Big iron rakes in big dollars

A big boost in four-wheel-drive tractor sales signals that the farm equipment industry is returning to normal, say salespeople and other industry experts.

New 4WD unit sales in Canada grew 84.8 per cent year over year in November and 41.5 percent year to date, according to the Association of Equipment Managers.

In October, it reported Canadian sales of tractors above 100 horsepower were up 37.4 per cent compared to the same month in 2022. Sales of 4WD tractors were up 141 per cent in October, also compared to the same month in 2022.

However, the figures are a little deceptive, said John Schmeiser, CEO of the North American Equipment Dealers Association. That’s because farmers are finally receiving equipment ordered when the industry was still working through pandemic and strike-driven supply chain woes.

“The 4WD sales are definitely due to the delayed inventory of ordered equipment finally arriving, whereas the previous year’s sales were impacted by the pandemic and fewer unit numbers than what the market wanted were able to be delivered,” wrote Schmeiser in an email.

“So it looks good that there was an increase in sales, but in reality, the industry was getting caught up in delivering the units.”

Jim Wood, chief sales and operations officer with Calgary-based Rocky Mountain Equipment, agrees with Schmeiser that long-awaited deliveries make up the bulk of recent purchases.

“When you see big spikes like that, especially in this day and age and with production the way it was, it’s really just deliveries. They’re finally delivering stuff.”

However, producers still appear to have the confidence to buy, he added.

“We’ve sold all our four-wheel-drive production up until Q4 of next year, so I think that the farmers are confident. The pandemic brought on $24 canola, which brings on taxable income for farmers and cash receipts. So there is more demand because of commodity prices and things like that during COVID.”

Most farm equipment, new and used, is selling well at Rocky Mountain Equipment, said Wood.

“Combines are pretty consistent now and most other (equipment is) fairly consistent. Demand is still high. We sell as much used as we do new.”

Trading used for new has become a trend among customers thanks to the high value placed on pre-owned machinery, said Wood. Played right, it could mean paying a relatively small cash difference.

“As the new (equipment) goes up, your used value goes up. It’s the person that maybe had a 2022 combine and trades it on a new 2023 combine that are just paying that cash difference,” he said.

“Somebody buying a 2023 combine and trading in a 2014 combine, that’s where they’re going to see the huge price gap, because they’re 2014. They really didn’t see the same appreciation that a 2022 did.”

Kevin Kehler, vice-president of sales with Manitoba-based Greenvalley Equipment, said his business has had strong sales across all its product lines, including 4WD tractors.

While he concedes a lot of these sales stem from the lag between customers ordering equipment and receiving it, he said producers continue to place orders on 4WD tractors and other equipment.

“The long lead times to receive a new tractor are decreasing. It’s a good time to be in business and a good time to be in business as a farm producer as well.”

Overall, Kehler rates producers’ confidence as high when it comes to buying new equipment.

“We still have a number of new four-wheel-drive tractors on order that do not have delivery dates, so there’s still some new orders to fill.”

He attributes strong sales to strong cash receipts built on high commodity prices. However, commodity prices have weakened a bit over the past year.

“We see a spillover of income from some good crops and strong pricing over the last number of years. Do we anticipate that we could see a slight drop in demand? Yes. The reality is, we won’t be surprised if that happens,” he said.

“But at this moment, we have not seen demand drop for equipment. It’s extremely strong.”

Kehler would like to see more farmers trade in their used equipment and buy new at a cash difference. This would rebuild Greenvalley’s inventory of pre-owned equipment at a time when machines in that category are at a premium.

Strong sales aren’t due to lower equipment prices. Those have gone in the opposite direction, Scott Garvey reported in Grainews in early December.

According to the Manitoba government’s most recent cost of production guide, medium (160 to 224 horsepower) tractor prices have increased 35 per cent; large four-wheel drives (550+ hp) are up 28 per cent; Class 9 combines are up 27 per cent; high-clearance sprayers are up 31 per cent; and air drills are up 62 per cent, Garvey wrote.

Closer to home, calculations based on Alberta Agriculture and Irrigation’s latest report on farm input prices in the province reveal the average price of a new combine (Class 7, self-propelled, 323-374 hp) rose almost 20 per cent between November 2022 and November 2023. A 4WD tractor (325-375 hp) rose just over 20 per cent in the same time period.

Full equipment sales reports can be found in the Market Data section of the AEM website under Ag Tractor and Combine Reports.