North American Farm Machinery Sales Beat 2011 Forecast

January 17, 2012

Farm machinery sales increased in North America in 2011, outperforming a forecast made by the top American manufacturer that sales would remain flat.

Unit sales of tractor and combines in the U.S. and Canada climbed 2 percent, according to the Association of Equipment Manufacturers Tuesday.

Agriculture equipment giant Deere & Co. had predicted farm machinery sales would be unchanged in 2011, partly a result of changing emission standards. However, when U.S. farm cash receipts reached record levels in 2011, farmers began buying equipment.

"Historically, when farm income is increasing, sales of agricultural equipment increases as farmers reinvest in their operations," said Ken Golden, director of global public relations for Deere. "Crop prices have remained strong and this has helped produce these strong farm cash receipts."

Overall tractor sales in North America in 2011 reached 192,425 units, up 2.4 percent. Sales of combines, massive harvesting machines that can cost more than $350,000, were down 4.2 percent at 12,808 units, 571 fewer than in 2010. Still, combine sales constituted only 6 percent of total sales.

"We continue to receive questions about the North American combine market in 2012," said Ann Duignan, machinery analyst for JPMorgan Chase & Co., in a note Wednesday. "Concerns have focused around replacement purchases in recent years and the ability or desire of farmers to continue this activity."

Trade publication Ag Equipment Intelligence had a more optimistic outlook. A dealer survey reported that 85 percent of North American dealers expect combine unit sales to increase in 2012.

For the fiscal year ended Oct. 31, Deere reported worldwide agriculture and turf net sales of $24.09 billion, up 21 percent from the previous year. CNH Global NV, a worldwide leader in equipment manufacturing, reported agricultural equipment sales of $10.49 billion, up 23 percent, for the first nine months ended Sept. 30. Neither company reports geographical breakdowns for their agricultural divisions.

In November, Deere forecast industry farm machinery sales in the U.S. and Canada would increase 5 to 10 percent in 2012.

- Source: Simone Del Rosario, Medill Reports Chicago

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