WESTERN PRODUCER — Soaring sales of four-wheel-drive tractors this year in North America is a vote of confidence from farmers in the long-term future of their operations as they embrace new technologies, says an industry leader.
Sales have increased 43 percent in the United States this year and 22 percent in Canada, said Curt Blades, senior vice-president of the Association of Equipment Manufacturers. It amounts to about 1,000 additional units in the American market at a cost of roughly US$500,000 each, he added.
“And that’s a big deal because when you think about those pieces of equipment, they’re not small and they’re not cheap, so farmers must be feeling pretty good about their long-term operations to be making those upgrades in that articulator pole drive market.”
Part of the jump in sales is likely due to producers needing to replace older tractors that are nearing the end of their operational lives, said Blades. However, it is also an expression of long-term optimism because “you don’t buy a big, four-wheel-drive tractor for next year’s harvest and planting. You buy it for the next five to 10 years of planting and harvest.”
In Canada the total sales of two-wheel drive tractors are down 15 percent to the end of September compared to the same time period last year.
Sales of four-wheel drive tractors are up 22 percent to the end of September compared to last year, while combine sales in Canada are up 16.5 percent.
Another factor driving this year’s equipment market is delayed demand as the supply chain deals with the disruptions caused by the COVID-19 pandemic and Russia’s war with Ukraine, he said.
“But the trend that I get most excited about is — when you look at the four-wheel-drive tractors and combines, specifically — the farmers taking advantage of technology to really make their farms more efficient.”
Rising costs at the pump mean producers are seeking equipment that uses less fuel, “as well as having all that technology in place that allows the tractor to drive itself and therefore have straighter lines and not do as much overlap,” he said.
If farmers have engines that are 20 percent more fuel efficient, that’s real money when it comes to the impact on their bottom line, he added.
The latest models also include built-in precision equipment, said Blades.
“Although retrofits are certainly available and farmers take advantage of that, as they should … the economy in the last few years has actually been pretty positive,” he said.
“So, as farmers are evaluating their total capital outlay, they say, ‘this might be the time for us to make an upgrade,’ and take advantage of, maybe its precision equipment, or maybe additional features come into play.”
Blades said farmers are also seeking equipment that is reliable. Producers who might once have been comfortable with 10-year-old equipment that goes down for a day or two are increasingly not willing to gamble on the weather with their crops, he added.
“As you know, the last couple of years have been kind of crazy when it comes to weather patterns.… Farmers recognize the need for being as efficient as you can be in that short weather window that might get shorter and shorter, so making sure that you have maximum uptime.”
Blades said the focus for the next few years will be building on foundational technologies such as autosteer.
“Just like spreadsheets were the killer app for a computer, autosteer is that killer app — you begin to stack the data on top of that, which will be pretty amazing,” he said.
“The advice I always give to any farmer that is either involved in precision agriculture or is looking to do it is to start somewhere, and they’ll begin to build that data. You’ll figure out at some point when it makes sense to fully implement all of that data into your operation, and you might find that it doesn’t necessarily apply for you, which is fine as well, but the key is, start.”
He said initiatives in Canada and the U.S. that bring broadband internet to rural residents are also benefiting producers by improving their ability to gather vast amounts of data required for precision agriculture.
“I love dreaming what that’s going to look like,” he said.
“I think in 10 years, are we going to have tractors that are driving themselves without farmers on them? Maybe, maybe not. Will the technology be there in 20 years, 30 years? Absolutely. Will those tractors look the same as they do today? Probably not.”
It is exciting to think about how rapidly the market is changing, he said, “because a tractor knows where it is in the field, and when you apply all the things that come out of that fundamental difference … the data that comes with that, and recognizing that the planter and the harvester are really just good data collection tools, it’s amazing what this industry is going to look like.…
“You couple that with really good irrigation sensors — couple that with all of the variable rate technology, both in planters and crop protection equipment and fertilizer — it’s going to be really fun, and that technology is available today.”
Although this year’s large jump in tractor sales is a sign of good times for manufacturers, Blades said they learned an important lesson during the boom in the late 1990s and early 2000s. Companies are now more careful to satisfy demand in a responsible way that ensures dealers don’t have too much inventory on their lots.
“We saw similar numbers a few years ago, and that’s the thing that we also recognize, is what goes up sometimes does come down. I would say that this growth feels different to me than the previous growth.… Although I’m optimistic that this is going to continue for years and years, the reality is markets do ebb and flow.”
Blades said many economists predict storm clouds in the market during the next few years.
“Input costs are certainly going up. There’s the global politics that is certainly going to play into this, so the next two or three years, I think there are some real question marks.”
This year is likely shaping up to be below 2022 in terms of net farm income, and 2024 is expected to be “just a little bit off of that, so moving forward, hopefully those things will return — as … net farm income (goes), typically farm equipment sales tend to follow,” he said.
However, Blades expects that the story of the next five to 10 years will generally be one of optimism.
“We’ve had some remarkable sales for the last three years in both tractors and combines, but the ag market in general has been very, very strong, and farmers are in businesses for multiple generations, and they’re prepared for those good years and for those bad years.”
