U.S. Farm Equipment Forecast 2010

by: Yengsts Associates     URL: www.yengstsassociates.com

9/30/2009

As indicated in the table below, sales of tractors will decline approximately 23 percent in 2009. These estimates are based on retail sales as reported to both the Association of Equipment Manufacturers (AEM) and Yengsts Associates's analysis of non-reported sales of tractors.

Total tractor sales are expected to fall well below 200,000 units in 2009 to 179,700 units or a 20 percent decline from the level of 2008 sales. Small and medium-sized tractors, those machines that are consumer oriented and tied to housing, rental, and utility work, rated under 60 hp will fall the most in 2009. Sales of compact tractors rated below 40 hp have declined more than 23 percent the first six months of the year already. Sales of these smaller machines will continue to be a drag on overall tractor sales. Net farm income is projected to fall 38 percent in 2009 a level not seen for a number of years. Beyond 2010, sales of all tractor types are expected to improve with the larger tractor sales coming back as well. According to industry experts, tractor sales are not expected to reach the levels achieved in 2008 until after 2013.

One product bucking the sales trends of 2009 is harvesting combines. Sales in 2009 are expected to improve about 20 percent versus demand in 2008, with demand dropping off in 2010 about 18 percent. Why combine sales are stronger this year is difficult to understand in view of the fact that large row crop tractor sales are down as much as 15 – 20 percent. Industry experts will be watching this product more closely as 2009 comes to a close and make a reassessment of sales and production projections for their future forecasts.

Well, the bad news has finally hit the agricultural sector of the economy. The farm sector has been hitting near record highs in all three sectors of farm earnings since 2004. The U.S.D.A. forecasts this to end in 2009 when both net farm income and net cash income will decline by more than 30 percent over 2008 levels. Total expenses are forecast to decline for the first time since 2002 however; projected expenses will still be five percent greater than they were in 2007.

The U.S. Department of Agriculture offers the following projections for the near-term state of net farm income:

Net farm income reached $87.2 billion in 2008, a 23 percent increase over the revised net farm income for 2007, $71.1 billion. This is $8.6 billion less than what was projected last year at this time. The record net farm income in 2008 was resultant from the large increase on the value of crop production despite a drop in prices toward the end of the year. Net farm income is forecast to reach $54.0 billion in 2009, a 38 percent decline from 2008, and $9 billion below the 10-year average of $63.2 billion. Crop and livestock prices in 2009 will be considerably less than they averaged in 2008 and that is why there is such a steep drop in net farm income.

Where farm income is headed in 2010 is difficult to project. The experts reaction to the overall situation is leaning towards lower income for the year as commodity prices are expected to be near the same levels as currently seen, but with higher expenses, which would have somewhat of a negative impact on income. Therefore, net farm income is expected to decline modestly in 2010 from the 2009 level, and then show improvement in 2011.

Net cash income achieved record levels once again in 2008 when it reached $97.6 billion. It is forecast to fall to $68.2 billion in 2009, a 30 percent drop over 2008, and $3 billion below the 10-year average of $71.2 billion. Net cash income is expected to decline less than net farm income because it reflects the sale of $1.8 billion in carry over stocks from 2008. Cash receipts rose to $324.3 billion in 2008, a 12 percent increase over 2007. The U.S.D.A. forecasts that cash receipt for most crops will decline in 2009 and total cash receipts will be $284.0 billion, a 12 percent decrease from 2008.