Demand for large agriculture equipment continues to soften, according to a just-released Rabobank report.
The “Contraction Today, Consolidation Tomorrow?” report asserts after several years of rising row crop prices, a perfect storm of high crop production, a sharp correction in grain prices and contracting farmer margins in mid-2014 resulted in declining purchases of large tractors and combines in North America.
This trend has continued into 2015 and is unlikely to abate for quite some time, according to the Rabobank Food and Agribusiness Research and Advisory Group, which prepared the report.
The downturn in equipment sales could lead to a number of scenarios in North America’s future, including mergers among the five largest original equipment manufacturers – excluding market leader Deere & Co. – as well as acquisitions of smaller specialty harvesting and implement equipment manufacturers by those five largest players, Rabobank concluded in the report.
Equipment is usually the first farm input purchase to be delayed or eliminated during a downturn, and so the precipitous decline in new equipment sales following the drop in corn and soybean prices was logical, Rabobank, one of the world’s largest banks, said.