Strong post-pandemic sales of farm equipment aren’t expected to continue into 2024 said Farm Credit Canada (FCC) in a new report.
“Farm revenue is a main driver in equipment sales,” said said J.P. Gervais, FCC’s chief economist, in a Nov. 16 news release. “This year, the drought in western Canada has impacted overall production, reducing cash flow for some producers.”
According to FCC’s 2024 outlook for the Canadian farm equipment market, new sales are projected to be softer in 2024 based on three factors: higher interest rates, elevated equipment prices and a decline in commodity prices, wrote Leigh Anderson, senior economist with Farm Credit Canada (FCC), in a Nov. 15 article on FCC’s website.
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Robust sales of new farm equipment in 2023 was due in part to a correction of supply roadblocks experienced during the pandemic, wrote FCC senior economist Leigh Anderson.
“Strong sales in 2023 reflect the resolution of supply chain issues and record-high crop receipts in 2022 and the first half of 2023,” he said. A “more cautious environment” driven in part by drought in western Canada and a slowing Canadian economy will likely see a decline in unit sales of 100+ horsepower and lower tractors in 2024.
Implement sales look more positive, wrote Anderson.
“Canadian implement manufacturing dollar sales are expected to finish higher in 2023 due to price inflation on raw materials used in manufacturing,” he said.
“Both 4WD tractors and implement manufacturers (e.g., air drills) faced delivery issues and low inventory levels throughout 2023, which are driving part of the increase in our 2024 projections.”
Used equipment — a go-to for many producers during the pandemic — has already seen a downhill slide in sales. But there are some bright spots.
“Sales of used equipment this year for combines and 4WD tractors have already eased by approximately 20 per cent,” wrote Anderson.
“However, the number of used air drills sold continues to be strong, up 26 per cent this year due to reduced deliveries of new manufactured units and subsequent trades over the previous few years.”
Anderson outlines a few trends to monitor in 2024. These include ongoing inflation and high interest rates plus the age of Canadian farm equipment.
“The strong sales during the 2008 to 2014 period are early indications that the 4WD tractor, 100+ HP tractor and combine fleet is starting to age when looking at the rolling average of five-year sales relative to 10-years on new equipment to estimate the replacement cycle age,” he wrote.
“While replacement cycles can be altered and older equipment can be serviced and overhauled, a slowdown in new equipment sales could be short-lived. Sales could improve in the second half of 2024 and beyond if interest rates decline and producers move to upgrade their aging fleet.”
Although commodities have come down from their 2022 highs, record-high crop receipts that year and the first half of 2023 should place many farmers in a “strong financial position” to absorb rising interest rates and equipment prices.
“While the drought in western Canada means overall reduced production, there are regions where the crop was better than expected and will support the cash flow of producers.”
— Jeff Melchior reports for Alberta Farmer Express from Edmonton.
