Are Softer Equipment Sales Ahead?

Farmer Iron

Farm equipment dealers answer survey offering some insight to they see 2014 shaping up.

Published on: October 1, 2013

The farm equipment industry has been barreling along at an unusually fast clip for the past five years, so fast in fact that some execs have commented that a little "breather" might be appreciated. From the looks of some new survey from the investment community that may be ahead.

A recent dealer survey conducted by the financial firm UBS shows that dealers see sales into 2014 as flat or declining, depending on the market. The survey, which had responses from 160 dealers, shows almost the classic bell curve with 55% of those responding saying sales will be the "same as last year" or essentially flat.

The chart on this page shows that "4.95" index number which UBS uses to quantify dealer responses. That 4.95 is essentially an index for flat sales in 2014 and flat is still above the historical average since 1996.

FLAT IS GOOD: The 4.95 is essentially an index of dealer responses, and note that 5 is "flat" in this chart meaning sales will remain level in 2014.
FLAT IS GOOD: The 4.95 is essentially an index of dealer responses, and note that 5 is "flat" in this chart meaning sales will remain level in 2014.

Interestingly, however, a greater number of Agco dealers see "the best ever" and "higher than last year" with a combined 36% in those two categories. For Case IH dealers that combined figure is 16%, John Deere its 14% and for New Holland it's 25%.

The same survey shows more Case IH and John Deere dealers seeing a decline in sales with 33% of Deere dealers and 24% of Case IH showing "worse than last year" and "poor" combined. Remember all dealers in the farm equipment business have been having bang-up sales years.

The two key market indicators to watch will be crop prices and interest rates. However, for farmers with money in the bank, softer equipment sales could offer solid deals into 2014. It's usually better to buy on the dips.