Decline Of US$ ~~ Potential Effect On Tractor Prices

[jeff9366]

Dollar slumps to 32-month low.

Sep. 8, 2017 5:50 AM ET| By: Seeking Alpha Financial News​

The greenback is losing ground against both the yen and euro as a combination of factors weigh on investors' minds.

These include the impending landfall of Hurricane Irma, tensions over North Korea, the ECB's indication it may taper its QE program, as well as a Fed rate hike that's likely off the table for December.

The U.S. dollar index is now at its lowest level since January 2015, slipping 0.4% to 91.08 in overnight Asia trading.




I predict US$ decline will lead to higher net tractor prices in 2018, either through increased MSRPs or reductions in promotions. Our tractors have a high proportion of imported components.

 

[AxleHub]

Greetings Jeff,

The dollar exchange rate to other currencies is ever-changing. It's important to notice that the dollar is not in a 32 month pattern of decline, it's merely in a very short term roller coaster pattern of value.

Farmers have historically aLso been astute in holding various commodities to counter balance each other. If you have some gold or silver or copper the can balance out. But also to be noted, when our dollar is lower it's easier to export and easier debt repayment.

Lastly, in a global marketplace we also need to see that our trade in units increase in value just as prices of new units do and because our equipment lasts many years - any pricing changes up or down balance out over time.

You're right of course that the dollar moves up and down quite often . . but thankfully today w are no longer shackled by energy being always foreign supplied. And foreign tractor makers have certainly gotten a great deal of U. S. Based facilities established also.

In the end. . . all the major countries battle to have lower currency exchange levels so they can export more product.

 

[edgarrian]

Im not supporter of the QE program at all. I understand what they are doing by injecting money into the economy but that hasn't really found its way to everyones pocket. I would have let the financial market crawl its way out of its own misery. We would have been better off.

The purchasing power is horrible if you go back to the early 2000's. I bought an excavator for 35k. That same excavator today is 70 to 90k. I think with the 100 year anniversary of the great depression right around the corner we will probably be in the that realm

 

[MessickFarmEqu]

The purchasing power is horrible if you go back to the early 2000's. I bought an excavator for 35k. That same excavator today is 70 to 90k. I think with the 100 year anniversary of the great depression right around the corner we will probably be in the that realm

the jump in the price of this stuff was driven by increases in Steel prices, our friends at the EPA, and the natural progression of improvements to the equipment. The actual change in purchasing power of this period is meaningful, but not double.

 

[edgarrian]

Well when I look up used CX80 excavator prices compared to what i purchased they are infact doubled or the link belt i purchased back then and compare prices for todays used 2012s and 2013s. They have doubled. IT was a fine machine. Never had an issue with it. You add the good old epa crap and the fact that the US has had to print money out of thin air for the last 8 years and I can see that your probably right that it hasn't doubled from inflation alone but its certainly added to the cost of buying machinery.

My grampa when he first started farming decades ago paid off his new tractor in one year. There is no such thing now days. Printing money, subsidies, bailouts, and using tax money for anything other than what its original purpose will lead us back to the great depression

 

[AxleHub]

One additional issue not yet mentioned is a combination of a greater exploding world population. As a result with more people wanting product, it increases the demand for new and used product.

Take as an example concrete. We are in no danger of running out of concrete powder in the U. S. But for a period of 12 years about 46% of all we produced went to China for their dam project. That drove the price of concrete up greatly and it never came down. Construction equipment is similar. But big big big farm equipment isn't holding up so well like it did 7 years ago. . . a result of 9 dollar beans and 3.5 dollar corn and 1.80 a gallon retail milk.

 

[edgarrian]

A can of pop was 50 cents and is now around a dollar maybe a bit more. QE1 through QE3 wasn't a great a idea. Sure it allowed everyone to keep rolling on and look at the economy now. Stocks are over inflated. And will continue to be especially if they roll out QE4. My theory on this is Trump rolls back the Frank Dod act and deregulates the banking system then greed will take over once again and the next financial ruin will be upon us. Of course this is just me speculating but from where I sit it doesn't really look all that great. This idea is where I get my idea of the 100 year anniversary of the depression. I hope I'm wrong but it sounds logical to me

 

[jeff9366]

The dollar exchange rate to other currencies is ever-changing. It's important to notice that the dollar is not in a 32 month pattern of decline, it's merely in a very short term roller coaster pattern of value.

Farmers have historically aLso been astute in holding various commodities to counter balance each other. If you have some gold or silver or copper the can balance out. But also to be noted, when our dollar is lower it's easier to export and easier debt repayment.

Lastly, in a global marketplace we also need to see that our trade in units increase in value just as prices of new units do and because our equipment lasts many years - any pricing changes up or down balance out over time.

You're right of course that the dollar moves up and down quite often . . but thankfully today w are no longer shackled by energy being always foreign supplied. And foreign tractor makers have certainly gotten a great deal of U. S. Based facilities established also.

GOOD POST, AXLEHUB.

In January 2017 the Wall Street Journal US/$ index was $93.94. Today it is $85.67, a decline of 9.1% since January.

Few publicly traded equipment manufacturing companies manage 4% net, net, net profit margins.

I think tractor price increases of at least 5% but more likely around 7% are likely in January 2018, assuming the dollar continues to skid.

I understand some components are manufactured in the USA, which is why I do not expect 9% or 10% prices increases.

I have been wrong a few times in my life, guessing the future of exchange rates. However, the dollar decline has been steady. The trend is your "friend".

Whether January 2018 price increases will come via increased MSRPs or decreased promos, or a combination of the two, we will see.

And, of course, tractor prices may not move at all.

 

[AxleHub]

A can of pop was 50 cents and is now around a dollar maybe a bit more. QE1 through QE3 wasn't a great a idea. Sure it allowed everyone to keep rolling on and look at the economy now. Stocks are over inflated. And will continue to be especially if they roll out QE4. My theory on this is Trump rolls back the Frank Dod act and deregulates the banking system then greed will take over once again and the next financial ruin will be upon us. Of course this is just me speculating but from where I sit it doesn't really look all that great. This idea is where I get my idea of the 100 year anniversary of the depression. I hope I'm wrong but it sounds logical to me

The banks are already leveraged significantly more than they were in 2008. And what is stunning to me is that we've not seen a single article by the media regarding how much hurricanes Harvey and Irma will wreck banks and Fannie May and Freddy Mac in the coming year.

FEMA doesn't replace private property and most homes don't have flood insurance, we will see many "walk aways" from mortgages. And defining quantity will be many factors greater than Katrina had, or Sandy or . . .

Those walk aways are also in vehicle loans as well as mortgages.

 

[edgarrian]

It could be the reason why QE4 might be rolled out later on this year. Although i haven't seen anything on the net about it. I just checked not to long ago.

The banks are already leveraged significantly more than they were in 2008. And what is stunning to me is that we've not seen a single article by the media regarding how much hurricanes Harvey and Irma will wreck banks and Fannie May and Freddy Mac in the coming year.

FEMA doesn't replace private property and most homes don't have flood insurance, we will see many "walk aways" from mortgages. And defining quantity will be many factors greater than Katrina had, or Sandy or . . .

Those walk aways are also in vehicle loans as well as mortgages.