A building series of circumstances, from weather to trade policy, are putting downward pressure on the agriculture sector of the economy. Still, agricultural equipment dealers and manufacturers are expecting primarily flat results in the coming year.
According to the latest survey conducted by the Association of Equipment Manufacturers (AEM) and the Equipment Dealers Assn. (EDA), manufacturers and dealers are looking to reduce costs to adjust to conditions, with dealers focusing on smaller equipment orders and manufacturers focused on containing head count.
More than 75% of dealers said they are reducing volumes, another 45% said they’re reducing or cancelling capital investments and less than 20% say they’re reducing hiring. Meanwhile, nearly 80% of manufacturers surveyed say they’re reducing hiring, 55% are reducing capital investments in expansion and just less than 50% are reducing capital investments in equipment.
“The data shows manufacturers are noticeably more concerned about trade issues and economic performance globally, where economic data is showing headwinds, especially in Europe and China,” AEM senior vice president of ag services Curt Blades said. “Fortunately, the trade issue is one that can be controlled, and we’re optimistic U.S. and world leaders will resolve these disputes in the near future.”
“Ag equipment dealers are echoing the concerns of their clientele, the farmers,” EDA vice president of industry relations Joe Dykes said. “Their biggest concern is the challenging weather conditions that have made planting and harvesting difficult and even impossible in some regions. Tariffs on end-user markets is their next largest concern, and you can see that, especially in the dairy sector.”
Manufacturers and dealers are more in agreement on new equipment inventory levels than they have ever been in the past. Half of manufacturers say dealer inventories of new equipment are “about right,” while almost 58% of dealers say the same. That reduces the amount of separation from last year’s already record level of agreement by nearly half.
Meanwhile, roughly 43% of both groups are planning for a flat performance next year. From there, 36% of dealers are planning on normal growth or better, while about 9% of manufacturers are planning for the same scenario.
The reasoning for those disparities in thought may come from market exposure.