Has the heyday of the US agricultural machinery and equipment industry passed?

As major agricultural equipment manufacturers in the United States begin to lay off workers, close factories, and shift their manufacturing operations to Mexico, and there is an 

excess of second-hand equipment filling dealers' inventory, the US agricultural machinery market is rapidly turning into a downturn. Has the continuous growth trend of the 

agricultural machinery equipment manufacturing industry come to an abrupt end?

Recently, American agricultural media personality Steve Kubach wrote an article analyzing this and proposed government policy support suggestions to change the trend of the 

agricultural machinery market.

As an agricultural journalist, he remembers that one of his first reporting tasks was to cover the clearance auction of agricultural machinery recovered in Columbia, Missouri.

That was in the late summer of 1985, when the agricultural crisis of the 1980s was at its peak.He still remembers that the exhibition venue was filled with used corn cutting tables.

On that day, a total of 174 agricultural equipment items appeared on the auction table.

This is certainly not the "feel good" story he envisioned when he started his career as a journalist in the agricultural field, but he said, "I understand the fragility of agriculture.

Fast forward to today, I saw a report on Bloomberg News stating that old equipment (rather than new technology) is the star of this year's Farm Progress Show. The article 

emphasizes that BigIron Auctions, a supplier of old farm machinery and exhibitor at the show, has set a historic high in exhibit size. While this may be good news for auction 

houses, it could signal bad news for others in the industry.

You may ask, how bad is the situation? When agricultural equipment manufacturers begin to lay off workers, close factories, shift manufacturing operations to Mexico, and the 

second-hand agricultural machinery market becomes active, do these suddenly indicate that the tide of the agricultural machinery market is rapidly shifting?

Those who rise will also fall. Many of us have observed the agricultural economic cycle. This time, despite a sharp increase in input costs, the rise in commodity prices exceeded 

input costs, ultimately resulting in a net agricultural income of 182 billion US dollars in 2022. However, those beautiful times have become a thing of the past. By 2024, it is 

expected that net agricultural income will decrease to $140 billion.

It is not surprising that farmers purchased fresh agricultural machinery and equipment during the prosperous period. American agricultural equipment manufacturers and 

machinery distributors recorded their best sales performance in over a decade in 2021, with strong sales continuing for most of 2023. Although sales of new small and 

medium-sized tractors peaked in 2021, sales of high-powered tractors and combination tractors remained unchanged until the beginning of this year.

The win-win situation has ended. The recent "peak" period in the agricultural machinery and equipment industry is coming to an end due to high inflation, high interest rates, and 

declining crop prices. In the past four years, the average price of new agricultural machinery has increased by 30%. In 2020, the average price of a new tractor was $363000. In 

2023, this price soared to $491800.

Since March 2022, the Federal Reserve has raised interest rates 11 times to curb inflation. Therefore, not only has the cost of new agricultural machinery increased by at least 

30%, but the purchase of capital projects through loans has also increased by 161%. Now, the speed at which commodity prices are falling is faster than interest rates or 

equipment prices, and this period of prosperity has come to an end.

According to an analysis by the Equipment Manufacturers Association of America, sales of new two wheel drive tractors in June 2024 decreased by 16.3% compared to 2023,and 

total sales decreased by 31%.

Greg Peterson,a mechanical analyst at Farm Journal and the head of the popular online platform Machinery Pete,said that the business expansion of BigIron Auctions shows that 

dealers' reactions to this downturn have been different day and night compared to 2014-2015. This time, dealers have been actively reducing their large inventory of second-hand 

agricultural machinery. In the first 8 months of 2024, the market saw a 450% increase in the original number of equipment units auctioned for one to two years compared to 2014 

and 2015.

The value of the equipment used in the Peterson project will continue to deteriorate in the short term. However, these changes in value may not be comparable to the percentage 

in the previous downturn. Why? Online bidding.

This market force was still in its infancy ten years ago. Mechanical auctions used to be localized. Now, they have become regional and even national.Even farmers over the age of

 65 are bidding on tractors from eight states away.

Although the number of large-scale second-hand equipment transactions in the later stage is unprecedented, Peterson pointed out that this rapid surge may bring a glimmer of 

hope. The faster the inventory surplus is reversed, the faster the equipment industry will return to a bright era. How quickly this situation occurs will depend on many factors, so 

pushing the market in the right direction may be a prudent approach.

Longing for policy support and certainty. With the political end of this election, there are many things we can do to provide more certainty to the market. I have created a

 'to-do list' for our newly elected officials to address this issue.

According to market analysts, we will be at the bottom of a roller coaster ride in the next year or so.

The good news is that in the long run, all signs indicate that the agricultural manufacturing industry will recover very healthily by the end of this decade. With the increasing 

integration of robots, artificial intelligence, and information systems, the US agricultural machinery sector is expected to grow from $39.56 billion this year to $53.7 billion by 2029.

Of course, whether such a number can be achieved depends on how difficult the financial situation is from now until then. He pointed out, 'We only know that we don't need history to repeat itself. The last story I want in my career as a journalist is to imitate the heartbreaking story I started nearly 40 years ago.'.

Source: Zhongzhi

Original: Li Shechao