This is an exciting time in the Farm Equipment Business. There is a generational paradigm shift happening both with Ag Equipment Dealer and the Producers. Retiring Producers and those that have gone out of business, have the left the door open to expansion. Across North America, the demand for Technology, specialized product knowledge, and the decreasing number of Producers has lead to greater Dealership consolidation. In order to create economies of scale both sides will continue to grow. So what does this mean and how will it effect each other’s business? I am of the opinion, the next five years will have such a dramatic change the industry it will be unrecognizable.
As the number of Producers shrink the number of buyers do as well. So what does this mean to both the New and Used Equipment Market? I believe the market will mirror the Construction Market. As Producers’s Operations grow the 2nd and 3rd buyers will disappear. This will leave a void in the market. Dealerships will be faced with what to do with a Used Market with less buyers. So how will this effect the sell of New Equipment? Yearly roles of equipment will be be greatly scaled back. Dealerships will not have the appetite to digest the number of units each large scale operation produces. In doing so, each year will consist of a cross section of equipment trades. Customers will be more interested in maximizing Machines Throughput v. Machine Deprecation. In other words, when have they gotten the good out of the machine and maximized ROI.
Like the Construction Industry, larger operations will have an Inventory Control Manager buying and selling their equipment. They will understand the market as well as, the effect of equipment on balance sheets. Sound familiar? If not it should! This person will have the same functions as the Remarketing Managers do at Dealerships today. They will look at the market and understand what hour range will produce the best ROI. They will also know what Used Machines to buy with the best value. They will be professional buyers and understand the ins and outs of the dealerships because they will come from the dealership!
So the biggest questions in the scenario is who is going to be the buyers of Used Equiupment. The fastest growing segment in Ag Production is the 500 or less acre Farm/Ranch. There are a lot of part time farmers and rancher working their “Day Job” while working the Farm/Ranch at night and the weekend. This has never been more evident then in the raising demand in the 150 HP and less tractor. This segment grows every year and is an important revenue stream to any dealership.
On the flip side, the fast decreasing operation is the 3500 acre and less farm. These are the operations big enough to support one family but not 2 or more. This is where the larger operations are are getting their expansion. These are also the prominent buyers of late model and low hour Used Equipment. As these buyers go by the wayside so do the buyers of used. So as this population of buyers continues to shrink the Dealer Groups will have to rely on the 1500 acre or less Operation to fill the void. This machines will need to older and have more hour in order to find buyers. This will become the the “New” Used Equipment Buyer.
In my opinion, this will broaden the auction market moreover, the online auction market. Because Larger Operations will have the personnel in place, they will be selling more of their equipment Online to end users, listing equipment on Online Auctions, and trading a smaller amount of equipment back to Dealerships. I see the New Equipment Market developing into a different mindset as automation becomes more mainstream. The number of machines working in the field will increase and the size and HP will decrease. This will open a a whole new door to a whole new buying and selling cycle.
The market is changing and Equipment Dealer needs to be driving change; not the Producer. The shift between Grandpa and Dad was simple, for the most part. The Internet and Auto Track wasn’t mainstream yet. The generation taking over, at a minimum, has spent half of there life on the Internet and is completely comfortable buying off the Internet site unseen. This generation views equipment as a commodity but the technology and support are not. So I will leave you with one last questions, are we Equipment Dealers or Technology Companies selling Ag Equipment? I believe the later! The future is bright for Ag Equipment Dealer Groups adapting and overcome the challenges they are facing today as well as, recognizing and preparing for challenges the future will hold.
For more topics like this tune into the Moving Iron Podcast which can be found on iTunes, Google Play, Stitcher Radio, TuneIn Radio, and SoundCloud. If you would like to continue and of the conversation you can hit me up on Facebook, Twitter, and Instagram @MovingIronLL or send an email to MovingIronPodcast@MovingIronPodcast.com. You can also visit my website, www.movingironllc.com, where you can final all things going on at Moving Iron. So until next time lets go move some iron. This is Casey Seymour out!!