Analyst says stricter federal emission standards distort sales numbers
By MATEUSZ PERKOWSKI
Sales of four-wheel-drive tractors and combines are surging in the U.S. as many farmers are buoyed by high commodity prices, according to an industry group.
In the first quarter of 2011, manufacturers have seen unit sales of four-wheel-drive tractors rise by 12 percent, according to the Association of Equipment Manufacturers.
Unit sales of combines have grown at an even faster clip compared to the first quarter of last year, climbing nearly 39 percent, according to AEM.
"People are buying new combines as a result of the optimism in the market," said Charlie O'Brien, agricultural sector vice president for the trade group.
Improved farm incomes have prompted growers to invest in their businesses, reducing the eventual tax hit, said Steve Sparks, salesman at Nyssa Tractor and Implement Co. in Nyssa, Ore.
"It's either give it to Uncle Sam or buy a new $300,000 combine," he said.
Even so, the AEM has reported an 8 percent drop in unit sales of two-wheel-drive tractors with more than 100 horsepower.
That decrease may be partly attributed to stricter federal emissions standards that went into effect this year, O'Brien said.
Some farmers are adopting a "wait-and-see" approach to the technology, he said.
Also, sales of such large tractors were inflated last year because farmers decided to buy machinery before the standards went into effect, O'Brien said.
"Even though it's down some from last year, we're still at very high levels of units getting sold," he said.
Though four-wheel-drive tractors are also subject to stricter emissions standards, overall unit sales of these machines are smaller than for two-wheel-drive tractors over 100 horsepower, O'Brien said.
In other words, four-wheel-drive tractor sales represent a narrower slice of the marketplace -- often, they're bought by very large farmers who may be more eager to adopt new technology, he said.
Sparks said the trend toward four-wheel-drive also reflects the popularity of brawnier machinery.
"They've got more power, more traction," he said. "They need more oomph."
Though larger tractors may consume more fuel, that cost is outweighed by the benefit of increased productivity, Sparks said.
Dennis Solbrack, product support manager at Arrow Machinery in Colfax, Wash., said sales in his area have been brisk but not as robust as reflected in the nationwide statistics.
"The Midwest corn frenzy is fueling those numbers," he said.
The rising demand for tractors and combines in the major corn-growing states has limited availability in other parts of the U.S., Solbrack said. "It's harder to get machinery, no doubt about that."
The spike in national machinery sales has not yet reverberated to Oregon's Willamette Valley, said Pat Richards, president of Tangent, Ore.-based Fisher Farm and Lawn.
However, the company is expecting sales to rise later this year, based on orders and interest from farmers, he said. "I wouldn't say we're seeing a bounce yet, but we are seeing some cautious optimism."
Unit sales of small two-wheel-drive tractors, which plummeted between 2007 and 2009, continued an upward trend seen in 2010.
Last year, unit sales of tractors under 100 horsepower rose 3 percent. In the first quarter of 2011, sales have increased 9 percent compared to the same time in 2010.
Such small tractors generally reflect consumer attitudes, as they're popular among hobby farmers, O'Brien said. "We're seeing a rebound in the general economy, so we're seeing more discretionary spending on that type of tractor."
The rebound in small tractor sales hasn't caught up to everyone, though.
Roger Seifer, co-owner of Cascade Farm Machinery in Silverton, Ore., said his small tractor business hasn't seen much improvement this year.
The Christmas tree farmers, nursery producers and vineyard growers who make up the bulk of his agricultural customers have continued to struggle economically, he said.
As for consumers, Seifer said he hasn't seen a great deal of confidence return in that sector either.
"A lot of people are worried about their job," he said.