Iron sales skyrocket despite supply challenges

A year ago, new equipment lined dealers' lots. Farmers, low on debt and high on higher commodity prices for the first time since 2013, were dreaming of new iron for their operation.

Today, dealers' lots are not as bare as they were last spring …but they're still skeletal.

And farmers are still hungry for new iron having picked the bones clean of what new and late-model used equipment was available.

"We are seeing some real interesting changes taking place regarding machinery inventories," observes Curt Blades of the Association of Equipment Manufacturers (AEM). "I think the days of walking onto a dealers' lot and seeing five combines are likely past."

Equipment manufacturers still have supply chain challenges that kept them from meeting demand for new machinery. "But our AEM members are optimistic the supply chain pressure we've been under is showing signs of easing."

Shipping is intermittent right now, which is exasperating the challenge manufacturers face getting everything from semi conductors to steel to tires.

But roughly 76% of manufacturers report that demand for machinery rivals requests earlier in the year, according to a recent AEM report. And AEM members are anticipating a 6% to 10% increase in machinery demand over the next 12 months. Types of equipment leading this increased demand include:

• Trailers and transportation equipment – expected to grow 16% to 20%
• Harvesting equipment – expected to grow 11% to 15%
• Components to grow – expected to grow 11% to 15%
• Tillage, seeding, fertilizer, and spraying equipment – expected to grow 6% to 10%
• Loaders and material handlers – expected to grow 6% to 10%
• Tractors – expected to grow 6% to 10%

Even while enjoying this growth, manufacturers are facing the challenge of finding skilled labor. Keeping up with demand has also been daunting. More than half of survey respondents said inventory levels have declined mid-year, and roughly 60% now report levels that are too low.

"While production has been up, I feel this can cause issues as the backlog is getting bigger, as well," adds Benjamin Duyck of AEM.

Worldwide, the U.S. leads the world in producing ag machinery, experiencing a 27% increase for this year. By comparison, increases were limited to 1% in the Eurozone, 3% in England, 4% in Brazil, 8% in Eastern Europe, and 9% in Russia.

This year's explosive growth in the U.S. has allowed equipment sales to reach their highest point since around 2012.

"From 2022 onward, however, growth in the U.S. will begin to moderate," expects Chloe Parkins, senior economist at Oxford Economics. "That doesn't reflect a change in sentiment, just a return to normal."