Outlook 2017: Some bright spots but machinery sales hard to predict

Machinery manufacturers, distributors and dealers have been trying to identify how sales are likely to fare in 2017, as factories gear up to place orders for raw materials and components.

With many factors potentially influencing farmer investment, forecasting is especially challenging.

Uncertainty over farmgate prices, input costs, currency values and farming support have coincided with dampened demand in previously reliable outlets for new and used equipment in western, eastern and central Europe.

See also: 2016 BPS payments – what you need to know

While no-one anticipates a sudden turn-around in the UK market, nor is there an air of total doom and gloom.

Manufacturer and distributor representatives report a fair degree of optimism and cheeriness at winter shows such as Agriscot and the Midlands Machinery Show, with some positive movement on farmgate prices and the prospect of larger currency-adjusted basic payments.

According to figures compiled by AEA, the UK industry body for manufacturers and distributors, equipment sales to farmers and contractors are worth about £2bn a year.

Tractors and combines account for half the total, with spending on new tractors at just under 40% of the total and combines around 9%.

Increased sales of bigger tractors during the first half of 2016 pushed the average size of unit sold to 158.5hp, a 2.7% increase on the same period in 2015, while fewer purchases below this output lowered the total tractor power sold by 7.5% to 853,000hp.

In unit terms, the first six months were characterised by a continuation of the slide in tractor sales seen in 2015. In that year, sales of tractors larger than 50hp plunged 12.8% to 10,840 units from a 2014 figure of 12,400 and the 5,382 tractors registered to the end of June 2016 represented a further reduction of almost 10% on first-half 2015 figures.

Business pointers

  • Some farmgate commodity prices have risen and a larger Basic Payment income will help investment
  • Added competition maintains machinery price pressure
  • Improving exports of used equipment easing dealer stocks
  • Farmers seeking lower costs by changing systems

An autumn surge saw October registrations up by a third on the same month in 2015, partly thanks to incentives to shift machines that would no longer comply with emissions rules from the end of that month.

The added sales helped take the 10-month figure to within 1.4% of the previous year’s level, causing some to hope that the UK tractor market was bottoming out.

Whether that is the case remains anyone’s guess and the same goes for equipment sales in general which, according to AEA statistics, are broadly down compared with previous years, with some exceptions.

Sales of heavy stubble cultivators have picked up a bit in contrast with other soil preparation equipment, while drill sales have improved slightly as growers continue to move to lower-cost crop establishment techniques.

In the grass sector, mower sales are up a little and sales of other grass harvesting equipment have been stable, according to AEA numbers, with forage wagon sales up and bale handling equipment rising significantly.

Out-of-season grass equipment sales are said to be holding up well, with demand for forage wagons streets ahead according to one supplier, as more producers look to take silage-making in-house and some adopt a zero-grazing approach in the search for lower costs and maximum grass use.

Some input costs are going to rise; new machinery prices will certainly firm.

So far, manufacturers importing to Britain – who have a major share of sales – have taken the drop in sterling on the chin and absorbed a major part of the currency shift as part of a broader strategy to keep factories turning over as key markets in Europe shrink.

Sales in France fell 5% in the second half of 2016 and this trend is expected to continue in the coming months, while Germany saw a 9% drop as a result of depressed commodity prices.

As a result, unfamiliar machinery manufacturers are coming to the UK looking for sales. The loosening of the second-hand market, which has been a significant restriction to new tractor sales in past months, is also encouraging.

The drop in sterling’s value has brought new overseas customers; exporting dealers have found fresh outlets as far away as South America and farmers investing in good used tractors have helped reduce dealer inventories.

Farmers Weekly says…

Oliver Mark, machinery editor

Machinery sales prospects will be affected by the uncertainty over farmgate prices and in the medium term by questions over post-Brexit farm support.

The full impact of the drop in sterling is yet to feed into imported machinery prices. If that fall in sterling is maintained, farmers can also expect more competition for second-hand equipment to continue.

Andersons Outlook

The Farmers Weekly outlook articles are based on Andersons Outlook 2017. Copies of the full publication can be downloaded from the Andersons website by clicking on “Publications & Events”. Alternatively, request a printed copy by telephoning 01664 503 200.

Andersons is running a series of seminars in the spring looking at the prospects for UK agriculture in greater detail.

3 March – RAF Club, Piccadilly, London

7 March – Harper Adams University, Newport, Shropshire

8 March – Westmorland, J36 Auction Centre, Kendal

9 March – Carfraemill Lodge Hotel, Lauder, Berwickshire

10 March – York Racecourse, York, North Yorkshire

14 March – Yew Lodge Hotel, Kegworth Leicestershire

15 March – Perth Racecourse, Perth

17 March – Newmarket Racecourse, Newmarket, Suffolk

21 March – East of England Showground, Peterborough, Cambridgeshire

22 March – Salisbury Racecourse, Salisbury, Wiltshire

23 March – Exeter Racecourse, Exeter, Devon

24 March – Royal Agricultural University, Cirencester, Gloucestershire

More information on the Andersons website.