Machinery Chatter
Jim Patrico Progressive Farmer Senior Editor

Monday 12/30/13

Mixed Forecast for Global Machinery Sales in 2014

When I talk to North American farm equipment manufacturers, I get the feeling they are lowering their expectations for 2014 sales. Why wouldn't they? Commodity prices have slumped and their customers have been on a buying binge that inevitably has to slow. But, surprisingly perhaps, farm equipment manufacturers worldwide are optimistic about sales. At least, that is what they reported when taking a recent survey by the Agrievolution Alliance. In fact, the headline for the one section of the Alliance's executive summary read: "Bullish signs are dominating the view of manufacturers worldwide."

If crowds at November 2013 Agritechnica were any indication, interest in new farm machinery is high. The world's largest farm show drew record attendance, more than 450,000. (DTN/The Progressive Farmer photo by Jim Patrico)

Which leads to the questions: Where and why is the optimism?

First, an introduction to the Alliance: It is an outgrowth of Agrievolution, an international trade organization of machinery manufacturers with roots that go back to 2008. Currently, the Alliance has member organizations from eleven regions or nations, including the U.S., South America, Europe, Korea and India. The U.S. member organization is the Association of Equipment Manufacturers (A.E.M.)

For 2013's survey taken in October, the Alliance contacted 250 senior managers of equipment manufacturers around the globe. I first heard a draft of the results in November while attending Agritechnica in Germany. In early December those results became final in a report delivered to the Agrievolution Alliance held in New Delhi, India. Here are some bullet points from the Executive Summary of the survey's findings:

*Favorable situations for farmers are the norm around the globe.

*Profitability of the sector is high, but in some regions competitiveness in global markets has still to be improved

*Government programs are considered a remarkable support for machinery sales, especially in Japan, Brazil and China

*Financing restraints for farmers are a major topic in Turkey, Brazil and parts of Europe, especially Italy and Netherlands.

*50% of manufacturers regard their business to be "good" or "very good."

*Overall outlook points to expansion based on higher order levels over the past three months of 2013 (above average increase: Brazil, China).

*Parts of Europe have stagnating sales. France and Poland sales are decreasing; sales in the UK, Spain, Germany and Italy are flat.

*Manufacturers are hiring in much of the world while in Western Europe temporary workers are getting laid off.

Managers rated current and future business climates in 2013 better than in 2010 and 2012, but not as good as 2011.

U.S. manufacturers' responses are not broken out in all of the survey results. But on the question of expectations for sales in the next six months, 46% expected increased sales, while only 10% expected a decrease. For employment, 41% of U.S. managers surveyed expected to hire more workers, 54% expected their workforce numbers to remain unchanged and only 5% expected layoffs.

In looking at global trends in farm equipment sales, it is important to remember that agriculture is evolving at different rates in different regions. But the need to feed is growing everywhere. To meet that need more farmers adopt mechanization and technology. That can only generate long-term optimism among equipment manufacturers.

A second thing to remember: Many of the equipment manufacturers who sell Americans tractors, planters, combines and other gear also sell some of the same products to farmers in other countries. So if sales slump here, they can count on sales growing in another corner of the world. Agriculture is truly a global industry.

To illustrate, here are a couple of quotes that appeared in the Alliance's news release about its summit. They both relate to how U.S.-based manufacturers view future machinery markets here and abroad.

*"J.B. Penn, the chief economist with John Deere, observed that U.S. farmers have been aggressively adopting advances in technology, but that U.S. infrastructure, which is necessary for getting goods to market, is lagging. Brazilian farmers have been 'adopting tech like crazy,' Brazilian infrastructure has kept pace with this trend, and the U.S. should take note, he added."

*"Matt Rushing, vice president, global product management for AGCO Advanced Technology Solutions and Electronics Functional Group, said the 'farmer cannot cost-reduce his way to prosperity -- you've got to increase yield. Iron is no longer the goal. Farmers are about preparing, planting, harvesting, storing, not just 'tractoring.' Rushing added that 'everyone is a connected asset to something. Everything on farms is a connected asset.'"

Posted at 1:06PM CST 12/30/13 by Jim Patrico
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