Christian Farmers Federation of Ontario Commentary
By Paul Bootsma, CFFO Field Service Manager
The sale of farm equipment is largely based on the confidence farmers have in farm cash receipts (including crops and livestock). Most equipment purchase is based on the profit margins for the sale of grains and livestock or their products such as milk or eggs.
Prices are mainly set in the US; therefore the exchange rate between the two currencies also has an impact on the price for Ontario farmers. For the past two years the lower Canadian dollar has held up the price of commodities but increased the cost of equipment manufactured in the US.
In a report from FCC earlier this year, indications are that commodity prices look stronger in the future which gives optimism to the farm equipment industry. The article points out that sales in 2014 were high making 2015 sales look down but were actually on par with the 10 year average. There is mixed anticipation for 2016 but looking ahead to 2017 there is an expected increase in sales. However in Ontario we are now mid-summer and many areas are experiencing drought weather and there is less confidence of good yields coming off crops.
Brian Kennedy, vice-president of sales for HJV Equipment, in Alliston ON expects some action between manufacturers of farm equipment businesses such as mergers or even take over’s. Profitability may not be realized till 2018 for the equipment dealers, but he does foresee improvement down the road.
In time Kennedy expects that the main equipment companies will have one central location in Ontario and then service and maintenance will all be done from mobile service vehicles. As the number of buyers gets smaller over the years, equipment companies will need to adjust and become more efficient to survive.
Others also wondered if the downturn in equipment sales will be as short lived as the FCC report suggests. They expect the correction to take longer to complete. Wishing to remain anonymous, one equipment dealer wondered whether this was the time to get out of the business or merge with another to increase the line of equipment to deal with.
Another way that farm equipment sales are happening is through the internet which allows people from other countries to inquire into online sales. If someone is patient enough, transporting equipment overseas is affordable and cheaper equipment has been moving across waterways as well. European equipment which for some is more practical because of its smaller size is crossing the ocean to North America.
The FCC report is optimistic about the future as it anticipates better returns for farmers in 2017 and beyond, which will also then be positive news for the equipment dealers. This is all part of the agricultural industry which provides one job per eight jobs in Ontario.