Equipment dealers fret over impact of market

Associate Editor

(March 22, 2016) Delmarva farm equipment retailers expressed concern last week with cratering grain prices that have pinched farmers who are tightening budgets and cutting back on machinery purchases.
“If it’s a prolonged cycle that we’re going through right now it could lead to having to make some major decisions,” said Alan Quillen, general manager of a Hoober equipment store in Seaford, Del.
Grain prices rested last week in the mid- to upper $3 range with soybeans in the upper $8 range.
Three years ago, they were more than double that.
When grain prices tumble, farmers don’t buy as much machinery and unresponsive retailers can find themselves in serious financial danger with too much inventory and not enough demand.
“It’s definitely a struggle for a farm equipment dealership to make ends meet right now,” said David Studley, sales manager at Rathell Farm Equipment in Cordova, Md. “You have to adjust your business.”
How they do that varies. Studley said Rathell relies more on sales to small businesses, landscapers and poultry farmers, purchasing items to handle litter.
“A dealership that is 100 percent dedicated to the larger farm equipment sales is definitely in dire straits this year,” he said. “There’s not much there. The competition is tremendous. There’s a lot of used equipment on the market.”
Parts and service also become more important, Quillen said. Hoober has always covered its budget primarily through parts and service work and used whole goods sales — farm equipment — to cover capital improvements, he said.
“That’s been the backbone of our company for 75 years,” he said.
But signs of a drawback do exist. Hoober has had to lay off a few employees, Quillen said, and the Maryland Agricultural Commission earlier this month listened to one member express concerns that depressed grain prices could lead to consolidation or closures of equipment businesses throughout the region.
Retailers nationwide are hurting. Deere & Co., the world’s largest dealer of tractors and combines, last month predicted sales will drop 10 percent this year with slumping grain prices being a key factor.
Nationwide, sales of tractors and combines for February were mixed, according to a monthly report from the Association of Equipment Manufacturers.
Though two-wheel-drive tractor sales were up almost 8 percent compared to the same month last year, the number of tractors with 100 horsepower or more fell by more than 40 percent, data show.
Four-wheel-drive farm tractors were also down more than 40 percent, and self-propelled combines were down by more than half.
Still, business was picking up at Hoober last week, Quillen said.
“It’s good to hear because we’ve been kind of twiddling our thumbs this winter,” he said.
But established retailers may be able to bridge the gap with confidence. Mike Asche, agricultural sales manager at Atlantic Tractor, has spent 40 years in the ag sales industry across several regions. What’s going on now with grain prices is nothing new, he said.
“I’ve been in the ag industry for 40 years, so this is the fourth time I’ve seen the bottom of the cycle,” he said. “That does give you somewhat of a blueprint of what you need to do in order to weather the storm.
“It’s all those good management techniques.”
Those include, he said, not carrying too much inventory, curtailing employee overtime and improving efficiencies across operations any way possible.