Are there to many tractor manufactures ?

davesl708 · Feb 7, 2015

While watching RFDTV today the news reported AGCO is cutting inventory/production and reducing workforce. Other manufacturers are reporting declining sales.

Do any of you think we have to many tractor manufacturers for the limited market of tractor buyers?

Do you feel the abundance of tractors available and declining sales of new equipment will result in cost cutting that will degrade the quality of the new tractors produced?

RickB · Feb 7, 2015

2 years ago manufacturers couldn't build tractors and equipment fast enough for production agriculture. It's not just AGCO that is laying off production workers, it's industry wide. Not a matter of if, but when. It's a cyclical business that's in a downturn because of low commodity prices. It happens. I read the other day that during the ag collapse of the 1980's Deere didn't build a single rowcrop tractor over 100 HP for 18 months.

super55 · Feb 7, 2015

I don't know if it is too many manufacturers but I think a lot of people farmers especially are going to hold onto their equipment for as long as they possibly can especially if they are built before the emission restrictions. It's hard to justify purchasing a new piece of equipment that cost thousands more than what it previously did, require more maintenance and have more costly repairs most likely.

The benefit of a new tractor for the added cost just isn't there. Even the smaller CUTs without Tier 4 are holding their value remarkably well. I search listings quite often and for a tractor that 5 or 6 years old with 500 hours is just marginally less than what a new is going for.

To me that tells me that 1. either older tractors are highly desirable 2. That inadvertently the new emission restrictions that even exceed European standards have had an effect on tractor sales. I think everyone is kind of waiting for a better system to come along that becomes an industry standard with a proven reliability.

jeff9366 · Feb 7, 2015

The tractor business has always been highly cyclical.

The last few years demand has been high due to ethanol mandates and low interest rates. It appears Congress may trim or eliminate ethanol fuel mandates this year.

Corn and bean prices are in a slump. Tractor sales are slow when farmers cash flow is slow.

coobie · Feb 7, 2015

Reading in my farm world news paper that I get weekly john deere is laying off at least 1,000 workers from there Moline Ill. plant.I believe there are more tractor manufactures out there (Kioti,LS,Mahindra) offering better prices on comparable models that JD,Kubota,Massey and New Holland make.

davesl708 · Feb 7, 2015

My concern is with all the manufacturers and competition for market share quality will suffer to cut cost and increase margins.
Sears has had a bad habit of cheapening their products during down turns and hoping the reputation would carry them. It did not work.

MHarryE · Feb 7, 2015

Soybeans are less than $10 when in 2013 they were over $16. Corn for my sister's dairy was purchased out of the field and trucked to their bins for $3.50 delivered where a year ago it was double. I sold hay last year for $60 per bale whereas now I have hay I can't get rid of for $40. Prices had been so high for corn and soybeans that everyone loaded up and there were no severe drought areas in the Midwest so farmers got bumper yields but low cash return on high production cost. Much of the large ag buying is end of year when you total things up and see what equipment purchases are needed to write off depreciation.

It's not just tractors - everything is on sale from mowers to balers, planters to sprayers and so on.

My sister's dairy saw their milk price drop from $25 per 100 lb to $16 per 100 lb, partly offset by the low corn price. That $25 price up here in 2014 was astonishingly high but probably due to the Midwest drought in 2013. Lots of dairy farmers in places like Missouri had to liquidate their herds. Now production is coming back so the price is tanking. In addition the labor flow down on the West Coast is trashing exports that would be heading to Asia further killing the market.

European farmers are hurting because of the Russian sanctions. They have lost a significant share of their market. A good war to straighten things out would benefit their farmers but at what cost?

But according to our dealers the SCUT and CUT market us booming. Those tractors don't go to ag farmers. Possibly why a Kubota cut their 60 month zero interest to 48 month zero interest.

Deere's cuts are in their large ag production - Waterloo tractor works, Moline harvester works, etc.

In addition the euro has tanked dropping as low as $1.12 per euro last week vs $1.40 last year. It makes it hard to export the Waterloo production at a profit while they can heavily discount their ag utility tractors built in Germany and still make a tidy profit.

As much as I hate to say it, it's a nice thing when a good portion of the Midwest has a drought because it boosts the prices and the profit margins, as long as you aren't in the drought area. Then it really sucks.

Now all the hay I have stored - the deer are everywhere but the DNR won't let us harvest them.

TomSeller · Feb 8, 2015

I don't know the answer to the question, but I do think there are marginal manufacturers out there. Chinese mainly. Also the brands that seem to be sourcing parts or suppliers at will.

Baby Grand · Feb 8, 2015

Depends who you ask.
Tractor makers likely would say too many.
Tractor buyers likely would say too few.
Regardless, the invisible hand of the market will decide.