Farm equipment market adjusting to economic environment: FCC outlook
Strong demand for farm equipment is expected to continue in 2023, as the market weathers rising interest rates and a weakening Canadian dollar, according to Farm Credit Canada’s (FCC) farm equipment market outlook.
“Producers will benefit from strategic planning as inventory levels for farm equipment remain below pre-pandemic levels, something we expect could continue through 2024.” said J.P. Gervais, FCC’s chief economist, noting tractor inventory levels are down 42 per cent and combines are down 47 per cent from the five-year average. “This equipment demand is supported by strong farm cash receipts, while inventory is hampered by the supply chain disruptions we saw over the past two years.”
The used equipment market has seen increased demand because of the pandemic-related shutdowns. With limited availability of new equipment and parts, producers were adapting by having additional used equipment available for parts if needed.
Equipment manufacturers are expected to increase production of new equipment due to the changing economic environment providing the opportunity for inflationary pressures in the used equipment market to moderate.
As for new equipment, the Canadian dollar has a direct impact on equipment prices.
“Most new tractors and combines sold in Canada are manufactured south of the border, so an expected depreciation of the loonie through 2023 should lead to price increases on farm machinery,” Gervais explained. “This is also the result of inflationary pressures in the supply chain that occurred in the last half of 2022.”
While the depreciating loonie makes new tractors and combines more expensive, producers can take some solace in the fact that a depreciating loonie also has a positive effect on farm commodities destined for export.
Strong commodity prices will continue to support the demand for farm equipment, offsetting the impact of higher interest rates and a lower Canadian dollar. The used equipment market is expected to stay robust for most of 2023 and into 2024.
Farm equipment sales for 2023 are projected higher for high horse-powered (HP) tractors, combines, and implement sales driven by strong crop receipts:
- 100+ HP tractor sales to rise 8.7 per cent
- 4WD tractor sales to rise 13.9 per cent
- Combine sales to rise 19.3 per cent
- Canadian agricultural implement manufacturing to rise 32.2 per cent
However, small HP tractor sales, which are largely driven by the health of the Canadian economy, are expected to slow in 2023:
- Less than 40 HP tractor sales to decline 0.4 per cent
- 40 – 100 HP tractor sales to rise 0.4 per cent
By sharing economic knowledge and forecasts, FCC provides solid insights and expertise to help those in the business of agriculture and food achieve their goals. For more economic insights and analysis on the top trends to watch for in Canada’s agriculture and food industry in 2022, visit fcc.ca/Economics.
FCC is Canada’s leading agriculture and food lender, with a healthy loan portfolio of more than $44 billion. Our employees are dedicated to the future of Canadian agriculture and food. We provide flexible financing, AgExpert management software, information and knowledge specifically designed for the agriculture and food industry. As a Crown corporation, we provide an appropriate return to our shareholder, and reinvest our profits back into the industry and communities we serve. For more information, visit fcc.ca.
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