|Chris Ambrose is an attorney and the owner of Harvest Legal in Emporia, Kansas. His practice consists primarily of agriculture, business, estate planning, and elder law planning. In addition, Chris works to stay on the bleeding edge of developments and advances in the legal services industry, especially when they pertain to small legal practices.|
Implement Sales and Commodity Prices
For production agriculture, the last two growing seasons have been a trying time. After nearly a decade of high commodity prices that allowed farmers to rake in record profits off their farms, commodities prices have been consistently depressed, with no real sign of changes in the future with global demand softening at the same time the grain belts are producing bumper crops and record yields. In this article, I will examine what this has meant for implement sales, and what it may mean moving into the future.
Simply put, implement sales and commodity prices appear to be directly correlated with one another; when commodity prices increase, so do implementation sales, and when commodity prices decrease, so do implement sales. While this may seem somewhat obvious that implement sales will decrease with diminishing commodity prices, what is astounding is the percentage of the loss year after year. In each of the last two growing seasons, implement manufacturers have posted decreased sales of 20% to 30% over the previous year. Without the cash on hand from the increased farm incomes, production agriculture operations are simply not expending the capital to modernize or expand their fleet of machines.
While the implement manufactures have posted such decreased sales, farm equipment does wear out and break down over time, so farmers still have to expend capital at times. Unfortunately for the implement manufacturers, that has begun to change as well. While the used market for agriculture implements has always been rather robust, the options available to producers has really begun to increase over the last several years. Several major national online marketplaces have developed and evolved, which make buying and selling used equipment easier than ever before. Many of these marketplaces even have developed enough to help facilitate transportation of implements nationally once they have been sold, reducing yet another barrier for used sales. This expansion of the local classifieds for implements increases the market so much for the buyer and seller that it is often a more appealing choice when compared to the local implement dealer’s used lot. This not only pulls the potential buyer out of the market for new machinery from the implement dealer, but eliminates the dealer from the equation altogether if the farmer elects to utilize one of these now fully flesh-out marketplaces for their implement purchasing during leaner times.
While it may come as no surprise, the correlation between implement sales and commodities prices reflects a greater overall ecosystem that is often more fragile than we imagine. Whole communities and industries are dependent upon increasing or steady farm income, and without it wide-range ripples can be seen throughout the economies of rural communities, far beyond the implement manufacturers and dealers.
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