Worries About Continuing Drought Haven't Disrupted Farm Machinery Spending Yet

By Dave Franzman, Reporter


By Dave Franzman

MONTICELLO, Iowa — High grain prices and rising farm income sent farmers on a shopping spree last year. But will the good times carry over if 2013 looks like round two of a serious drought?

The good news about farm implement sales showed up on the bottom line with Deere and Company announcing record first quarter earnings last week. The company earned $650-million dollars during that three month period ending January 31, 2013. That was a 22 percent increase in sales compared to the same time period a year ago. The company expects relatively high commodity prices and strong farm incomes to suppose a favorable level of demand for farm machinery this year.

Ag equipment dealers in Eastern Iowa are benefiting from the increased sales along with manufacturers. But while the dealers are happy now, they have to wonder if things will change, and farmers will become more financially cautious, if the extreme dry weather persists for another year.

Jim Haughenbury, manager of Monticello Equipment Company, said a number of new, large and “sold” combines are tucked away in a large machine shed. Customers made the buys last year after calculating crop yields, prices and insurance payments. Those approximately $400-thousand dollar pieces of equipment will be delivered to individual farmers in the spring.

Haughenbury said some large farm operators trade in equipment every two or three years to keep their operations running. He doesn’t think those equipment buyers will change their habits.

“Most of them who are in a trade pattern will continue to buy as they did. Because they know it takes five or six months to get a new tractor or combine when ordered,” Haughenbury said. But he added that farmers more concerned about what the weather does this spring and summer “would tend to wait a little longer” before they replace equipment.

Most farmers benefited in 2012 either from selling good crops stored from the year before or from high grain prices spurred on by the dry summer — or both. Normally, good farm income translates into healthy ag equipment sales. But dealers do have lingering concerns that if this spring looks like the second year of a serious drought some farmers might get cautious about big purchases.

Greg Kromminga, owner of Kromminga Motors in Monticello, wouldn’t be surprised in a portion of farmers want to see the rainfall in April, May and June before they commit to large purchases.

“We’ll have a lot of wait and see people on whether the rain will come and replace that subsoil moisture that got used up last summer … late July or early August is when the crop’s mostly set by then. Then they’ll know if there is something in the bin or not,” Kromminga said.

Kromminga said for now, equipment dealers are grateful for sales, but they’re also keeping a wary eye on the weather to see what 2013 brings.

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