New inventories being kept in line with demand

By CAROL RYAN DUMAS
Capital Press

Last year was a boom year for ag equipment sales, but this year things are noticeably different. Many commodity prices are down, milk is in the tank, and that's affecting farmers' decisions and ability to purchase equipment.

"Commodity prices influence the demand for agricultural equipment, and with soft commodity prices, demand for agricultural equipment is not as robust as it was a year ago," said Ron Moore, president of the Pacific Northwest Hardware and Implement Association in Salem, Ore.

"In the Northwest (Oregon, Washington and Idaho), we have two different markets, with the western side of the Cascade Mountains being a bit softer market than the eastern side," he said.

In response to market conditions, farm equipment dealers kept their inventories in line with demand.

"They're not burdened by too much used, (and) have enough new or have access to enough new equipment to meet the demand," he said.

Availability of new equipment has improved from last year, which is good news for those looking to buy new equipment, especially on a pre-order basis, Moore said.

"I don't think there will be buildup of new inventory on the dealer's lots this year based on two factors. First, the number of lenders in the wholesale credit business contracted, and those left in the market became very guarded, as have the dealers," he said.

Farrell Oswald, Idaho division general manager for Pioneer dealerships in Southern Idaho, agreed the market is soft but said it's "self-inflicted."

"Equipment is available, but dealerships are being cautious -- that's on the new side," he said. "There's a lot of used inventory in the market place: hay equipment, combines, tractors."

There's less new equipment sitting on dealers' lots, but new equipment is easier to get this year. Last year, it was about impossible to get new equipment if it hadn't been pre-ordered; manufacturers had no inventory, he said. Now, he can get most new equipment in 90 days.

"That just shows you demand is down," he said.

But if manufacturers are going to build it, they want an order for it.

"Manufacturers are directing dealers to have it presold. That's certainly good for the dealership, but it's leaving farmers out of the equation," Oswald said.

There is a lot of pre-selling going on, but not as much as manufacturers would like, he said.

Steven Kost, executive vice president of Far West Equipment Dealers Association in Dixon, Calif., said it's hard to get a feel for what's going on in the field.

Used equipment is less of a factor in California, but he said there's a number of repossessed implements in the mix.

As for new equipment, dealers can get it this year, but they're being cautious, he said.

"I don't think we'll see the buildup of equipment like we did last year," he said. "One of the issues (is) lack of wholesale financing for dealers to bring inventory in."

Between lenders wanting higher credit scores and fewer lenders in general, financing is hard to get, he said.

Nonetheless, "when commodity prices rebound and farmers have the capacity to buy equipment next spring, the equipment will be available," Moore said.

"I don't think farmers should be concerned," he said.

As for dealers, the final outcome for equipment sales in 2009 will depend on commodity prices, farmers' individual situations, whether they take advantage of year-end tax breaks and government programs, he said. Sales in 2009 most likely will not equal 2008 sales, but 2008 was an exceptional year for agriculture, he said.

The tendency and temptation in sales is to compare current year with the previous year, Oswald said. But last year, equipment purchases were atypical, and they're soft this year. Still, he said he thinks his sales will be as good as 2006 and 2007.

"That's today, but who knows," he said. "There's a lot of uncertainty with the economic status."

Online
Pacific Northwest Hardware and Implement Association: www.pnwassoc.com
Far West Equipment Dealers Association: www.fweda.com
Pioneer Equipment Co.: www.pioneerequipment.com/idaho