Tractor sales: Massive demand fuels ag machine shortages, could push up prices
As pressure mounts on the ag machinery supply chain, dealers warn the situation is likely to get worse before it gets better.
IT HAS been the perfect storm.
A bumper season ending a long, widespread drought, strong grain prices, a stimulating tax write-off, the lowest interest rates on record and surging global demand have all combined to whip up the hottest market for farm machinery in Australia for more than 40 years.
With farmers’ confidence on a high, cheap finance, a desire for machinery innovation and the Federal Government’s 100 per cent tax deductibility for business assets, it’s no surprise Australia’s farm machinery dealers are run off their feet with their yards lying empty.
Throw in a pandemic and you really are putting the world’s agriculture machinery supply chain under immense pressure.
Shortages of components due to Covid shutdowns are holding up some production lines and limited shipping space and choked ports are also creating bottlenecks.
“This is a global situation – we are not fighting for orders against other Australian dealers we are fighting every other dealer globally for orders and solid world grain prices are a major driver of that demand,” says Gareth Webb, chief executive of Case IH dealer O’Connors, one of Victoria’s biggest farm dealerships.
Derek Reid, sales manager at Horsham’s John Deere dealer, Emmetts, says it has been one of their busiest years yet.
“Sales across the board are up, everything from tractors to sprayers, seeding equipment, spreaders and headers,” Mr Reid says.
“We’re struggling with supply at the moment just purely because the market is so strong. Our new stock is selling before it lands, so we’ve got very little unsold new stock in the yard.
“It’s the same for used stock – we just can’t get enough.
“We are selling everything used before it hits the market. It is ridiculously strong.”
March was the 13th consecutive month of record sales.
More than 15,000 new tractors sold in the past 12 months, up 40 per cent on the previous 12-month period and the first time in 40 years annual sales have exceeded 13,000 units, says Tractor and Machinery Association chief executive Gary Northover.
Sales of all categories have been strong with the under-40hp to 100hp range up 68 per cent for the year ending March, 100-200hp up 53 per cent and the 200hp-plus up a staggering 92 per cent.
NSW has led the revival with sales up a massive 105 per cent for the year, as the state emerged from a three-year drought, while Victoria, which continued a run of good seasons, was up 45 per cent.
The current level of activity is even more remarkable given the strain being experienced across the supply chain, although there are early signs this may be improving, Mr Northover says.
“Since mid-2020, supply of product from manufacturing facilities in Europe, the US and Asia have been heavily impacted by the COVID-19 lockdowns and social distancing requirements,” he says.
“Shipping activity being seen through Australian ports were reported to be around 40 to 50 per cent of normal capacity mid-last year.
“But this has now improved to around 90 per cent of normal capacity.”
Despite the delays, dealers report that farmers have not had to wait much longer than normal for delivery. But that could change.
“We haven’t experienced too many delays on delivery but at the moment third-party component suppliers are definitely holding up the production of tractors, which could lead to delays from now,” says Emmetts’ Derek Reid.
Dan Bingham, of Bingham Agriculture, one of Victoria’s biggest agricultural contractors, says he had a few problems sourcing machines from John Deere for this sowing season, so settled for other brands.
He was unable to obtain a new sprayer, so bought a Case IH instead and also a new Horsch seeder instead of his usual Seed Hawk. He also managed to get his hands on a recent model, second-hand John Deere tractor from Western Australia, but he had to be quick.
Local manufacturers have not been left out of the boom either.
Tim Alcott, from Pakenham manufacturer Farm Implements, which makes slashers, cultivators and spreaders, says they were swamped with orders throughout last year. Fortunately, because agriculture had an exemption from workplace shutdowns, production was almost normal, albeit a little slower due to Covid-safe practices.
“We’re only just keeping up,” Mr Alcott says. “When you’re selling that many tractors, demand for implements follows.”
He recently helped a customer who wanted a 2.5m mulcher, but all Farm Implements could offer immediately was a 1.6m. So the customer took it, with a proviso.
“He was happy to take it and trade it in in a few months when the one he wanted was available,” Mr Alcott says.
It is the same at Ararat implement manufacturer AF Gason.
“Last year was our busiest year for sales ever and this year is shaping up much the same, if not more so,” says marketing co-ordinator Oakley Gason. “All our order books are full up until July-August so if someone wanted a machine before July it won’t be possible.”
Both Farm Implements and AF Gason are manufacturing only to customer orders, with any surplus stock now gone. And the squeeze is set to continue.
“If you walk into one of our outlets in say October, hoping to get a machine for next sowing, you will be dreaming,” O’Connors chief executive Gareth Webb says.
“Supply will be an industry-wide issue from October onwards – tractors, air seeders, self-propelled sprayers, tillage equipment, all those will be extremely hard to find.”
Another implication of tight supply is the prospect of rising prices. Mr Webb says it is another reason to commit to sales now.
“We are already seeing prices increases for steel, rubber, tyres and shipping costs. It will absolutely flow through to machinery prices. But of course, the extent of any price rises will depend on what the Australian dollar does in the next year,” he says.
“If you know your business will be buying something in the next 12 or 18 months you would be crazy, given interest rates, not to be jumping in and ordering now while prices are still in check.”
TRACKING WELL
As early adopters of technology, the Rethus family is always keen to have the latest machinery to give them an edge.
Whether it’s auto steer, precision ag, controlled traffic or remote data monitoring, Geoff and sons Tim and Luke have been among the first to adopt each new advance in machine technology and farm practices.
Continually upgrading their tractors and equipment has been crucial to improving efficiency and productivity,
Geoff says.
The family operates a broadacre business growing cereals, canola and export hay in the Wimmera with land at Noradjuha, Horsham, and Vectis.
They run a mixed fleet of equipment with technology the top priority on their shopping list.
Having new machinery also means greater reliability and minimum downtime, which adds to an efficient operation, Geoff says.
Fortunately, the family have already taken delivery of their most recent purchases, bought through their dealer, Emmetts in Horsham, so they are not worried about any potential supply problems in the immediate future.
“We are pretty much replacing something every year, whether that be a combine or tractor, seeding equipment or a hay baler,” Geoff says.
Their latest investment is the new model John Deere 8RX tracked tractor, which will replace a conventional John Deere tyre tractor and complement another tracked John Deere 9RX.
“We will use this one, for example, to spread fertiliser in the winter when we need better flotation on wet ground,” Geoff says.
They also bought two new John Deere S780 combines and a Krone rear swing mower.
“We run two combines and normally only keep them two or three years and so we are replacing nearly one each year, although we had an opportunity to replace both of them (in late 2019) with a good deal from Emmetts, so we did that.”
SHOP AROUND
Victorian agricultural contractor Dan Bingham says in the current buying environment, brand loyalty takes a back seat.
While normally a John Deere customer, he’s not rusted on and will buy whatever is available as long as it has the best technology and offers a good deal. Dan operates a fleet of 25 headers plus tractors, cultivation and sowing equipment, buying up to four new combines a year.
He generally buys tractors second hand but the combines and implements are always new.
“A tractor is just a motor on wheels, really,” he says. “The important technology is all in the implements. They’re what gets us work.”
He says Australian ag machinery customers are generally last in line for the latest models.
“Quite often we only get the run-out models and it’s only when that stock is exhausted, we get the latest model,” he says. “The new John Deere X9 header has been available to Northern American farmers for a year but it will be another year before we get it.”
Dan employs 30 full time workers plus casuals and believes his staff are as much the key to a successful contracting business as technology.
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