How Dealers Deal with Ag's Business Cycles: Keep Data in Perspective with Customer Input
For farm equipment dealers, planning for agriculture’s business cycles must involve close contact with customers.
In addition to observing economic indicators over a period of time, it’s essential for dealers to put the data into context with history and customer input, says Graham Drake, president and CEO of Cervus Equipment Co.
“Since 2008, we’ve seen a real shift in terms of commodity prices, and while there’s been some ups and downs, prices are still higher today than they were during the previous 10 years,” says Drake. “More recently, we’ve seen a dip in commodity prices compared to last fall. But by examining the rolling 5-year average, we can see that prices are still significantly above where we were in previous years,” which he says helps give perspective to the price volatility that’s far more prevalent today than it was in years past.
He also adds that pricing moves in one direction or another doesn’t necessarily lead farmers to react in predictable ways or for purely economic reasons. But you only know this by talking to them, Drake says.
“For example, we’ll hear that canola prices are up, so it’s assumed that more acres will be seeded to canola. But when I talk to farmers, they will tell me that it doesn’t really matter because they’re going to do what they’ve always done, which is to produce what the land can handle. Many believe that rotating their crops is more important than reacting to price spikes. They also know that things can change quickly and the price of wheat is up and canola is down.
“In my experience, taking a longer term view has been the better and more conservative way of looking at market conditions,” Drake says.
