Tractor News What is driving up the demand for tractors?

[Jchonline]

For me it was, 430/ton for fertilizer last year, today I was told 620/ton. Last 2 years have seen significant increases and has me second guessing alternatives. Fertilizer rep is thinking they may out of work shortly due to lack of demand.

Yep Fertilizer has gotten ridiculous. Raw material costs have gone through the roof. Production issues.

 

[MHarryE]

I needed to replace my CUT with a larger tractor so made the deal in August but dealer didn't get the new tractor until December so signed the paperwork after sitting in my new tractor in December. It was still 0% interest in addition to a rebate which is difficult to understand with tractor shortages. My area is poor for real cash crops like soybeans and corn, but we can grow fantastic oats and people buying products made from oats (go Cheerios) have driven up the oats market. I shipped a couple semi loads to General Mills at year end that went for more than double, in fact 2.5 times, what I got the year before. High temperatures plus the drought caused real problems - many oat farmers in my area cut their oats for hay so I came out well. The tractor deal was made after my oats was in the bin and the price was 75% higher than the year before so when I actually sold it for 150% higher, I was glad I had made the tractor deal.

The subsidies following the tariffs on Chinese goods were a real cash cow for a lot of farmers. My oats only got me a small check but others in my state. Farm subsidies went from $4 billion in 2017 to $20 billion in 2020. Cash infusion and low interest rates, lots of people buying. More cash came in 2020 to stimulate the economy - my dealers said lots of their customers came in with cash from their stimulus checks to buy tractors since they weren't spending it on things they normally would have done - vacations, eating out, movies. My JD dealer, normally a 2.5 hour drive, put in a new facility only 30 minutes from me but only for the small equipment because so many customers in my area have their place "up North". Largest tractor they sell from this facility is the 5 series. People can still buy a wooded 40 up here for around $40k, have their hunting land, place for their ATV's, snowmobiles, store their boat. All need tractors. Customers new to tractors are leery of buying used. I was that way 20 years ago, bought a CUT, retired from engineering 6 years later, ended up farming and just keep growing - 6 new tractors since I retired.

The cost of natural gas, which is used to make many fertilizers, has been increasing, especially in continental Europe and the UK. In addition, Hurricane Ida shut down some fertilizer production in the US earlier this year. And power outages caused problems for fertilizer plants in China, prompting the country to start discouraging fertilizer exports to protect its own supply. I'm going to be hurting come spring because oats loves nitrogen but it was -29 degrees this morning - tough to get excited about that now.

 

[Hay Dude]

N went from $500/ton to $900 here. Chicken litter was nearly free four years ago, now it’s almost $500/ton if you can even find any.

The sole reason I decided to focus on hay is the local market demographics. Theres a nonstop supply of buyers (mushroom growers, cattle, horses) and a nonstop supply of free fertilizer. Of course anything can happen, but its been that way here for 100 years. Make a balance of quality feed hay and mushroom hay and youll do ok. My crop transportation costs stay low, too.

 

[jyoutz]

I think it is simply population trends, and not some conspiracy, manufacturing, or politics that is driving the shortage in tractors and parts right now.

Apparently being recently retired - or about to do so - is a trend for baby boomers. For that fairly large part of the working population it was becoming time to retire - but Covid made the decision easy for a lot of people at the same time.

Lots of boomers had long planned to end up living on a few acres in the country - and a tractor was always part of that vision.

As a generation, boomers have done well financially. Plus it's a normal part of retirement to realize that time has all of a sudden become more precious than the price of things.

Add these things together.... throw in Covid..... and you have a trend.

rScotty

I think you are correct.

 

[jyoutz]

I think you are right, but strangely see opposite trends, too. I see less people working on their properties and hiring me to do the work for them. Now these are very wealthy people who bought up huge chunks of fam land and have no clue what they are doing so theyre in rare air.
However, also see smaller property owners (1-5 acres) sell the lawn tractor and hiring out lawn service. I live on a private road of 15 homes on very large lots and me and one other guy are only ones who cut our own grass. All others hire it out.

I guess people are cheap where I live. That’s not happening here.

 

[jyoutz]

I've spoken with two local farmers recently that are seriously considering not planting this year because margins are so tight that lack of rain or a storm at the wrong time would put them at too much of a loss to justify the work. It's a hard spot to be in I'm sure. I think a lot of small or 1st generation farms are going to fail this year and some farmers aren't going to plant or are going to plant more economical crops which may not be human food and next fall/winter the country is really going to start feeling that.

Just one wannabe's opinion.

A high percentage of US grain crops are grown for export. If half the acreage was fallowed, we would still have more than enough for the US food market. I work for USDA and see the statistics.

 

[jyoutz]

During the last administration, they earned 25-40% per year... each year. Yes. I’m not looking at only the past few weeks, and I’ve been through a couple corrections... it just doesn’t seem like good fiscal policy to sell $120k of investments at a 10% loss at this point, when as you said, markets go up and they go down... I’ll probably wait until they recover at some point. We should have done so last year, but we were more optimistic than we should have been about how this “recovery” would be handled. My guess is after midterms, we will see positive changes with sentiment.

Who said I was fretting? I’m looking at what that $12k loss could buy, if I’m a little patient.

I agree that selling now wouldn’t be a good idea, but last year, S&P 500 investments were up 30-30%. And of course, there were very significant losses in 2018 and 2020.

 

[Torvy]

A high percentage of US grain crops are grown for export. If half the acreage was fallowed, we would still have more than enough for the US food market. I work for USDA and see the statistics.

Crops are not typically grown "for" export. Crops are exported when the demand in foreign markets is high enough to offset the cost of shipping and import duties. There may be some some farmers who specifically grow to meet the import requirements of some countries (non-GMO or whatever).

Percentage of U.S. Agricultural Products Exported

Graphic showing the percentage of U.S. agricultural production which is exported overseas. All told, more than 20 percent of U.S. agriculture is exported.

www.fas.usda.gov

I guess it also depends on what you consider a high percentage.

 

[jyoutz]

Crops are not typically grown "for" export. Crops are exported when the demand in foreign markets is high enough to offset the cost of shipping and import duties. There may be some some farmers who specifically grow to meet the import requirements of some countries (non-GMO or whatever).

Percentage of U.S. Agricultural Products Exported

Graphic showing the percentage of U.S. agricultural production which is exported overseas. All told, more than 20 percent of U.S. agriculture is exported.

www.fas.usda.gov

I guess it also depends on what you consider a high percentage.

Grain crop acreage in the US exceeds domestic use and a significant percentage of production is exported. If the export market didn’t exist, far less acres would be planted in the US.

https://crsreports.congress.gov/product/pdf/R/R46760

 

[4570Man]

I think the tractor build numbers have gone down vs the sale numbers going up. Also inflation is driving the price hikes as much or more than shortages are.