Just what the heck is going on with the farm equipment business? Plant closures, worker layoffs, lowered earnings expectations are all hitting the news these days. Truth is, this is just another part of the long equipment cycle that's been around since the first plow turned earth back in the early 1700s (thanks Jethro Tull).
Market up and downswings that hit your own farm definitely hit the equipment business. And each time the players get smarter. While the big machinery firms have been seeing earnings fall, they're still showing positive numbers. They may not be making shareholders happy all the time; but they're hunkering down for the long haul.
In addition, they've gotten smarter about field inventories - at least I hope they have. Back when I first started writing about equipment in the last great Ag Depression in the mid 1980s; some companies (many no longer independent brands) had dealer field inventories that would meet the needs of more than a year of their usual sales targets. Of course, back then there was nothing "usual" about any equipment sales. And working those numbers down was costly.
Today, industry players are aiming for three-month inventories on hand. Many have some work to do, but a shorter inventory cycle boosts income for them. It also reduces the need for these firms to discount to make the sale. While we all like a great deal, chances are over-discounting hurts resale values later, and that can impact your farm's equity.
All this inventory control work may be tweaking used machinery inventories as well - which may raise equipment values. And it might also make you're cost of doing business if you like buying used equipment.
All-in-all the rumor of mergers, the talk of layoffs and the sales of assets add up to one thing...change. And if there's one thing we all understand in ag is that change happens.
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