A slowdown in the farm equipment market is expected as producers close their wallets amid shrinking profit margins.
With falling commodity prices and high operating costs, farms are placing a greater emphasis on their price per acre equipment costs, according to Farm Credit Canada’s 2025 outlook for the Canadian farm equipment market.
“Farmers are looking for cost saving measures including delaying purchases and planning to further reduce equipment costs,” Leigh Anderson, FCC senior economist, said in a release. “But as demand slows and prices adjust, there may be opportunities for producers who are looking to invest in new farm equipment.”
This year began promising enough for the farm equipment industry, with the FCC report noting a surge in demand for large farm equipment, particularly combines and 4WD tractors. In fact, new combine sales in the first half of 2024 saw a five-year high, and 4WD tractor sales trailed only slightly behind 2021 sales. The report attributed the brisk start to the year to slower US sales, which allowed manufacturers to send more pre-orders to Canada earlier. Usually, the Canadian combine market sees the most sales in the second half of the year.
However, the FCC does not expect the strong pace of sales to last through the remainder of the year and into 2025. Still, the decline in new farm equipment sales is projected to be less severe than in 2024, and sales of 4WD tractors should stay above the five-year average, the report said (see table below).
Meanwhile, the early arrival of new equipment has led to an increase in trade-ins, injecting a considerable volume of used equipment into the market, particularly used combines. It’s estimated total used combine sales have dropped by 18% compared to the same period last year. Smaller used horsepower tractor sales are down 40%, and sales of used seeding and planting equipment have declined by 23% year over year. Lower sales of used seeding and planting equipment mark a slowdown compared to the previous year.
In the US, farm equipment manufacturers have reduced production to align with lower demand. In Canada, manufacturing sales have fallen 8.7% compared to last year, and new orders are down 9.2%, suggesting sales will continue to decrease.
Click here to see more...