Oil & Fuel Fuel prices affecting tractor sales?

[CTW]

With the price of oil topping $125 this Friday we're all watching as the price of fuel (especially diesel) climbs and climbs. I just wonder if this will affect the selling price of tractors or if it will add a bit of a bargining chip for buyers looking for a deal on a new model. Whatever the case, operating cost are through the roof when it comes to farming and ranching (feed,fuel, fertilizer, HERBICIDE!). Not sure when it will all calm down.

 

[Runner]

I could see where it might affect the number of people deciding to "upsize". However, my 2520 burns half as much fuel per hour as my little gas lawn tractor doing the same tasks, so I wouldn't think fuel costs would be much of an issue.

Also, with tractors, it seems to me that if you need it, you need it and fuel wouldn't affect the decision. Maybe the general economy as relates to the price of everything rising due to increased fuel costs might have some effect on the sales of new tractors in general. Might be seeing more action in the used market.

It will be interesting to see what happens.

 

[shimp]

i doubt it will affect sales, as the companies are strong enough to continue zero financing and other incentives

 

[Nuru]

I agree, the 0% financing and long term (7yr) financing seems to keep some sales brisk.

however, i feel when regular gas hits and stays at 4 bucks, then retail sales are bottom out, and that will impact everything!

 

[Baby Grand]

The weak dollar doesn't help you bargain for a foreign built machine, and most of the machines discussed here are from overseas. With the economy looking pretty weak for the near future, I don't think people are going to be rushing out to buy big ticket items in record numbers.

On the other hand, with the price of food going through the roof, I think a lot of people who have an extra acre or two are going to take a serious look at putting it to work. When I take a walk through the produce section and see blueberries from South America, it makes me wonder how they can grow the stuff, fertilize it, harvest it, truck it to the docks, ship it here, distribute it by truck and have any money left to buy seeds for next year. So there's an argiment for stronger sales.

Kinda hard to to figure out which side of the fence it'll land.

-Jim

 

[rdbigfarmboy]

No CUT sales will grow. Look at the growing number of hobby farms on divided farms. Consider every body with 5 acres will ant a CUT. Whereas a farmer used more job sized and job efficient machines. The folk paying 5 to 10 K per acre for hobby farm will pay 10 to 20 for a CUT.
As far as production Its all about cost. Its cheaper to grow or make in a foreign country and there are no taxes for most imports. This is 2008 not 1978.

 

[Baby Grand]

As far as production Its all about cost. Its cheaper to grow or make in a foreign country and there are no taxes for most imports. This is 2008 not 1978.

I'm in complete agreement with you on the production costs, rdbigfarmboy. If the price of fuel doubles (substantially increasing transportation & storage costs at every point along the long journey here) and the value of the dollar slides 50% relative to where the food's being produced (meaning I need twice as many dollars to by a peso worth of blueberries), then it makes sense that the cost of that imported food will go up 2 to 4 times what it presently sells for. I don't think there's a lot of margin on those South American blueberries, today, even though they seem a bit pricey.

As for this being 2008 not 1978, Amen to that, brother. China and India's middle classes have grown in that time period, while ours has shrunk. There's a lot more people in the world who are thinking about small scale tillage who want a CUT and are willing to pay for it with their own, strengthening, foreign currency.

There's also a lot of people in the US who are stretched so lean on their credit that making a big ticket purchase just isn't in the cards for them anytime soon. And the ATM machine they live in has an out of order sign taped to it.

Sorry to be so long winded, but I think what I'm really trying to say here is that the rising price of energy is going to have an effect on everything, but I'm still not sure how that all shakes out in terms of CUT sales.

-Jim

 

[Rara Avis]

When people finally hit the wall creditwise...There will be a large contraction of the CUT market, but knowing when that will occur needs a Warren Buffett-type...

The answer to the above question is how long companies can afford to offer 0% financing and long term (7yr) financing...because when they stop that will be beginning of the big slowdown of CUT purchases...

 

[john_bud]

I know the used tractor prices are up up up up.

I also know that I will be parking a tractor on my timber land as trailering up is so spendy!

jb

 

[browns40]

The typical tractor owner is by nature an animal that tends to lean towards self-sufficiency... and that is a very appealing thing to people right now.

My impression is that sales will actually increase short-term among non-professionals in efforts to grow more of their own food, harvest wood for fuel or milling, maintain theor own property, seek out methods for producing biodiesel, etc.

Professionals will look to greater efficiencies in their work, but ultimately will pass the costs on come harvest/slaughter, the same way distribution tacks it on through shipping cost. It has to be done to profit.

As oil continues to climb, and more people hit the wall of more out than in, they'll start to drop off... from what I see people are not quite at the wall yet, but are cutting out more frivolities.

Because the price of that barrel today doen't hit you for everything all at once except the pump & distribution cost... the major impact is what we will start seeing on store shelves months down the road...

Just my .02 on it... maybe there won't be any inflation at all, hmm?