After several years of collapsing sales, U.S. large farm machinery purchases seem to have stopped the bleeding. Even though manufacturers are still selling roughly half the number of self-propelled combines, four-wheel drive tractors and two wheel drive tractors over 100 horsepower that they were selling five years ago, sales appear to have bottomed and are starting to tick higher. For the entirety of 2017, unit sales of combines and four-wheel drive tractors increased by +3.6% and +5% respectively — a huge improvement over 2016, when the market for large farm machinery was still in a double-digit freefall. Sales for two-wheel drive tractors over 100 horsepower continued to decrease in 2017, falling by roughly -8%, but this is still better than the -22% drop experienced the prior year. From what I am hearing, many insiders believe the farm machinery industry entered a “replacement cycle” in the final half of 2017, helping to boost sales even as growers remain unenthusiastic about crop prices. I suspect if commodity crop prices can continue to gain momentum to the upside the “replacement cycle” could remain in play. Agriculture-friendly provisions in the tax reform bill enacted late last year could also help revive more sales in the near future. From what I am hearing, manufacturers are also encouraged by the healthy demand for small farm machinery, which is generally tied to the overall U.S. economy. Two-wheel drive tractors under 40 horsepower saw sales climb +8% in 2017 over the previous year, while sales have been fairly flat for equipment between 40 horsepower and 100 horsepower. A report recently published by Global Market Insights shows the largest growth will come in the autonomous tractor sector, surging to over $400 billion in the U.S. within the next six-years. As a result of the precise control that autonomous tractors and farm equipment can allow, growers will now be able to work well into the evening. Even when it’s too dark to see clearly, the sensors in place can deliver straight rows and accurate planting, which is especially important during the critical spring months. In other words planting and harvesting delays could soon become much less problematic. Self-driving tractors are also providing better guidance when applying fertilizer, and are better at making sure the tires stay between the rows and away from growing plants. Bottom-line, if growers can catch a sizable increase in crop prices, getting their head back above water, I suspect we will start to see a big push in the self-driving equipment. (Source: Capital Press)
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