Farmers Still Buying Tractors; Buying Expected to Slow in Coming Months
If farm machinery sales over the last few months -- and projections for the near future -- are any indication, the farm profitability downturn has yet to exert too much financial pressure on farmers after several years of positive grain farm returns.
A report released by the Equipment Leasing and Finance Association (ELFA) this week sheds light on general farm financial viability through the lens of equipment and machinery sales in the last year. And, if these tractor sales are any indication, the farm financial downturn has yet to cause much of a shift in farmer spending: Total U.S. tractor sales were up 5.1% from 2013, with 21,829 machines sold in June 2014 vs. 20,775 in the same month a year ago. The yearly trend was less pronounced, with 106,997 tractors sold through June 2014 compared to 104,291 in the same period a year ago, a 2.6% increase.
The same's not quite true with combines; total sales for harvesters were down sharply in June. "Total U.S. unit retail sales of combines were 705, down 23.9% from the same month in 2013," according to an ELFA report. "Year-to-date, a total of 4,004 combines were sold, down 12.6% from the same period in 2013."
Moving into the next year, ELFA officials expect the farm income downturn to start to have a greater impact on equipment sales. Citing data from manufacturer John Deere, an ELFA fact sheet says the continued slide in income potential will eventually cause tractor sales to slump, and the collective market comprising tractors and combines will see as much as a 10% decline in by this time next year.
"Farm incomes are expected to remain at healthy levels; however, they are forecast to be lower than in the previous year. The decline will have a dampening effect on demand, especially for larger models of equipment," according to ELFA. "Partly as a result of these factors, industry sales for agricultural machinery in the U.S. and Canada are forecast to be down 5% to 10% for the year, with the decline mainly reflecting lower sales of high-horsepower tractors and combines."