BILLINGS – Farm and ranch equipment dealers play a very important role in Montana’s Ag Industry. And like other main street businesses that depend on farmers and ranchers, the recent lower net farm income is impacting their businesses too.
“We’re not, not selling equipment, but we could be selling more but certainly understand we’re in it for the long haul with our growers,” said Tim Schulz, store manager for C & B Operations, the John Deere dealer in Billings.
The downward trend in net farm income obviously is a concern since it is such a big factor in equipment sales.
“I think the farm and ranch clientele is keeping a little tighter hold onto their checkbook,” said Schulz. “Commodity prices are certainly down from what we’ve seen four or five years ago for sure but yet we’re not seeing the increase that we really need to see to have those guys free up some cash.”
A bright spot, if you will, will be the eventual replacement of aging machines.
“Specifically, for your market where you’re looking at the really big heavy horsepower tractors and articulated four-wheel drives, those have enjoyed some steady month-over-month, year-over-year growth not anything to set the world on fire but certainly a reversal of the trend of being negative,” said Curt Blades, Vice President of Ag Services for the Association of Equipment Manufacturers.
The tax reform package that Congress passed could also be a big help.
“Section 179 is certainly a huge benefit to the grower where they can accelerate the depreciation on the new purchases and some of the used as well,” said Schulz. “That’s a huge benefit to help them offset some of that tax.”
But a new challenge for U.S. ag equipment dealers and manufacturers is the U.S. tariffs on imported steel and aluminum.
“Higher prices of aluminum and steel potentially leads to higher prices of equipment,” said Blades. “And that’s not necessarily good for farmers in a down income year. But even more scary for farmers is the potential for some sort of trade war or trade ramifications as a result of those policies. So, we’re paying very close attention to that.”
Ag equipment sales are a good barometer of how things are doing in the industry and it’s just another great reminder of how important the ag dollar is in states like Montana where agriculture is the number one industry.