Farm Credit Canada is projecting new farm equipment sales in 2024 to slow down, based on a variety of factors.
In FCC’s Canadian Farm Equipment Market Outlook, the conclusion is based on high interest rates, increased equipment prices, a decline in commodity prices, drought in Western Canada, and tighter revenues in the livestock sectors.
A chart looking at sales growth shows only two equipment types expected to have positive gains in 2024 – 4-wheel drive tractors at 6.4 percent and agricultural implements – such as air drills – at 8.4 percent. Combines, tractors with over 100 horsepower (HP), between 40-100HP, and less than 40HP are all projected to decrease in sales next year.
“The low inventory we had the last few years and delays in equipment deliveries from manufacturers – some of that is reflected in the stronger growth for 4-wheel drive tractors and ag implements,” said Leigh Anderson, a Senior Economist with Farm Credit Canada. “In previous years, we’ve had delays in deliveries and that’s kind of a spill over to 2024. Most of the supply chains have fully recovered but some of the strong sales are still in 2024, kind of reflected from previous issues.”
FCC notes as new equipment sales slow, inventory levels are expected to increase and even be close to pre-pandemic levels as manufacurers make new units.
There are a few trends FCC will be watching next year, including the age of farm equipment. The report suggests that the slowdown of new sales could be short-lived if “older equipment can be serviced and overhauled”. It also says sales could get stronger in the second half of 2024 and beyond “if interest rates decline and producers move to upgrade their aging fleet.”
Another trend is interest rates and inflation, as Anderson says they can influence a farmer’s decision to replace used equipment or have them serviced until rates go down.
The third trend is farm income and commodity prices. Anderson says how good new sales are largely depends on how much revenue a farmer generates. A strong 2022 and first half of 2023 financially allowed some producers to handle interest rates and prices this year.
“There was drought in Western Canada and some areas were of course hit really bad but some areas we are hearing that crops were better than expected which could support some stronger farm revenue than expected in 2024.” he said.
The 2024 Canadian Farm Equipment Market Outlook can be view online at FCC.ca.