Passage of the Section 179 and Bonus Depreciation tax incentives in late December probably helped some, but not enough to meaningfully reduce new and used farm equipment inventories on dealers’ lots. Based on comments from dealers, it appears some manufacturers are stuffing dealer channels with the delivery of new equipment.

According to the results of the latest Dealer Sentiments & Business Condition Update survey, a net 39% of dealers report new inventory as “too high” (46% too high; 47% about right; 7% too low) compared to a net 34% the previous month. On the used equipment side, a net 37% of dealers reported used equipment inventory as “too high” in December (49% too high; 39% about right; 12% too low), slightly below the net 41% in the previous month.

Specifically, dealers point to the continued glut of used combines with a net 47% reporting inventories as “too high,” well above the net 38% a month earlier. The backlog of used high horsepower tractors appears to have improved somewhat as a net 10% of dealers reported inventories “too high,” which is well below the net 18% the month before.

Dealers continue to be concerned with their inventory of used sprayers. A net 28% of dealers reported inventories of these machines are “too high,” in line with the net 27% in the previous month.

The 156 dealers who participated in the most recent survey report that pricing of used machinery has not improved. Used combine values are reported at down 9% year-over-year, similar to the previous month. Large tractor values are reported at down 3% year-over-year, while small tractor values were relatively flat year-over-year. On an absolute basis, all three product category values were reported as declining in December vs. November.

On average, North American dealers expect an 8% drop in ag equipment sales in 2015. This is a slight improvement vs. the down 10% forecast in the previous month.