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Iron sales growth seen slowing in next 3 years
Between an increase in the amount of new machinery farmers are buying this year and a general softening of the macroeconomy, the rate of growth in the U.S. farm machinery business is expected to slip in the next 3 years but stay in the black, according to new information from the Association of Equipment Manufacturers (AEM).
New AEM data released this week shows 2011 will go down as a strong year for machinery sales in the U.S. and Canada, up 6.4% and 7.6%, respectively over 2010. That's driven largely by improved profitability for the crop industry in general, says AEM ag sector vice president Charlie O'Brien.
"Agricultural equipment manufacturers overall fared very well in an otherwise struggling economy. Recent growth has been positive in most categories, and exports to emerging countries are rebounding. Strong commodity demand and prices have translated into equipment sales," O'Brien says. "The general economy has stalled somewhat in recent months, and we are always aware of the potential for boom-and-bust cycles; manufacturers are assessing the business landscape for any possible slowdowns in domestic demand as well as overseas."
And, there's good reason for that awareness; though still expected to stay on the positive side, growth in ag machinery sales is expected to decline slowly over the next 3 years in both the U.S. and Canada, AEM data shows. Between 2012 and 2014, U.S. ag machinery business growth is seen declining from 4.9% to 2.8%, while Canadian ag machinery sales growth will decline by 4.8% to 1.7% in those years. The same is true for sales in the rest of the world; Though 2011 will see ag machinery sales growth of almost 7%, that number's expected to slip to 4.6% in 2014.
But, despite the decline in year-over-year sales growth, it's still a good sign for the industry, O'Brien says. "These are sound fundamentals for long-term business," he adds.
Specifically, 2-wheel-drive tractor (under 40 horsepower) sales are expected to see the strongest growth in North America in the next 3 years, while machines between 40 and 100 horsepower are seen climbing at a slightly slower rate. Four-wheel drive tractors will grow by an even slower clip. Combines are the only category of iron that will see numbers in the red for 2011 and beyond, culminating with sales expected to dip by 3% by 2014.