Demand for large agriculture equipment continues to soften, according to a just-released Rabobank report.
The “Contraction Today, Consolidation Tomorrow?” report asserts after several years of rising row crop prices, a perfect storm of high crop production, a sharp correction in grain prices and contracting farmer margins in mid-2014 resulted in declining purchases of large tractors and combines in North America.
This trend has continued into 2015 and is unlikely to abate for quite some time, according to the Rabobank Food and Agribusiness Research and Advisory Group, which prepared the report.
The downturn in equipment sales could lead to a number of scenarios in North America’s future, including mergers among the five largest original equipment manufacturers – excluding market leader Deere & Co. – as well as acquisitions of smaller specialty harvesting and implement equipment manufacturers by those five largest players, Rabobank concluded in the report.
Equipment is usually the first farm input purchase to be delayed or eliminated during a downturn, and so the precipitous decline in new equipment sales following the drop in corn and soybean prices was logical, Rabobank, one of the world’s largest banks, said.
Sales of new tractors with more than 100 horsepower for the first six months of 2015 dropped 17.7 percent in the United States and 14.3 percent in Canada, according to the Association of Equipment Manufacturers. The association also reported combine sales tumbled 41.7 percent in the U.S. and 14.9 percent in Canada during the same time period.
U.S. sales of smaller horsepower tractors – used primarily in the dairy and livestock industries – continued to grow, as did certain farm implements, Rabobank noted as a bright spot for growth. Sales of new tractors with less than 40 horsepower rose 4.4 percent during the first six months of the year in the United States, according to the manufacturers association.
To find out how to obtain this research and other reports, go to www.RaboAg.com.