With higher interest rates, increased equipment prices and a decline in commodity prices, farm equipment sales are expected to slow down going into 2024, Farm Credit Canada’s (FCC) 2024 outlook for the Canadian farm equipment market said. However, aging equipment fleets could see the slowdown short-lived.
The farm equipment market saw strong sales at the start of 2023 as inventory levels of new equipment rebounded and farmers recorded record-high cash receipts. Canadian implement manufacturing dollar sales are expected to finish higher in 2023 due to price inflation on raw material used in manufacturing. But with drought in Western Canada and tighter revenues for the hog and dairy sectors in eastern Canada, combined with high interest rates, producers are expected to be more cautious entering 2024, the report noted.
“Farm revenue is a main driver in equipment sales,” J.P. Gervais, FCC’s chief economist, said in a release on the report. “Record-high crop receipts in 2022 and the first half of 2023 put many Canadian farmers in a strong financial position to absorb the rising interest rates and equipment prices. We saw more cash purchases. This year, the drought in western Canada has impacted overall production, reducing cash flow for some producers.”
A slowing of equipment sales means new inventory levels will continue to increase, returning closer to pre-pandemic levels, the report said. In 2023, inventory of new equipment rebounded and is now in line with the five-year average for most categories. Air drills and 4WD tractors are some of the few equipment categories where sales growth is anticipated in 2024 as delivery issues and low inventory in prior years drive sales up.
However, strong equipment sales between 2008 and 2014 and longer replacement cycles indicate that Canadian farm equipment fleets are starting to age, the report noted.
“Producers will be weighing the efficiency gains of newer equipment compared to the costs of repairing their current fleet,” Gervais explained. “This creates an opportunity for equipment dealers to sell new and used machines, as well as sell parts and offer services to maintain older fleets. This is a trend to watch in 2024.”
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