WESTERN PRODUCER — As the height of the pandemic fades, COVID-induced problems for the big farm equipment brands are starting to ease.
Their sales numbers have seen a post-pandemic jump.
One small negative for manufacturers is the sales of utility and compact utility tractors. They have declined sharply from an artificial high, which was attributed to acreage owners stuck at home during the pandemic and spending their cash on home improvement projects, including small tractors.
“During COVID, a lot of folks bought small ag, because they were kind of trapped in their home and saw projects out their window,” AGCO chief executive officer Eric Hansotia said during an interview broadcast on Yahoo Finance. “So they pulled in demand to work on those projects. We saw a lot of demand (for small tractors) over the last few years. That’s cooled off a little bit.”
The good news, though, is the pace of sales for agricultural tractors of more than 100 horsepower. As well, combine sales have increased significantly in both the United States and Canada so far this year. And they offer much higher profit margins than small tractors.
Overall, the major manufacturers are reporting much larger profits for the second quarter of this year compared to the same period in 2022. At AGCO, the numbers have soared to a record high.
“We had the best quarter in the history of the company this quarter,” added Hansotia. “I mean, it was a blowout quarter.”
Net sales for AGCO, the parent company of Fendt and Massey Ferguson brands, in the second quarter of 2023 hit US$3.8 billion, a 29.8 percent increase over the same period last year.
At CNH Industrial, the parent company of Case IH and New Holland, net sales rose by more than $300 million from a year ago.
John Deere, too, racked up a rosy balance sheet in its third quarter performance. Deere’s fiscal year is slightly offset from its two major competitors, so its comparable reporting period is its third quarter, which ended July 30th.
“Worldwide net sales and revenues increased 12 percent to $15.801 billion, for the third quarter of 2023 and rose 24 percent, to $45.839 billion, for nine months,” it revealed in a quarterly earnings report. “Net sales were $14.284 billion for the quarter and $41.765 billion for nine months, compared with $13 billion and $33.565 billion last year.”
“Reflected by our strong third-quarter results, Deere continues to benefit from favourable market conditions and an operating environment showing further improvement,” John May, company chair and chief executive officer said in a news release. “We are also being helped by stabilizing conditions in the supply chain… and an improving ability to meet demand for our products and serve customers.”
The large equipment makers expect this trend to continue because of several positive factors. The higher grain prices caused in part by the Russian invasion of Ukraine, for one. And they believe counting to develop new technologies and build more sophisticated machines should continue to drive demand for new equipment.
“Now going forward we’re continuing on the pace we’ve been on for the last few years,” Hansotia said. “We’re continuing to invest in more engineering. I’ve raised engineering (spending) 20 percent every year since I’ve been leading the company. It’s all to fuel these technology-rich projects on our product that add more value to farmers, and in turn add more value to investors. Our margins have steadily been going up. We’ve been gaining market share.”
Deere’s prediction for the future is optimistic too. It expects net income for its fiscal 2023 production year to be in a range of $9.75 billion to $10 billion,”
“Deere is well on the way to another year of exceptional achievement due in large part to positive fundamentals in the farm and construction sectors and the unwavering commitment of the Deere team, including our dealers and suppliers,” May said.
“Fundamentals are expected to continue fuelling solid demand for our equipment, supported by a strong advance-order position.”
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