The hemorrhaging downturn in U.S. large farm machinery sales appears to have been stanched in 2017 despite continued weakness in agricultural incomes.
In 2017, manufacturers sold roughly half the number of self-propelled combines, four-wheel-drive tractors and two-wheel-drive tractors over 100 horsepower as they did five years earlier.
For the year, though, unit sales of combines and four-wheel drive tractors ticked up 3.6 percent and 5 percent, respectively — a huge improvement over 2016, when the market for large farm machinery was still in a double-digit freefall.
Unit sales for two-wheel-drive tractors over 100 horsepower decreased 8 percent in 2017, compared to a drop of more than 22 percent the prior year.
“We started seeing the slowing of the decline,” said Curt Blades, senior vice president of agricultural services for the Association of Equipment Manufacturers, which compiles machinery sales data.
It appears the farm machinery industry entered a “replacement cycle” in the final half of 2017, boosting sales even as growers remain unenthusiastic about crop prices, he said.
Manufacturers can’t expect sales to return to the “exuberance” earlier in the decade, but the current market is more predictable, Blades said.
“The good news about a replacement cycle, those are sustainable,” he said.
Strong profitability spurred farm machinery demand between 2007 and 2013, when unit sales increased about 88 percent for four-wheel-drive tractors, 78 percent for two-wheel-drive tractors over 100 horsepower and 50 percent for combines.
Economists aren’t forecasting a major upswing in commodity crop prices, but they’re likely to at least remain stable in 2018, allowing the “replacement cycle” to keep its forward momentum, Blades said.
Meanwhile, agriculture-friendly provisions in the tax reform bill enacted late last year will probably “shake some sales loose” in the future, he said.
The amount of used machinery on the market is not so abundant as to significantly cannibalize sales of new equipment, he said. “The excess inventory is beginning to work its way through the system.
Manufacturers are also heartened by the healthy demand for small farm machinery, which is generally tied to the overall U.S. economy, Blades said.
Two-wheel-drive tractors under 40 horsepower have seen unit sales climb 8 percent in 2017 over the prior year, while sales have been flat for those between 40 horsepower and 100 horsepower.