Is it Time to Invest in Ag?

Is now the time to invest in agriculture?

Conventional wisdom would tell us, no. Now is the time to avoid the risk that comes with a soft market and wait until business picks back up.

This kind of sounds to me like trying to time the stock market: take your best educated guess at when things will pick up or fall off and hope you guessed correctly. Most people who have tried this approach will tell you that it almost never works because there’s always going to be someone else who has a more educated guess than you.

It’s a lot like cutting out advertising when sales slow down and then trying to get your message to customers when it looks like it’s picking back up. That’s when you find out that your customers are already shopping elsewhere. They’re looking at the products they learned about when things were slow. It has been demonstrated that the sales of those businesses that continue investing to get their message out during the slow times, bounce back much faster than those of companies who chose to hunker down to weather the storm.

Last week, I had the opportunity to visit with a manufacturer who is pushing hard to sign up dealers in the U.S. They believe the current slowdown in farm equipment sales is the perfect time to find dealers. And they’ve had some pretty good luck in doing so. Their products aren’t necessarily niche, but they’re differentiated enough to get peoples’ attention.

They say they’ve been able to sign on some dealers who are tired of their major suppliers’ overreaching control tactics and increasing demands that move margin from dealers’ bottom line to their own. When sales levels were as good as they have been the past several years, the dealer had some incentive to stick around and put up with it. But as business has fallen off, they’ve started looking for a situation that’s more to their liking.

In other cases, this manufacturer says established dealers are looking for new products that will get customers in the door now and in the future. At the moment, not a lot of farmers are looking for the same type of machinery they already have sitting in their sheds. Their equipment is pretty new, anyway, and they can wait until it wears out or something new and better comes out.

I can’t tell you how many times in the past several months that I’ve heard, farmers have money, (see the “Forecast & Trends” segment in this issue of E-Watch) and they will spend it for something that’s new and worthwhile to their operation. Until then, they’re looking a little taller because they’re sitting on their wallets.

A case in point is a manufacturer who just rolled out a new tillage tool at the National Farm Machinery Show last month. It’s a new concept and apparently unique enough that a farmer purchased one without ever seeing it in the field. I’m told that new tillage tool has a price tag of $100,000-plus, which demonstrates the point that farmers will invest when they perceive the value — even in a down market. The same appears to be true with dealers, as well.

So, is it time to get active and invest for the longer term? From what I can tell, there may not be a better time than now.