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.
Farm Credit Canada's senior economist Leigh Anderson says record-high crop receipts in 2022 put farmers in a strong financial position to absorb the rising interest rates and equipment prices.
"So far, year to date for four wheel drive tractors, we're seeing it relatively strong still. A little bit on combines, as well and agricultural implements. The other categories a lot of them are see softer sales so far in 2023 and what we expect for the remainder of the year."
FCC’s chief economist J.P. Gervais says farm revenue is a main driver in equipment sales.
"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."
Anderson says going forward to 2024 it may be a tougher decision for farmers to make that purchase as he expects a lot will be really assessing their risks.
"Higher interest rates, higher equipment prices and of course the drought is impacting, basically the purchasing decisions on a lot of Canadian farms. Especially in Western Canada where we had the drought. A lot of farms will be assessing their overall needs for what they need, and looking at replacement cycles. So they will look at their own needs, what it costs and what makes the best decision and some of the instances they will be looking at probably some used equipment relative to new."
According to FCC's outlook a slowing of equipment sales means new inventory levels will continue to increase, returning closer to pre-pandemic levels. 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.
FCC's 2024 outlook for the Canadian farm equipment market is available here.
To hear Glenda-Lee's conversation with Leigh Anderson click on the link below.