GMG uses historic data models that track net farm income, net farm cash income, commodity prices, currency exchange rates, worldwide agricultural market data and other factors that influence the purchase of tractors and combines in the U.S.
Total tractor sales in October fell about 8%, with utility tractors (40-100 horsepower) showing the only growth at up 6%. Compact tractor (under 40 horsepower) sales fell 11% last month and high horsepower tractors (over 100 horsepower) fell 18%.
Worldwide economic unrest along with political unrest both here and abroad has placed a black cloud over the U.S. agricultural economy and has slowed large equipment sales to almost a crawl.
2019 is developing into a very unique year for equipment sales. For the past several decades the under 40 horsepower class of tractors represented more than 50% of the total tractors sold in the U.S. In 2019, we expect this class of tractors will represent between 62-65% of the total tractors sold as sales for the larger tractors slide even more.
The downturn that we are experiencing today is certainly as dramatic as those early ones, but today farmers are not encumbered with massive debt and the current interest rates are very reasonable for those who have debts to service. This certainly is not a pleasant experience for anyone in the industry, but there is much more optimism than in previous downturns.
While the majority of producers are still buying their equipment outright, there continues to be a number of farmers who have been nudged toward lease contracts in order to conserve capital and still have new, dependable equipment with which to farm their land.
2019 continues to unfold as a good year for the smaller horsepower tractors and equipment which are driven by the U.S. general economy, and a weak year for production agricultural equipment sales as net farm income continues to decline.
U.S. farmers are persistent optimists. If that were not so, they would never risk their time, efforts and resources to produce a crop of unknown quantity to be sold in the future at an unknown price.
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