Sep 22, 2016 by Scott Garvey

By the numbers

Revenue at Versatile has been improving lately, likely aided in part by strong equipment demand in Russia

Revenue at Versatile has been improving lately, likely aided in part by strong equipment demand in Russia

A few days ago I was stopped on the side of the road chatting with a member of the harvesting crew from a neighbouring farm. The field just beside where we were parked, along with others nearby, were yielding exceptionally well, he told me. The canola was running somewhere north of 60 bushels per acre.

Even though commodity prices are well off the all-time highs of a few years ago, yields like that at today’s elevator cash prices are bound to make most growers smile. And they’re bound to make machinery company executives happy too, because higher farm profits almost always boost new equipment sales.

It’s no secret the ag machinery sector has seen a major slowdown in the past couple of years. Nearly every major brand has announced layoffs at manufacturing plants in North America. And many European plants have seen similar staff reductions. Of course, it’s not only lower commodity prices that have affected equipment sales on the other side of the Atlantic, political events like the Brexit have taken a toll on farmers’ confidence levels and willingness to spend on big-ticket items.

And I found it a bit surprising those high-profile terrorist actions of 2015 have contributed to the sales slump in some countries as well. One equipment company executive told me major events like that, which tend to demoralize or shake public confidence, are often reflected in reduced machinery sales in some countries, particularly France. I assume he knows of what he speaks, given his senior position in the firm and the length of time he’s spent in the industry.

Back here at home, the glut of late-model used equipment on the market seems to be easing, and all the major brand executives I spoke to recently are at least cautiously optimistic. So, what does the market picture look like these days? The Association of Equipment manufacturers monthly sales report shows we’re still below last year’s numbers in most areas.

In Canada, sales of rigid-frame tractors above 100 horsepower are still off by about 22 percent. But four-wheel drive tractor sales are down much less, at 7 percent. And August sales of the big machines actually showed an increase over last year. Combine sales are down 11 percent, but August was a relatively good month for sales of them as well, with the numbers almost matching last year’s.

South of the 49th, the numbers are actually much worse. Sales of tractors in the U.S. above 100 horsepower are 24 percent lower, and four-wheel drives are down by a third over last year so far. The reduction in combine sales doubles our numbers, at 22 percent.

Oddly, over in Russia things are looking reasonably rosy. Four-wheel drive tractor sales have jumped by more than 65 percent compared to last year according to Rosagromash’s market analysis. It shows new combines rolling out to farmers 51 percent faster this year, too. Sales of rigid-frame tractors above 100 horsepower are up 35 percent. August was an exceptional month there too, with month-to-month comparisons showing even higher gains

Those Russian market numbers are good news for Winnipeg-based Versatile, which ships a fairly large percentage of its big tractors over there. It’s maybe no coincidence, then, that its recent financial report shows the company’s net revenue is moving solidly back into the black. In the last quarter of 2015 and the first quarter of this year, its income sank into the red. But recent quarterly net earnings reports show it has climbed out of that difficulty and revenues are increasing.

Even executives at some of the European implement brands that have developed markets in Russia have told me over the past few months that their shipments east have been picking up again. The international embargoes that have affected some trade with that country have apparently not really hit the ag equipment sector too hard. Shipments from some countries, though, have to be routed through others rather than direct to Russia.

As one one European executive put it, If there is market demand, people will find a way to get the equipment there.

Scott

Scott Garvey

Scott Garvey


Grainews' machinery editor Scott Garvey follows trends and innovation in equipment technology, takes a look at new farm machinery offerings, tracks their performance and goes into the workshop to find better ways to keep them up and running.


« Keeping your head above water Why some cattle feeders are bleeding red »