The talk for much of 2023 largely centered around an expected downturn and not if, but when. Ag Equipment Intelligence’s Dealer Sentiments & Business Conditions Update has continued to show dealer optimism in negative territory in every month of 2023.

The reasons are what I’m sure you’ve experienced yourself: rising interest rates, drought, OEM price increase, growing used equipment inventories, etc. 

Despite the challenges, some positivity remains. The 2024 Dealer Business Outlook & Trends report shows 51.2% of dealers expect their 2024 new equipment revenue to be as good as or better than 2023. 

For used equipment, 71.2% of dealers said 2024 revenues would be as good as or better than 2023.

Less Shallow Dip. During the August 2023 Dealership Minds Summit, Chris Johnson, senior research analyst with Cleveland Research, said while he’s forecasting a slowdown, it won’t be anything like that of 2014-19. 

The current U.S. row-crop tractor cycle (beginning in 2013) has seen the deepest trough since 1984. The current cycle is tied for the longest period between peak years. “Prior cycles show they go 6 years from peak to peak,” Johnson says. “But 2005 through 2013 was unique. It went 8 years, and the peak was much higher. We overbuilt through it, and we sold too many units. The trough since then and on through 2023 has been longer and taken longer to get out of.”

Johnson says this bodes well for the future of the ag equipment market and should generate a less shallow dip in the next row-crop tractor cycle as a result. 

Preparing for the Slowdown. Mike Hedge, CEO for Case IH dealership Birkey’s Farm Store, maintains the best time to prepare for a slowdown is before we see the market turn. 

“Our dealerships are on strong financial ground now — probably as good as they have been. But the downturn in 2014 caught a lot of us off guard, and many of us were reactive,” he says. “As quickly as that change came, the next one could come as well.”

While we need to be realistic about the year ahead and the challenges it will present, I’ve heard glimmers of optimism. One ag lender told me he thinks interest rates have peaked, and we’ll likely see them come down in the new year. A Business Insider report from Dec. 4, 2023 says the Fed is likely to cut interest rates 4 times in 2024. Purdue’s latest Ag Economy Barometer saw improvements in both the Index of Current Conditions and Index of Future Expectations. 

Comparing responses received in May to those in the November survey highlights the change in producers’ perspectives about farm income, say the authors. The biggest shift vs. last year was movement toward expecting financial performance to be about the same and away from expecting worse performance. In November, just 22% of respondents said they expected worse financial performance than a year earlier, significantly below the 38% in May. At the same time, the respondents expecting financial performance to be about the same as a year earlier rose from 48% in May to 61% in November.

Parts and service revenues were strong in 2023, and dealers are once again forecasting growth in aftermarket revenues for 2024.Regardless of any slowdown or its depth, the attention on the aftermarket is as important as ever.  

From all of us at Farm Equipment, we wish the best to you, your employees and families in 2024. We look forward to seeing you in Indianapolis for the Summit!