Interest Rate Increases Could Determine Farm Machinery Purchases

by | Feb 7, 2022 | Indiana Agriculture News, News Feed

 

Equipment sales for 2021 were up across the board in North America. The Association of Equipment Manufacturers reports nearly 360,000 tractors and combines were sold from dealer lots last year.

According to Curt Blades, senior vice president of industry sectors and product leadership with AEM, issues remain in getting equipment to market, especially new equipment.

Curt Blades | Photo provided

“Add to that these well-publicized supply chain challenges—whether it’s microchips or foam for seats—transportation or labor, the availability has been tightened,” he says. “It becomes really obvious where a farmer is going to a dealer lot and looking for something for delivery tomorrow. There’s not that availability. It simply is not there and hasn’t for a little while.”

Pre-pandemic, the equipment market was in a replacement mode. Blades says there’s still a relatively old equipment fleet in the countryside. With the Federal Reserve policymakers signaling an interest rate increase next month, he adds that farmers will have to make capital business decisions.

“Whether it’s equipment, land or whatever else they’re investing, they’re going to do what’s in the best interest of their farm and farm business long-term,” says Blades. “With pieces of equipment, you’re trying to maximize your uptime. If that means your business is set up to work with new equipment because that give you the most uptime and efficiency, that’s great. If your set up for used equipment, managing the uptime based on that, then that’s what you need to work into that.”

He recognizes that costs can delay farmers from making high-dollar purchases like machinery, but it will need to be replaced.

“We look at the overall fundamentals of the demand,” says Blades. “I think we’re probably still going to be in this replacement market—the market will continue to be strong for a while. There’ll be variabilities in each of the segments, but the economists we look at continue to point to growth or positive maintenance of the market for the next few years.”

Multiple factors are driving purchases, but Blades has noticed farmers buying machinery for the technology.

“You can see this specifically in the harvesting market where people are buying new harvesters because there’s new technology in those new machines are that much more efficient and allow a farmer to run their operation in a way that makes sense for them.”

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