been confirmed or declined as we speak.

2. We feel that dealers and retail customers are starting to understand the dynamics of the market have changed. They are starting to understand that the current manufacturing base can not supply an unlimited amount of product which will require the customers to evaluate their needs earlier in the season. While on several fronts we have customers struggling with this type of a market when it comes to making purchasing decisions, we feel it is changing because it is the same issues regardless of the supplier you are working with.

We feel we see a greater acceptance to the early order programs as a result of the current environment. While we have not changed the programs in general, we have seen better acceptance as a result of companies not being willing to renegotiate deals because business is strong enough to support itself without reaching outside the guidelines. We do not intend to portray a take it or leave it mind set, but the reality is the market place can support today's programs so we see greater adherence to programs as a result.

— Ken Streff, VP Sales / Marketing, Demco, Boyden, Iowa

In 2007, we have increased significantly our turnover and we expect the year 2008 to be at least as good as 2007. Our clients understand that it is very important to make early orders, since our production plant is full and our delivery time is quite long comparing to last year. So, they are getting used very well to this new situation.

— Arantxa Izeta, Communication Manager, Bellota Herramientas, Legazpi, Guipuzcoa

I believe that the U.S. ag market has definitely grown more positive over the past two years due to increased stability in farm commodity prices. This trend should continue as farm crops used in ethanol and food production continue to be in demand. For U.S. Exporters, the current lower international exchange rate of the U.S. dollar makes U.S. farm and manufactured products more attractive and affordable for importing nations. At AerWay– SAF-Holland Equipment we see demand for our product continue to grow as farmers are looking at ways to reduce input costs such as fuel, time and labor.

From our own experience and talking to other manufacturers, I think that farmers are doing a better job at planning for their future equipment needs. Farm machinery can be a significant investment or it may have specialized features to suit the farmer. For that reason, farmers as agri-business persons know manufacturing lead times are a reality to consider and that their machine isn't just sitting their customized with their options. The benefit to all is that they get the right machine at the right time.

Regarding equipment supply – dealer and manufacturers continue to be careful watching their cash flow, inventory turns and not carrying excess inventory. In most cases it's not like the old days when you could just go and buy a machine or tractor off the dealer lot. Early order programs are not for everyone but are gaining acceptance as it encourages advanced planning, contact and dialogue between the prospective customer, dealer and manufacturer. For example it may reward the farmer with an extra discount for his planning foresight. The advantage to the dealer, he now knows specifically what and when to bring in the correct product. The advantage to the manufacturer is that he is working with actual orders rather than a guess. With this advanced knowledge the manufacturer can gain efficiencies at various stages, starting with order processing right through to the manufacturing cycle including the planned freight and ship date. If administered correctly all three parties should benefit.

— Matt Mayer, Regional Sales Manager, AerWay - Div. of Holland Hitch, Norwich, Ontario

From our point of view, demand for our products has increased significantly, especially during the last quarter of 2007, and has continued so far in early 2008. During the past two years our retail sales activity began to increase in November and continued through March. This year, the retail demand started about the same time but has been much more intense. Because of this, our production is mostly sold out for spring 2008 delivery. We will now concentrate on in-season retail sales and replenishing dealer inventories. We have seen more export business, primarily because of the weak dollar and improved commodity prices in many countries, but it hasn't affected our North American supply significantly.

Because the surge in demand came on quickly, our dealers didn't have a great opportunity to plan for the additional business. Plus, some dealer did not take full advantage of our ordering program and now find inventory very limited or non-existent for spring delivery. Also, with many manufacturers relying on the same companies for components, and most companies carrying lower inventories, it is difficult for manufacturers to increase production in a timely manner. I think that in 2008 our early order programs will be successful because dealer inventories will be low and the positive outlook.

— Steve Pesik, VP Sales & Marketing, Miller-St. Nazianz, St. Nazianz, Wis.

1. Demand for high horse power tractors, combine and other professional producer products show strong signs of being greater than 2007, and as a manufacturer we are going to increase production to meet this demand. Dairy and livestock markets should continue with moderately strong demand, but input costs will limit dramatic upswings in market demand. Demand for consumer and commercial products will be slightly below 2007 levels during the first half of 2008.

How will it differ from the last 2 years? Over the last two years we have seen increased percentage of retail orders along with reduced company and dealer inventories. This industry wide supply chain efficiency has dramatically changed they planning and purchase process for the dealer and customer.

Is the export market significantly affecting equipment supply for North America? Export market demand has been strong and does have an effect, but AGCO is able to meet both US and export demand with increased production put in place for 2008.

2. Are dealers and their farm customers beginning to understand that the equipment supply situation has changed? Yes it is apparent by the increased percentage of retail orders. Are you seeing greater acceptance and adherence to early-order programs? Yes, combine, planter, and tillage early order programs showed signs of customer and dealer future planning. This, in combination with manufacturers wanted to aggressively manage inventory on the ground, has provided customers and dealers who forward plan purchases not only the best price of the year, but additionally an assurance of timely delivery in this strong market.

— Stephen Gorsuch, Rural Lifestyle Marketing Director, AGCO, Duluth, Ga.

1. Because we are a cattle/dairy based company, and due to the fact that the beef and dairy producer cannot meet the demand for their products, we feel that the demand for our products will remain high in 2008.

The demand for our products should remain high, and we are predicting that it will be higher in 2008 than the past two years.

The export market is beginning to take more products. The value of the US dollar is having a positive effect on this as well.

2. We are seeing more dealers and customers placing orders earlier and earlier in order to insure the product when they need it. In fact many of them are purchasing 6 to 8 months in advance.

Our early order programs have always driven our production. We are seeing production runs of certain products being sold out prior to them being produced.

— Al Goehring, Marketing Manager, DuraTech Industries Int., Jamestown, N.D.

From my viewpoint as an equipment importer, the major problem in the farm equipment industry in 2008 will be the weak U.S. dollar. In 2006, the USD was $1.18 per Euro, $1.28 in early 2008 and now $1.48 or worse.

This will drive the cost of imported equipment, of which much of our equipment purchases come from, to a point where the consumers will refuse to pay. In the same light U.S. manufactured equipment will be a deal to the rest of the world and the U.S. manufacturers will likely send the equipment offshore. So from the U.S. perspective, I believe that we are going to be in a tenuous situation for 2008 or until the USD gains some strength. I really don't look for this to improve. I don't think early order programs are going to help the situation at all. Price will drive the market.

— Earl Lesch, president, Wolagri USA, Brackney, Penn.

1. We believe demand will be higher for 2008. We plan to build more in anticipation of increased demand. This will be the first time in several years that we've planned for an increase. We do no exporting so don't have much of a feeling for that side of things.

2. I don't mean to be hard-hearted but, I don't believe farmers understand now, any more than in the past, why they can't get things when they want. They still don't want to order ahead. They want something now, no matter what conditions are. The dealer has to take the lead when it comes to early ordering and they won't do so unless Mr. Farmer places the order, as a cash sale.

— Wayne Karschner, General Manager, Hawkins Mfg., Inc., Holdrege, Neb.

1. Worldwide demand for equipment for milk, corn and cereals production is increasing because of increased prices and profits in these markets.

The market for equipment for set-aside land however, such as flail mowers or cultivators, is decreasing, because it is more profitable to grow products.

We are sure that the exchange rate of the dollar is negatively influencing imports of European products to the American market.

2. Although more and more companies try to lower their day-to-day stock, this situation is not yet accepted by our clients and will from time to time result in loss of orders because of longer delivery times.

— Frank Niels, Export manager, Van Wamel B.V., The Netherlands

Del Morino produces small to medium size machinery, much of which is use by hobby farmers, in Italy. As such, our business is different from those companies supplying the main stream of large farms. Also, we supply only distributors.

In the area of mowers we are seeing a decrease in demand due to zero-turn mowers, which are increasingly taking over where tractors with our mowers were used previously. In the area of tillers, we are seeing a good demand for the smaller units which we think is due to the increase in small organic farms and hobby farmers. We are also seeing a good growth in our business in Europe, where the manufacturing plant is but it has not had an effect on our ability to supply the U.S. market.

Our distributors have always ordered early not only for the better pricing but also because of the lead times for the production in Italy and the time for shipping to the U.S.

— Bert Crockett, Del Morino S.r.l. Denver, Colo.

I must confess that we have been overwhelmed with pre-sold orders, that we have not had the time to think about current or future advertising, other than our pre-planned schedules, dealer co-op advertising, show schedules, etc. We have set record sales for the last 2 Years, and see no reason that this trend will not continue for the next 18 – 24 Months. The confirmed orders have been steadily coming in at a slightly faster rate than our production. We are constantly speeding up our production to match, but then have problems with our suppliers in filling our orders.

Please note that we have been in business for over 30 years, manufacturing the same type equipment and improving them throughout these years. I would consider our equipment to fall under the "niche" market, in that our potential sales volume is not something that the "Majors" would be interested in competing with us in.

In talking to other manufacturers I personally know (in livestock feeding equipment), they are in a similar situation. Most of their leadtimes are way out of line. We feel bad that we are 2 to 3 weeks lead time. In comparison to 6 to 12 Months, I would guess that we are not losing the sales that these others are (because of unrealistic lead times).

In response to the questions: We see the demand to continue at the same rate as the last 2 years. The export market has not changed significantly over the last 2 years, even though the U.S. dollar is down compared to most foreign currencies.

Most of our dealers have accepted that the manufacturers' situation has changed. We have had no problems with our lead times with our regular dealer base. Our situation would not want to adhere to an early-order-program, because we are continually running at maximum production. We usually only do an early-order-programs when sales are slow, or unpredictable.

— Royal Burrows, President, Burrows Enterprises, Greeley, Colo.

Based on what we are seeing here at Poly Tech, new equipment demand will definitely outpace supply for 2008. The good news is there seems to be plenty of good used equipment out there. The avenues for locating, buying and selling used equipment also seem to be growing rapidly. Besides, not everyone can afford brand new equipment.

From Poly Tech's perspective this is actually a positive situation. We produce parts for repair and maintenance as well as to enhance equipment performance. The more used equipment being put into service the more potential customers we have.

While we have some dealers who take advantage of our early order program most do not. Some are not able to simply because their customers aren't planning that far ahead. Others rely on the OEMs ability to get product to them quickly. Poly Tech even offers a same day or next day shipping guarantee on most products.

As for the effect of exports on equipment availability I can't say for sure but it is a small world after all.

— Jimmy Rabitsch, Poly Tech Industries, Inc., Monticello, Ga.