DlO—Lancaster Farming, Saturday, November 8,1980
Economists see some rebound
from tractor sales slump
LANCASTER - While
farmers worried about
coming up short on cash flow
and financing early this
year, tractor and farm
equipment dealers were
critically short on
customers.
The farm machinery
market is already showing
some signs of bouncing back
from the doldrums of the
first half of the year when
manufacturers had to close
plants and lay off workers.
However, dealers won’t
match last year’s volume by
a big margin.
Demand for farm
machinery early this year
was pinched by tight credit,
high interest rates, and
disappointing returns on
crops and livestock. Far
mers also took a wait-and
see attitude when gram sales
to the Soviet Umon were
suspended.
Cost resistance may have
been a factor too, as farm
machinery prices climbed
about 10 percent from last
year.
Tractor sales decline
about 25 percent from a year
ago in the first half of 1980,
says USDA economist Carl
Vosloh, citing figures
compiled by the Farm and
Industrial Equipment In
stitute.
For 2-wheel-drive tractors
over 100 horsepower, the
drop was worse. About 25,000
rolled off the lots in the first
half of 1980, down 33 percent
from the 37,000 sold in first
half 1979. Sales of other farm
machines were also down:
Combme sales were off 14
percent, baler sales off 30
percent, and forage har
vester sales down 12 percent.
The first sign of a possible
pickup in tractor sales came
m May when volume for the
month ran only 23 percent
below the year-earher date.
To dealers, that represented
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a big improvement. Until
then, the decline from the
year-ago volume was
widening each month, and
April’s sales were down a
sharp 47 percent
In July, for the first time
this year, tractor sales
actually showed a year-to
year improvement. About 20
percent more tractors were
sold that month than in July
1979.
Although other machinery
categories were still lagging
and even tractor sales
slipped back under 1979’s
volume in August, the
market appeared stronger
than before-especially as the
harvest *of small grams
progressed.
The easing of interest
rates and credit availability
since mid-spring probably
contributed to this
comeback.
Also, a sharp turnaround
in farm prices gave many
producers outside drought
damaged areas the ex
pectation of a better cash
flow in the year ahead, thus
encouraging major capital
expenditures
“Farm equipment sales
are very sensitive to far
mers’ real cash flow and
their economic well-being,”
Vosloh says
“The classic pattern is
that in good times farmers
upgrade equipment, getting
a bigger and better tractor,
and then buy or rent more
land to capture the added
production potential of the
larger equipment. In a upt so
good year, they get by with
the old equipment,” he says.
Much of this year, many
farmers apparently stret
ched the life of older
equipment, hoping it would
last through another season.
They also leased more
equipment, and there was a
bigger market for used
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equipment, according to
industry reports.
Will the dropoff in
equipment sales affect farm
productivity 7
“In the short run, it will
probably not have
significant effect, as far
mers repair their machines
and keep them running,”
says economist Leland
Southward
“You can stretch equip
ment somewhat, but if
needed replacement is
postponed longer, say for
one or two years, produc
tivity could deteriorate.”
Most observers don’t
expect this to happen, since
sales have picked up and
prospects for higher crop
prices and relatively lower
interest rates should affect
the 1981 picture, Vosloh
suggests.
“The machinery sales
outlook next year should be
brighter, and sales might
approach the level of 1979,”
Vosloh says. There will
probably be more acreage in
production, since domestic
and foreign demand for U.S.
farm products continues
strong. Also, some farmers
who postponed buying
equipment this year will
have to buy next year.
The longer term prospects
for equipment dealers seem
secure. There are fewer
hired farmworkers and their
wages are higher, and many
farmers prefer a big tractor
with higher output per hour
of labor. Large equipment
that can do farm jobs
quickly provides at least
some protection against
weather uncertainties.
At the same time,
however, rising energy
costs, as well as the growing
use of less intensive tillage
practices, may slow down
the rate of machine sales
growth, especially for
tractors and certain types of
implements, Vosloh says.
Reduced tillage
techniques will be used in
creasingly to save fuel,
conserve the soil, and reduce
wear and tear on equipment
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