5 Strategies to Prepare for Challenges in the 2024 Ag Equipment Market

The ag market in the first half of 2024 has been marked by low projected profitability for farmers, renewed pressure from global ag commodities markets, and potential for a highly active auction season this summer.

To prepare for the next several months, dealerships need to strategize business decisions today to secure a strong position in the market by the end of the year and into a similarly challenging 2025.

Researching and understanding the global market conditions for ag commodities can provide context and valuable insights into customer buying behaviors that have downstream impact on local market trends.

In the past year, crop production, importing, and exporting from China, Brazil, Australia, Argentina, and India have directly affected the U.S. market and commodity prices. China has been buying more commodities from Brazil. Australia’s and Argentina’s crops are getting rain and possibly could increase competitive pressure for U.S. commodities. One bright spot is that Russia's wheat production has fallen, but with record production in other parts of the world, it has not helped commodity prices.

Suppressed commodity prices are projected throughout 2024. This, along with increased expenses, will lead to reduced funds in farmers’ checkbooks for buying equipment through the end of the year and into 2025.

“As an equipment dealer, you need to get ready for the same atmosphere as 2024 or down slightly more because of the early order activity where dealers pulled back their new sales due to the amount of used equipment sitting on lots today. Dealers need to continue to reduce inventories both new and used to manage carrying costs along with adjusting trade values to match current conditions,” says Duane Kautzman, Senior Strategy Manager at Tractor Zoom.

You can find opportunities to strengthen your financial position by closely managing your sales activity and monitoring your equipment inventory carefully through the remainder of the year.

For this, Kautzman recommends identifying which items in your inventory are high-risk, which may be best sold at auction to break even on, and staying in front of all customers in your Area of Responsibility (AOR) because those individuals do have buying potential.

The Federal Reserve Bank of Kansas City has reported a slight increase in loan delinquencies and increased loan demand. Banks’ loan to deposit ratio is about 5% higher now compared to the same time last year, which means they are indeed lending out more money.

“Everyone wants to look at farmer balance sheets, but that’s not indicative of their dollars to go buy,” Kautzman says. “Their debt-to-asset ratio hasn't moved much, but their debt-to-income ratio has moved dramatically, and they’re slowly but surely starting to get cash-strapped. It doesn’t mean they aren’t able to buy equipment, but they’re buying what they absolutely need, and it’s crucial to be in front of them to sell what they do need when they’re ready to buy.”

Keep good records of your customers, their buying history, and their projected equipment needs, in one CRM system, in order to meet them at the right place and time to sell.

We saw an increase in farm profitability and the availability of cash between 2021-2022 and at the end of 2023, meaning farmers who bought new or once-used equipment in these timeframes were ahead in the buying cycle and now are reverting to the normal washout cycle. Knowing this pattern should enable you to build a good relationship and anticipate their equipment needs.

“As a sales manager, you absolutely have to know what your team is doing,” Kautzman says. “It’s about seeing the right people to ensure we have the right opportunities to sell. Used Equipment Managers have to be cognizant of everything in their inventory.”

Employ an inventory management system to give you precise insights on the equipment on your lot to help your team with repricing, marketing, and moving units.

In today’s market, customers shop across the U.S., not only their local region. It’s key then to be aware of real-time market values and activity nationwide to benchmark against, ensure you’re competitive, and be prepared for customers when they’re ready to buy.

The past 18 months were an anomaly in sales processes as buyers were highly active in seeking out equipment to purchase with their increase in capital. Today, that isn't the case. Therefore, you and your team must utilize all of the tools available to manage the pipeline and navigate the upcoming challenges we’re likely to face in the market. Retrain your team for more active and strategic selling.