Recession anxiety is causing North American farmers to cut back on buying new equipment and fertilizer, as well as hold off trying out new technology.
“They’re being extremely careful with their money,” said Ian Wishart, president of Keystone Agricultural Producers. “I don’t think I’ve ever seen a spring where guys are conscious of costs as they are.”
North American tractor sales are down, but farmers are still kicking the tires, said Todd Stucke, vice-president professional producers marketing for Georgiabased Agco Corp., manufacturer of Massey Ferguson equipment.
They’re still asking for quotes on new equipment as often as ever, but sales of small-and medium-size tractors were down by roughly one-quarter across the industry in April, year over year, according to the Association of Equipment Manufacturers.
“Farmers are conservative by nature,” Stucke said. “They’ve made some good money in the last three years (but) they see the overall global economics. And they’re trying to look for that good deal.”
Instead of buying new, farmers are bidding up prices 10 to 15 per cent on used farm equipment, said Kevin Tink, senior vice-president of Canadian auction firm Ritchie Bros.
“(The recession) just creates more interest in good, used product,” Tink said. “…The good, low-hour (use) equipment has seen a definite increase.”
The auction firm hasn’t noticed any jump in farmers auctioning off equipment to cope with financial problems, he said.
Grain and oilseed growers are coming off a year of bumper crops and high prices, tempered by rising input costs.
The Canadian livestock sector, however, is in dire straits because of low prices, food-labelling laws in the U. S. and flu-related trade bans on North American pork.
Farmers have been slow to buy high-priced fertilizer, although cutting back on applications for crops that need nutrients can end up costing farmers in the end.
“I’m worried about yields,” said Bill Doyle, president and chief executive of Potash Corp. of Saskatchewan, after addressing shareholders on May 7. “I think we’re going to see lower yields worldwide after two record global crops.”
Fertilizer prices have dropped from a year ago, but not enough for farmers who are holding off on purchases.
Non-traditional farming tools like global-positioning systems and auto steering, which allow farmers to precisely manage their land, are also falling victim to North American farmers’ thriftiness. Grain farmers were overwhelmed by negative headlines in late winter, the peak sales season for the farm industry, said Steven Koles, president and chief executive of Calgary, Alberta-based Hemisphere GPS. The company reported last month a 31 per cent decrease in revenues for the first quarter.
“Farmers were sitting on cash, some of their bankers were even telling them to sit on their cash,” Koles said in an interview. “…It’s a psychological thing.”
Farmers and the fertilizer industry now seem to be waiting the other side out, creating an overhang on the rest of the agriculture industry, Koles said.
Cost-conscious farmers are also unwinding less, Wishart said. Many Canadian farmers spend the winter in Arizona and Texas, but not this year.
“Those who did go down said they were pretty lonely down there,” Wishart said.
There appears to be a limit to penny-pinching, however. Canadian sales of Ford’s top-selling pickup, the F-150, are up 3.8 per cent year to date, said Lauren More, vice-president of communications for Ford Canada. The company did not have a breakdown of sales to urban and rural buyers.
Farmers will start spending again late this year as commodity prices improve and if harvests are strong, said Koles of Hemisphere GPS.
“Just getting some more financial headlines out there that are less negative are going to help some of the optimism return.”