Manufacturers expect unit sales to increase up to 4.5 percent

By MATEUSZ PERKOWSKI

Capital Press

While the forecast for new combine sales is gloomy, tractor sales continued to grow in 2011 and manufacturers expect further gains this year.

Total tractor sales topped 82,800 units last year, an increase of 2 percent, according to the Association of Equipment Manufacturers.

Manufacturers anticipate that unit sales of tractors will increase 2.5 to 4.5 percent in 2012, depending on machine size, according to an AEM survey.

"There's an expectation of growth in all the tractor categories," said Charlie O'Brien, agriculture sector leader for the group.

The growth of new tractor sales has slowed since 2010, when unit sales grew by more than 6 percent.

That year, sales of two-wheel-drive tractors over 100 horsepower increased 18 percent and four-wheel-drive tractor sales grew 28 percent.

It's unrealistic to expect that trend to continue -- especially since 2010 saw a lot of pent-up demand after the deep recession prompted farmers to postpone investing in machinery, O'Brien said.

"You can't grow 20 percent every year," said Adam Fleck, an industry analyst for the Morningstar financial research firm. "The growth rate has to come down at some point."

Though the effect hasn't been as pronounced as with combines, new tractor sales have been softened by the availability of less expensive older tractors that have been traded in, he said.

Despite strong farm income estimates by USDA, worries about rising input costs and economic instability have weighed on buying decisions, O'Brien said. "That adds a level of cautiousness to it."

That's particularly evident in tractors under 40 horsepower, which are typically purchased by hobby farmers who are more affected by the general economy than by crop prices, he said.

Sales of smaller machines grew 5 percent in 2010 but flattened last year.

"The economy has sputtered a little bit," O'Brien said. "It goes along with consumer perception."