The farm equipment market has been anticipating a slowdown over the past year due to falling commodity prices, high operating costs, and lower profits. In response, farms have placed a greater emphasis on their per acre equipment costs with delayed purchases and plans to further reduce spending on equipment as a cost saving measure. The situation is not unique to Canada with U.S. farmers in a comparable situation. As a result, U.S. farm equipment manufacturers have implemented production cuts due to weak demand. Ultimately, what happens south of the border has implications for the Canadian market.
Canadian large equipment sales started this year strong, with increased sales of both combine and 4WD tractors. In fact, new combine sales through the first half of 2024 were the best in five years while 4WD tractor sales were only slightly behind 2021 sales
There are several factors as to why this occurred, including strong sales earlier in the year due to weak U.S. sales. U.S. combine sales dropped 17% in the first six months compared to last year. This slowdown allowed U.S. manufacturers to send more pre-orders to Canada earlier. Normally, the Canadian combine market sees the most sales in the second half of the year. This was also a leading indicator of the inevitable slowdown in farm sales we have been expecting.
New equipment sales projected to decline
We are projecting sales of new farm equipment will slow for the rest of 2024 and into 2025 (Table 1). Although 4WD tractor sales have remained strong throughout the first nine months of the year, we anticipate a decline in sales for the final quarter. The market will lose momentum as equipment deliveries arrive early. New farm equipment unit sales are projected to remain soft through 2025 as farmers feel the pressure of low commodity prices, high equipment prices and tighter profitability. However, the decline in sales is expected to be less severe than in 2024, and sales of 4WD tractors should stay above the five-year average.
The early arrival of new equipment from manufacturers has led to an increasing number of trade-ins, which has affected the used equipment market. As a result, the slowdown in the new equipment market is expected to spill over into the used equipment market.
Used farm equipment sales projections
Drive past most farm equipment dealer lots and one thing that stands out is the considerable inventory of used equipment. Units sold in the used equipment market are down about 20% compared to the same time last year. Smaller horsepower tractors are down 40% due to the difficult economic conditions and elevated interest rates, which have reduced demand for these tractors typically used for acreages. But it is the used combine market that continues to experience large inventory levels. The shift to more efficient machines, means one large, high-capacity combine can replace two smaller ones. This has led to an increase in the inventory of used combines.
Last year, nearly half of all used combine sales were Class 8, with Class 9 (horsepower determines class) machines close behind. However, there’s been a noticeable trend towards larger, more efficient machines like Class 10+ combines. In 2024, the number of used Class 10+ combines sold has more than doubled compared to the same time last year, while sales of smaller capacity machines have decreased.
We estimate that total used combine sales have dropped by 18% compared to the same period last year, resulting in a significant buildup of used combine inventory.
Sales of used seeding and planting equipment have declined by 23% year over year, marking a slowdown compared to previous years. This trend has significant implications for our manufacturing sector, especially given Canada’s prominent role in seeding and planting equipment manufacturing.
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