Fasten Your Seatbelt: Ag Market’s Thrill Ride

Manufacturer News – May 05, 2016

Just like an amusement park thrill ride, the ag equipment market has its ups and downs, sharp turns and thrilling speeds that keep our hearts pumping, ready to anticipate the next drop or incline. And for some of us who have witnessed these fluctuations over the years, today’s market is just as scary, exciting and unpredictable.

Let’s take the 1970s, for example. Looking back, dealers were experiencing great prosperity, anticipating big sales and even bigger returns. As a result, they built huge sales facilities (oftentimes referred to as Taj Mahals) and had no reason to think the growth wouldn’t continue.

But the boom of the 70s was short-lived. I started my career in sales in the early 80s selling financing options to dealers. At that time I can’t even count the number of dealers I would talk to one week, and the next week I would drive by to see empty lots and “for sale” signs out front. This was a steep down cycle and it was a very difficult time for the industry.

Now, if we wind the clock forward to 2010, we see a similar pattern emerge. Despite a small, recessionary dip in sales, the business was trending upward again. Back on that roller coaster, the industry was hearing the click, click, click as it started to travel upward, bringing with it an industry-wide sense of anticipation and excitement. And this incline was impressive! It lasted through 2013, and actually until the summer of 2014. The thrill and expectation were tremendous and new equipment sale heights were realized. Until, that is, the industry crested over the inevitable top of the market incline in the fall of 2014.

And that is when we all screamed! Unfortunately, we didn’t know how steep the down slope was going to be. We had no idea that in two years the sales of larger tractors and combines would drop 50 percent. And as the market was making very difficult decisions and trying to adjust to the dramatic shift, farmers and manufacturers alike were holding on to their hats experiencing a downward rate none of us on the ride could have expected. (Of course, the dairy and livestock sectors were enjoying this ride, waving hands in the air as they still enjoyed good sales and revenues, until the ride caught up with them, too.)

And here we are today, waiting for that plunge to level off, just as is has so many times before. Of course, we’ve had other twists and turns on the ride, including Section 179 in 2014 and 2015, the Farm Bill and, of course, the panic on the Renewable Fuel Standard (RFS) mandate. And believe me, these issues are making huge impacts on our ride, jostling us from side to side with no end in sight.

Added to this are the dynamics of the used inventory and how long it will take to move it through the system. We worry about crop insurance to cover catastrophic losses and what that could mean to equipment manufacturers. And we also get those really quick bumps on the rollercoaster that are based on commodity prices, which are influenced by a whole host of unpredictable factors, including the weather.

So when will this ride level off? Have we reached the bottom? As Jim Walker of Case IH, Todd Stucke of Kubota, Linda Salem of Great Plains and Leif Magnusson of CLAAS noted at the recent AEM Outlook, we are much more comfortable with the ride now that we’ve all had time to adjust to it. We are better prepared and have braced to meet the dips and cork screws yet ahead. Production and budgets have been right-sized to appropriately reflect the trends, some of which are still tilting south, but in a manageable slope. Programs have been set up to help push out excessive inventories, and plans are being put into place to meet the demand when we see it coming back at us over the horizon.

Is the ride over? Nope. And thank goodness. After all, I think we’ve come to appreciate the thrill of the highs and the challenge of the lows, twists and turns. But, keep your seatbelts fastened!


​Charlie O’Brien, AEM Senior Vice President & Ag Sector Lead