Though the slowdown in the grain sector of the ag economy’s yet to show signs of easing, recent data show producers remain confident in their machinery purchases looking ahead to the next year.
Looking back
About half of producers surveyed by AgDirect in late summer 2015 say they’ve added equipment to their farms’ lineups in the last year and of those purchases, 40% were financed.
And, the vast majority of those financing iron purchases – just over 85% -- say they typically reach their financing decision after considering only one or two lenders. Three quarters of all producers surveyed report that they made their most recent equipment purchase at a dealership.
Producers participating in the AgDirect survey — almost 2,100 in total — span 32 states and qualify themselves as primary financial decision-makers for their operations.
The next year
Looking ahead to 2016, the same percentage of producers – just over half -- say they have plans to buy or lease machinery, suggesting these levels are fairly consistent year-to-year.
While over 50% surveyed said they plan on adding machinery in the next year, 35% say they plan on holding off on new iron in 2016. And, of the 50% surveyed who say they plan on adding to their machinery lineup say they’ll be relying on financing to do so.
This latter figure – an increasing percentage of purchases being financed – could foreshadow the tightening of the clamp of continued low grain market prices on corn, soybean and wheat producers in the coming year. As such, AgDirect Vice President Duane Maciejewski says producers should make purchase and financing decisions with a close eye on working capital in the coming year.
“The call to action is making sure you’re preserving working capital in times of lower profitability,” Maciejewski says. “Growers need ways to keep equipment up-to-date but maintain sufficient levels of working capital.”
Survey data reflect some geographic differences in producers’ intentions when it comes to securing new machinery in the coming year. Those in the western U.S. — where drought has decimated crops and livestock productivity in the last 3 years — are less likely to finance machinery purchases in the coming year, while the data show a higher percentage of producers in the Plains and Midwest are more likely to sign purchase agreements in 2016. Producers in the Northeast and parts of the mid-South are even more inclined to finance iron in the next 12 months, the survey data show.
