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Economic dire straits reaching into farm machinery business

Agriculture.com Staff 01/05/2009 @ 6:53am

Many analysts expect 2009 -- the first few months of it, anyway -- to continue the painful economic conditions that closed out '08. Now, these general macroeconomic woes are starting to extend into the farm machinery marketplace.

It's coming in the form of lower demand, driven in part by cancelled machinery orders, say Agriculture Online Machinery Talk members and farmers who are starting to see a change in a market that, just months ago, had such high demand that waiting lists for some new pieces of machinery were a year long. Now, economic stress has that demand ebbing and the marketplace rapidly changing.

"I have a good friend that is in the equipment business. He says a lot of his customers are hinting they want out of some of the tractors and combines they ordered in the summer," says Machinery Talk member IH1086#1.

"It must be happening a lot, because I've talked to a few people who were expecting to take delivery on their new equipment in early spring and are getting told it will arrive months earlier," adds Machinery Talk member farmboy1007.

But, backing out of a deal like this comes at a cost. According to Greg "Machinery Pete" Peterson, publisher of the F.A.C.Ts Report, fees for walking away from an order or returning ordered machinery typically amount to a percentage of the purchase price, and is "not an insignificant dollar amount.

"I'm sure it's in there in the fine print," Peterson says.

"I did a quick informal survey of implement dealers around the country, most of whom I've known for 10+ years to ask what they're seeing. Their responses were pretty much along the same line: 'Sales still strong, a few cancellations, but no trend to speak of.' One dealer mentioned 'having to talk a few buyers off the ledge,'" Peterson says.

"But again, seems like those new equipment orders for 2009 remain very strong, with the possible exception of new orders from Europe, Russia and parts of South America. Not hard to figure out what's going on there, when credit dried up, so too did new equipment orders, thus some foreign cancellations," he adds. "The credit mess in Europe is main culprit; there do appear to be some large order cancellations from over there. How will affect the U.S. equipment market? We'll see."

Many analysts expect 2009 -- the first few months of it, anyway -- to continue the painful economic conditions that closed out '08. Now, these general macroeconomic woes are starting to extend into the farm machinery marketplace.

Another factor on the horizon that could loom large for the next year's machinery marketplace is dealer and manufacturer financing. Big financial institutions have experienced big trouble in the last few months, and if this continues and begins to affect some of the financing arms of equipment manufacturers, it could trickle to the retail level quickly, Peterson says.

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