Low commodity prices, high equipment prices and market uncertainty driven by geopolitical and trade issues may take their tolls this year, said Leigh Anderson with Farm Credit Canada.

However, a clearer vision of the future of U.S. tariffs and the possibility of a new Canada-U.S.-Mexico Agreement (CUSMA) may offer Canadian agricultural producers some degree of market predictability.

Why it matters: Farmers and farm equipment manufacturers alike could do with greater market certainty in 2026.

“They’re just kind of, ‘I’m not making a major investment decision until I get clarity,’ ” said Anderson.

That clarity may come as the U.S. builds up to its midterm elections for congressional seats in November 2026. Anderson said the U.S. will likely — if history is any indication — want to complete some iteration of a new CUSMA before then.

That will hopefully give Canada the opportunity to negotiate U.S. tariffs on the steel and aluminum that is needed to build machinery — at 25 per cent a dominant factor affecting equipment sales in both Canada and the United States.

However, those negotiations will depend on whether the U.S. has any appetite for a new CUSMA in the first place. Anderson is optimistic.

“While there has been talk by the U.S. of letting CUSMA expire, renewal efforts are expected to gain momentum as the White House seeks visible progress before the November midterm elections,” he wrote in a recent FCC article.

“If history is any guide, negotiations eventually lead to a trade deal. A revised CUSMA could bring positive changes, such as lower tariffs on steel and aluminum.”

‘Short-term slowdown’

Recent data from the Association of Equipment Manufacturers (AEM) isn’t exactly encouraging, although there are some bright spots.

Canadian sales of agricultural tractors dropped 6.9 per cent in November 2025 compared to November 2024. However, sales of combines in Canada grew 25.6 per cent in the same timeline.

The U.S. appeared to be in a worse position, with tractor sales dropping 19.6 per cent year over year and combine sales declining 35.2 per cent under the same metric.

“This month’s numbers reflect the continued economic pressures farmers have been navigating for the past several months,” wrote AEM senior vice-president Curt Blades in a news release.

However, he also expressed some optimism.

“While we’re seeing a short-term slowdown in sales, equipment manufacturers remain focused on supporting farmers with the tools and technologies that deliver efficiency and long-term value. As we move into 2026, we’re watching market conditions closely and remain confident in the industry’s underlying strength.”

Canadian sales outpace U.S.

The AEM year-to-date Canadian sales figures for 2025 reveal more specific trends.

Year-to-date sales of tractors in November were down 0.3 per cent compared to 2024, while combine sales were up 1.6 per cent.

Total four-wheel drive tractors sales fell by 22.5 per cent. Total two-wheel drive tractor sales rose by 0.8 per cent.

In November, sales of two-wheel drive tractors under 40 horsepower were down 10.2 per cent compared to the November 2024 year-to-date, while sales of tractors with more than 100 h.p. were down 18.6 per cent. Sales of tractors between 40 and 100 h.p. were up 11.8 per cent compared to the same month last year.

Four-wheel drive tractor sales fell by 50.6 per cent compared to last November. Combine sales were up 25.6 per cent.

Canadian equipment sales fared better than those of the U.S. At the end of November, year-to-date sales of all tractors were down 9.7 per cent in the U.S. Combine sales were down 38.3 per cent.

Overall, farm equipment sales in both countries have been trending down in recent years.

In late 2023, FCC warned that the year’s post-COVID robust sales were unlikely to continue. The farm lender said sales had been strong thanks to the resolution of pandemic-era supply chain issues and strong farm cash receipts. However, drought in Western Canada and softening commodity prices were likely to take their toll.

Sales declined in 2024 as predicted, and in November 2024, FCC again predicted a slump in 2025 as farmers faced low commodity prices and high equipment costs.

This was before U.S. President Donald Trump took office and announced sweeping tariffs, including imported steel and aluminum.

In late November, farm equipment manufacturer Deere and Co. said it expected tariff impacts on the company to come in around US$600 million (C$826.1 million). It predicted a pre-tax tariff hit of around US$1.2 billion (C$1.65 billion) in 2026.

Reduction of tariffs alone would go a long way toward solving the industry’s plight, said Anderson.

“I think that would really help the equipment market going forward the next several years because that’s adding a lot of extra cost to our manufacturers, whether it’s here in Canada or the U.S.”

Used over new

Though still quite modest, the 2026 outlook for ag equipment looks stronger for used tractors than new across most categories, said Anderson.

FCC forecasts say used tractors with 40 to 100 h.p. are expected to rise 2.8 per cent over 2025,100 h.p. or more are expected to rise 1.7 per cent while four-wheel drives sit at 2.3 per cent sales growth.

By comparison, new 40 to 100 h.p. tractors are forecast to drop by 4.7 per cent from 2025, more than 100 h.p. by 5.6 per cent and four-wheel drives by 1.6 per cent. Sales of new tractors with less than 40 h.p. are expected to grow 3.1 per cent compared to 2025.

However, these forecasts don’t tell the whole story because many of them come off downward sales figures between 2024 and 2025.

The estimates compared to five-year-average tractor sales are illuminating. One notable decline using this metric is a 22.1 per cent drop for used tractors with 40 to 100 h.p., while new 100 h.p. and more tractors are set to drop 19.5 per cent in 2026 compared to the five-year average.

“That weakness will persist through the new year, but it looks like with farmers moving towards real cost-consciousness, there may be opportunities for the equipment dealers and anyone selling used equipment,” said Anderson.

Bullish on forage

Expectations for used forage and haying equipment — driven by ongoing high prices in the livestock sector — are bullish, provided those prices remain strong, Anderson said. Even though baler sales are only expected to grow 1.6 per cent, they’re jumping off a 33.2 per cent increase between 2024 and 2025.

The forecast for used forage harvesters is steady: three per cent off zero growth in 2025.

A big question, however, is whether livestock producers will gravitate toward new-to-them equipment instead of keeping their existing older machines running until they spout their last fumes of exhaust. This is a common thread in livestock production equipment, said Anderson.

“They really do prefer to reinvest back in their herd.

“They’ll keep repairing some of their equipment for a long time. But having said that, some of them are already using really old equipment, and maybe this time they will do some upgrading.”

A favourable trade framework between the U.S. and China has potential to lift many economic boats, including Canada’s, said Anderson. If it arrives in early 2026, it could stabilize ag markets and boost both soybean exports and farmgate prices for both the U.S. and Canada. However, if progress stalls, expect the downturn in equipment sales to continue.

“Trade between the U.S. and China is still very critical for agriculture markets. If they can get some progress there, that does actually benefit Canada, especially in the oilseed market where U.S. soybean futures, for instance, are our major reference price for our canola and soybean crops here in Canada.”

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According to a recent news release from Alberta Agriculture and Irrigation, higher combine prices do not yet appear to have affected their sales in Canada. Increased market demand has driven higher sales each year since 2020. However, it noted, recent data suggests that combine sales, while strong on a year-to-date basis, tell a different story when measured year-over-year.

Good crop prices and record-high farm income may have previously buffered the effect of growing combine prices on buyer behaviour, the province said. That gravy train has since hit the brakes.

“Surprisingly, recent data from the Association of Equipment Manufacturers show combine sales in Canada up 5.7 per cent year-to-date in July, while U.S. sales are down nearly 18 per cent year-to-date,” read the release.

“Sales in Canada for the month of July 2024, however, are nearly 28 per cent lower compared to July 2023. This may indicate tougher market conditions ahead.”

The release also noted the technology-rich nature of newer combines, which may be playing into consumer demand.

“The level of technology has increased dramatically and newer machines are equipped with GPS, computer sensors and a range of automatic features,” it noted.

Inflation, unsurprisingly, is also playing a major role. Although the price of a combine has increased in real terms, general inflation has also “contributed substantially” to increasing sticker prices, said the department.

The release also referenced the effect of the exchange rate between Canada and the U.S. As of Aug. 29, the Canadian dollar is worth 74 cents of a U.S. dollar, according to Google Finance.

“Many combines sold in Canada are manufactured in the U.S., and so the exchange rate has an effect on prices as well,” the release noted. “Combine prices seem to be more suppressed when the Canadian dollar is strong vis-a-vis the U.S. dollar, such as the period from 2010 to 2012, than when the Canadian dollar is weak.”

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Shares of the world’s largest farm equipment maker rose six per cent, lifting peer Caterpillar, which also reported a profit beat last week amid moderating demand, nearly three per cent.

Higher prices, implemented two years ago following supply chain complications and a surge in demand for industrial and agricultural equipment, have helped U.S. machinery makers to shield their profits from an industry-wide slump.

“Deere’s pricing power was reflected well in Q3 as price helped to dampen impacts from contracting volumes,” CFRA Research analyst Jonathan Sakraida said.

Deere maintained its 2024 net income at about US $7 billion, even as sales of new machines have shrunk amid a decline in crop prices and high borrowing costs, which have also forced dealers to limit inventory restocking.

U.S. farm incomes are forecast to plunge in 2024 due to a sharp decline in commodity prices, heightened production costs and shrinking government support.

“By keeping inventories in check, we have been able to maintain solid price realization,” said Deere’s director of investor relations, Josh Beal.

Deere also said it expects an improved favorable price realization in its agriculture segments in 2024 compared to its previous targets.

For the third-quarter, Deere reported a net income of $6.29 per share, compared with LSEG estimate of $5.63, while net sales and revenue decreased 17 per cent to $13.15 billion.

“We’ve prudently and proactively adjusted production schedules in our large agriculture business at a faster pace than ever before, in order to reduce field inventory in our end markets,” CEO John C. May said.

Deere said in June it would cut some production jobs and reduce salaried employees to keep a tight lid on costs.

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The cuts will reduce “overlap and redundancy in roles and responsibilities”, Deere disclosed in a filing, following media reports from the past week about layoffs.

The news comes weeks after the company trimmed its annual profit forecast for the second time and projected steeper declines in sales of large agriculture equipment.

Lower crop prices are leaving agriculture equipment sellers with an excess of unsold tractors and combines, leading some to offer discounts and suspend new orders.

The U.S. Department of Agriculture has forecast farm income would slide 25.5 per cent to $116.1 billion (C$159.1 billion) this year from 2023.

In Canada, net cash income is forecast to decline 14 per cent to C$21.3 billion as cash receipts are forecast to fall slightly, with expenses modestly increasing, Agriculture Agri-Food Canada said earlier this year.

—Reporting for Reuters by Abhijith Ganapavaram and Nathan Gomes in Bengaluru, with files from Glacier FarmMedia

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In Canada, unit sales of 100+ horsepower tractors grew 2.7 per cent in March compared to the same month last year. In the U.S., unit sales of the same machinery class jumped for the second straight month. American large tractor sales grew 3.2 per cent in March compared to year-ago numbers, following February’s increase of 2.8 per cent.

For smaller two-wheel-drive tractors, the news wasn’t as positive. Sales of tractors under 40 hp were down 18.4 per cent compared to March 2023 in Canada, and tractors between 40 and 100 hp were down 12 per cent over the month last year. Combined, all two-wheel-drive tractor sales in March 2024 were down 13.2 per cent compared to March 2023.

The U.S. numbers show a similar trend, with tractors under 40 hp down 15.8 per cent and those between 40 and 100 hp down 6.9 per cent compared to 2023. Combined, sales of all Amercian two-wheel-drive tractors were down 12.1 per cent.

“Seeing the continued growth in 100+ horsepower tractor sales is a welcome sight as 2024 progresses, despite the softness in other tractor sizes,” said AEM senior vice-president Curt Blades. “As we start the planting season, we remain optimistic for the future of the ag equipment market.”

Farm Credit Canada released a report in November 2023 that forecast sales of farm equipment would soften going into 2024. However, the lender also suggested the downturn would be short-lived because of an aging fleet.

Blades agreed with the FCC assessment, but said it’s too early to determine whether the uptick in March signals an end to the downturn. January, February and March are traditionally poor months for agricultural equipment sales.

“If we were to see this kind of strength in April or May, then I would feel a bit differently. One month does not a trend make, so I want to be a little bit careful about reading too much into the March numbers. Our year-to-date numbers are still showing some softness.”

General soft market

While Canadian sales of four-wheel-drive tractors jumped 27.3 per cent and are up 10.8 per cent year-to-date, the AEM report notes that total U.S. year-to-date unit sales of ag tractors and combines are below 2023’s pace. Tractors are down 13.3 per cent and combines fell 20.4 per cent.

Equipment sales on both sides of the border broadly follow the same trends, but Blades said local weather, trade agreements and public policy sometimes throw the two markets out of step. He also said it’s been difficult to make reliable projections post-pandemic.

“With the supply chain messing up the normal delivery times, there might be some false positives in some months and some false negatives in other months. But, overall, the tractor sales were pretty solid for the last five years.”

Blades agreed that Canada’s agricultural fleet is getting long in the tooth.

“We’ve been working in a replacement market for eight years. That’s just sort of the reality. Ask a farmer how long a tractor can last. (The answer is) well, just one more year. And, if the farm economy is good, maybe this is the year. Maybe it’s next year. But, at some point, it’s time to replace that machine.”

With low commodity prices, high input prices and stubbornly high interest rates, farmers face tight margins and many may find themselves in that “maybe next year” category, but Blades remains optimistic.

“Even though there’s going to be some challenges in 2024, if you listen to economists, long term viability is pretty strong.”

He also pointed to significant technological advances in the machinery sphere that coincide with the replacement market.

“Precision ag has been around for a little bit, but now we’re really seeing the benefits of it,” he said. “That technology play and what it means to farmers and what it means to feed the world more efficiently with less inputs is a big deal. It’s really exciting.”

Blade also noted new tractors and combines are designed with forward compatibility in mind so equipment sold today will be compatible with the technological advancements of tomorrow.

“I think we’ll be looking back 10–20 years from now, seeing these were exciting times with revolutionary change.”

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