Farmers Thinking Twice Before Buying
Published: Friday, January 28, 2022
Coming off of a year with record crops and high prices, farmers have money in their pockets and appear to be cautiously optimistic heading into 2022.
According to equipment dealers attending last week's Fort Wayne Farm Show, orders for tractors, planters, grain dryers and other equipment are up this year but only modestly. Dealer representatives say farmers are concerned about rising input prices.
"They are spending money on equipment," said Jordan Polk, sales representative for Plevna Implement Co. in Nappanee. "However, they're holding back a little bit, I think, on some items, just because of fertilizer costs."
Fertilizer prices are up dramatically compared to a year ago, causing many farmers to adopt a wait-and-see approach toward equipment purchases.
"A lot of them are worried about fertilizer costs," said Vincent Herschberger, sales representative for Hochstetler Grain Equipment, also in Nappanee. "(Fertilizer costs) have doubled, if not tripled. Input costs are way high. So, a lot of guys are debating about expansion."
Anhydrous ammonia is among the fertilizer products experiencing the highest price jump right now. According to Kendell Culp, Indiana Farm Bureau vice president and a luncheon speaker last Wednesday in Fort Wayne, anhydrous ammonia is selling for as much as $1,500 per ton, more than double what farmers paid for it last year.
"Every aspect, pretty much, of our inputs for this growing season are going to be substantially higher," Culp said.
In addition to high fertilizer prices, farmers are cautious for another reason: they expect to receive less financial aid from the federal government. In 2020, nearly half of U.S. farm income came from Uncle Sam. This aid was meant to mitigate the effects of the trade war with China and to help farmers cover the additional expenses from the COVID-19 pandemic. The level of support dropped in 2021.
"Odds are that those dollars are going to continue to decline," Culp said.
Inflation is also affecting the farm sector. Farmers are paying more for tractors and other equipment, which are rising due to higher steel prices and backlogs in the supply chain.
Equipment dealers say this has been a challenging year for sales.
Randy Wenninger, ag sales manager with Kenn-Feld Group, a John Deere dealer with eight locations in northeastern Indiana and northwestern Ohio, said equipment sales have been "very good" but "could be better" if the supply chain was working more efficiently.
He said Deere and Co. has no problems manufacturing tractors and other equipment. However, "it's more so the tier one and tier two suppliers that are supplying components for the finished product," Wenninger said. "That's where the hold-up is."
He said high worker absenteeism, due to COVID-19, is responsible for most of the delays.
"Hopefully, we'll get back to normal soon."
As recently as three years ago, dealers sold equipment that was on their own lot. Now, every tractor has to be ordered direct from the factory in Waterloo, Iowa.
"We can place an order, and as long as (customers) understand the lead time, everybody is good with that," Wenninger said.
He said the lead time on a big tractor is eight to 12 months.
Herschberger said the main challenge with grain bins has been higher steel prices. But the company is seeing good demand for grain dryers.
He said farmers are being careful about their spending choices, mainly because of higher input costs.
The company's booth at the farm show was intended to allow sales representatives to connect with customers and to make them aware of new products. Occasionally, the reps meet someone with an interesting idea.
"We had a guy here with Airbnb," Herschberger said. "He wants to build a bin that is an Airbnb, to turn it into a little house."
Plevna Implement was one of 388 exhibitors at the farm show. Company sales reps have been busy ordering Massey Ferguson and Fendt equipment for customers, but Polk said many tractors are back-ordered.
"Over the next couple of months, we've got close to 50 tractors on order that we're going to start getting in," he said.
Tractor sales are up, he said, but he attributed tha, at least partially, to the addition of a third store in Auburn. The company also has a store in Kokomo.
While farmers are being cautious in their approach this year, Polk believes their overall tendency is to make improvements to their farming operations.
"Typically, when farmers make money, they like to spend money," he said. "They like to put it back into the economy."
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