Lower farm commodity prices aren’t the only thing that determines whether or not North American farmers will increase equipment spending during the remainder of 2015 and into next year.
Net farm income is forecast to decline for the second consecutive year, after reaching recent historic highs in 2013. NFI is expected to fall nearly $33 billion (36%) from 2014’s estimate to $58.3 billion in 2015. The 2015 forecast would be the lowest since 2010, and $29.1 billion below the 10-year average.
“The future of farm equipment distribution in North America is being reshaped in ways and by means that many dealers could not have imagined a decade ago.”
With Finning International's acquisition of Kramer Ltd. this past May, the fraternity of Caterpillar construction equipment dealerships in Canada became even more elite. This move leaves only eight CAT dealers operating 100 locations throughout the entire country. Nearly all of these are owned and operated by only three dealers, Finning and Toromont, both of which are publically held, as well as Hewitt Equipment.
A mid-year look at how dealers' expectations for 2015 are shaping up indicate that, on average, those responding to the July “Dealer Sentiments & Business Conditions Update” survey are looking for a year-over-year falloff of 15%. A year ago, dealers were forecasting a 6% year-over-year decline for 2014.
Bolstered by strong sales to the livestock segment of the industry, sales of compact and mid-range tractors were among the few bright spots for farm equipment sales in 2014. Overall, sales of tractors 40 horsepower and lower were up for all of last year by 6.8%, while those in the 40-100 horsepower range rose by 8.9% year-over-year.
On the heels of a 5.2% increase in revenues during its fiscal year 2015, Kubota Corp. says it plans to push ahead with further expansion into the large ag machinery market.
According to at least one industry analyst who studies the distribution part of the farm equipment business, the consolidation of the industry's dealers is inevitable and necessary.
Last Friday, the Assn. of Equipment Manufacturers reported that the U.S. and Canada sales of new large tractors and combines fell by 19% year-over-year, which was a step up from a 29% decline in the previous month.
In this episode of On the Record, brought to you by Associated Equipment Distributors, we take an initial look at the Dealer Business Outlook & Trends Report and what dealers are forecasting for 2025.
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