Tough year expected for world ag equipment sales

Demand for ag equipment expected to continue slide


Machinery
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Results from the US and trends in Europe show demand for agricultural equipment continuing to slide.

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US farm machinery exports are down, European agricultural machinery sales continue to fall, results from majors manufacturers have taken a hit and the outlook appears weak.

That’s the story of 2016 and this coming year is again shaping as a tough one for agricultural machinery sales with expectations of difficult times ahead.

Results have been tracking downward over the past 12 months.

The Australian tractor market is one of the few in the world that hasn’t plummeted, but numbers domestically are minnow compared to the world stage.

The Tractor & Machinery Association is putting a positive spin on things reporting total tractor sales being up 10 per cent - in dollar terms - on an annual comparison to the end of October 2016 with 150 kilowatt plus machines resurgent on the back of a strong harvest.

However, as the TMA notes, Australian monthly unit sales data tends to track a volatile path.

The group is also reporting local harvester sales are up 12pc on the year to the end of October - again in a small volume market.

In Europe, the manufacturers association, CEMA, has reported sales tractor sales dropping 4.5 per cent on 2015 numbers in the first three quarters of this year.

Demand is particularly low for mid-range tractors between 90 and 180 kilowatts.

In the US, agricultural equipment manufacturing exporters are feeling the pinch with export numbers slipping 14pc to the end of September.

The Association of Equipment Manufacturers says US made equipment sales are down 30pc in the Australia / Oceania region to a total of $US395 million.

Canadian imports of US equipment dropped 15pc to $US1.5 billion.

On the company front, recent results from majors like John Deere, CNH Industrial and Agco largely mirror overall market results.

CNH Industrial’s ag division has seen revenue for the first three quarters of 2016 of $US7.291 billion compared to $US8.043 in the same period 2015.

Results in the third quarter alone are down 3pc compared to 2015.

Over at Deere it says it has made its quarterly sales and profit expectations and expects declining sales of its agricultural machinery will start to ease in 2017.

That might be optimistic though as numbers for the 12 months to the end of October were poor with Deere revenue in the agricultural and turf segment down 7pc to $US18.487 billion from $US19.812 billion in the same period in 2015.

Deere’s farm and turf machinery sales fell 5pc during the fourth quarter from the same period in 2015 to $US4.44 billion, but the company is reporting profit surged 37pc to $US371 million from a combination of higher prices on machinery and lower expenses.

The company is expecting sales of farm machinery in 2017 to fall 5pc to 10pc industry wide in North America, but expects this to be offset somewhat by an expected 15pc increase in sales of tractors and harvesters in South America.

Lower commodity prices and a glut of used equipment has eased new equipment demand for the past three years, the company says.

Over at Agco, net sales are up for the third quarter by 1.5pc this year but are tracking down overall 3.5pc compared to the same nine months of 2015.

North America has tumbled the most for Agco heading down 8.5pc over the year with the company saying sales of high horsepower tractors, harvesters, sprayers and grain storage and handling equipment remained “well below” last year’s levels.

Locally the Agco team is doing alright with the APAC region gaining 18pc in the first nine months of 2016.

While major manufacturer’s sales numbers are down, Deere and CNH have moved to lower material and manufacturing costs, realise better prices and trim employment numbers to offset the conditions and Agco has said “cost reduction initiatives are expected to partially offset the volume-related impacts” which would be code for much the same approach.

In August, Deere announced it would trim $US500 million in costs by 2018 and overall costs and expenses fell 2.7pc in the latest quarter.

Another example of the worldwide downturn is European machinery manufacturer, Kuhn which saw net sales dive 13 per cent in the first three quarters of 2016.

Owned by the German Bucher Industries group, the company said the continued decline in the agricultural machinery market was taking its toll - particularly in North America where the effect “was particularly acute”.

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