New data from the Association of Equipment Manufacturers shows U.S. sales of agricultural tractors fell nearly 11 percent in July compared to a year ago, while combine sales dropped more than 5 percent. AEM Senior Vice President Curt Blades says the slowdown reflects broader challenges facing agriculture today.
“When you talk about the overarching ag economy, you can point to any number of things, whether it’s demand driven, whether it’s commodity prices, whether it’s input prices, whether it is loan interest rates or just general uncertainty of the global economy. Those are all factors that are leading to the ag economy being a little bit soft and also leading to those capital equipment purchases like equipment to be a little bit soft as well.”
He also addresses concerns about the rising cost of farm equipment.
“We did a recent study where we looked at the last 30 years of equipment prices versus the consumer price index. And interestingly enough, the equipment prices and the consumer price index are tracking almost one to one. Now, having said that, that still doesn’t help relieve a farmer that’s writing the check for a big piece of equipment. Now, what we also have to take a look at is that the equipment today is significantly more productive than the equipment of 30 years ago, where we’ve got farmers able to do more with less, with a whole lot of embedded technology and more fuel efficiency.”
While equipment prices have increased, Blades explains that manufacturers and dealers are facing their own financial pressures.
“But it is also something that the manufacturers take very seriously. This is a thin margin business, just like farming is a thin margin business. The equipment industry is a very thin margin business and dealers are very thin margin business. So we’re right here along with farmers as they’re dealing with the tough economic times. Our hearts are kind of going out with them as well and saying, we’re in the same boat with you. We’re trying to figure out how to maintain good business in a down ag economy.”
He says the industry anticipated a slowdown and adjusted production levels accordingly. But when sales soften, the effects extend beyond manufacturers. Local equipment dealerships often play a major role in rural economies.
“You know, nothing is more damaging to a dealer’s bottom line than to have an inventory that they’re having to pay interest rate on. So if you see an equipment dealer that’s got a lot of used equipment and new equipment on their lot, I mean, that’s not doing anybody any good. That’s, in fact, kind of hurting the business just a little bit. Oftentimes, those dealers may be the largest employer or certainly one of the largest employers in that region.”
Blades says keeping dealerships healthy is also essential for the service and support farmers depend on during planting and harvest. Looking ahead, he says policy solutions that strengthen farm profitability remain a priority.
“One of our core pillars from an advocacy standpoint is advocating for rural America. That includes strong support for things like biofuels, year-round sales of E-15 and the innovation that might create additional demand. Having said that, we also are big proponents, not just of biofuels, but anything that drives additional demand for the products that farmers produce. So that’s critical there. But in addition to advocating for the demand side, we’re tireless advocates for free trade. We’re tireless advocates for infrastructure that supports rural America, whether that’s roads and bridges to help deliver the grain, but also deliver those raw materials to the farm community. So all of these types of things, we are right there alongside farmers, making sure that the farm economy improves. The farm economy improves, we all improve. And that’s certainly one of our highest priorities.”
The latest sales numbers underscore the economic pressures facing agriculture, but Association of Equipment Manufacturers Senior Vice President Curt Blades says growing demand for U.S. agricultural products will be key to turning the trend around.