Machinery sales hang tough

Mateusz Perkowsi/Capital Press A small tractor is assembled by Wayne Wooten at AGCOÕs facility near Tacoma, Wash. Sales of tractors below 100 horsepower fell by 23 percent in 2009 and by 14 percent in 2008. Self-propelled combines, on the other hand, saw sales growth of 15 percent in 2009 and 19 percent in 2008.

Large equipment steady, small units drop in 2009; outlook for 2010 mixed

By MATEUSZ PERKOWSKI

Capital Press

Sales of large agricultural machinery held steady in 2009 despite harsh conditions in the general economy, according to industry statistics.

Many growers certainly felt the recession's impact, but the farm industry as a whole was better able to withstand the downturn than many other sectors, said Charlie O'Brien, vice president of agricultural services for the Association of Equipment Manufacturers.

"Agriculture still has a stable foundation," O'Brien said.

Sales of self-propelled combines actually increased 15 percent over the record high seen in 2008, rising from about 8,500 units to 9,700 units, according to the AEM's year-end machinery report.

Four-wheel-drive tractor sales were up by 2 percent, from about 4,400 units to 4,500 units.

The continued growth can largely be attributed to farmers taking deliveries on orders they placed in 2008, when machinery inventories were tight, said Eli Lustgarten, industry analyst with the Longbow market research firm.

"There was a big backlog of orders coming into 2009," said Lustgarten. "We knew big equipment would do better than the overall market."

For two-wheel-drive tractors over 100 horsepower, sales fell about 13 percent, from 26,300 to 22,800 units.

That drop can be misleading, however, since 2009 sales were still about 9 percent higher than in 2007, a relatively strong year for the machinery market, O'Brien said.

"Even though it's down, it's down from a peak," he said.

Manufacturers were buoyed by the stability in the market for large machinery, particularly in light of persistently declining sales of tractors below 100 horsepower.

Small machinery, typically considered the domain of hobby farmers, saw sales drop 23 percent, from 167,000 units to 128,000 units.

"The smaller equipment has definitely suffered the worst," said Adam Fleck, industry analyst with the Morningstar research firm.

Fleck doesn't expect the market for machinery of any size to be robust in 2010, but farm-oriented manufacturers don't seem to be headed toward major financial trouble, he said.

During the agricultural recession of 2000 to 2001, for example, manufacturers were faced with a large surplus of machinery, Fleck said. Currently, that's not a depressing force in the market, he said.

"There's not a huge overhang of inventory," Fleck said.

Manufacturers differ on the outlook for 2010, said O'Brien.

According to the preliminary results of an industry survey, some companies projecting a slight sales decline while others are projecting a slight improvement, he said.

"I didn't see anyone expect any huge drop-offs in 2010," O'Brien said.

One of the reasons farmers were able to continue buying machinery in 2009 is that they'd cut back on their fertilizer consumption, Lustgarten said.

That trend is likely to be reversed in the coming year, particularly since growers are expected to plant a larger crop of nitrogen-hungry corn, he said.

Increased fertilizer consumption would indicate weaker machinery sales, Lustgarten said. "2010 looks like it will be a softer year."

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