WHY MACHINERY TRADEIS KEEPING SO HEALTHY
Farm machinery sales are the briskest they have been for a long time.
Peter Hill asked the FTMTA about the reasons for the buoyant trade
BY now, things should have quietened down a bit. That, after all, is what the machinery trade was expecting this year following a period of strong demand for tractors and farm implements.
"But 2000 is holding up well to date, according to reports from our members," says Michael Moroney of the Dublin-based Farm Tractor & Machinery Trade Association. "The general economy is doing well, interest rates are low, and some sectors of the farming industry have more disposable income to invest in machinery."
How long will it last? Difficult to tell. With a 13% slump in farm incomes during 1998 to 1999, following a steady 21% climb over the previous seven years, things ought to have slowed down already.
Industry observers predict a decline in milk price and cow numbers, as well as reduction in tillage cropping by as much as 10%. So that does not bode particularly well for machinery sales over the next two or three years. On the other hand, beef prices are expected to firm (even if production may slide) as the effects of the UKs BSE problems continue to fade, while "no change" is the forecast as far as beet and potatoes are concerned.
Mr Moroney believes other factors are helping fuel tractor and machinery sales at present. Not least the increase in part-time farmers either forced by lack of farming income or enticed by the prospect of decent wages, to work in the booming pharmaceutical and computer industries.
"Companies in this sector are working round the clock to meet demand and pay attractive wages to get staff," explains Mr Moroney. "The weekend has become known as the farmers shift because that is when farmers can afford to be away from the farm and its when full-time employees want time off."
Despite the apparent contradiction in part-time farmers generating a mini machinery sales boom, off-the-farm work is giving these small businesses a larger disposable income than can be generated by traditional means.
"They are then using this income for equipment investments that they have been slow to make in recent years because they simply have not had the cash," Michael Moroney adds. "Farmers have always had a good track record when it comes to investing in their businesses. And with an estimated 40,000 now involved in off-farm work, they make up a significant number."
Other factors? With a similar number of farms signed up to the Rural Environment Protection Scheme (REPS), this initiative is also generating cash – typically I£5000 a year – that can be spent on machinery for DIY maintenance, or on contractors for the same purpose.
Either way, tidying farm hedges, rough ground and other such activities needs machinery and so a proportion of this money also filters down to the machinery trade by way of maintenance equipment sales.
Irelands booming construction industry is also providing employment for farmers unable to make sufficient living from the land, and influencing machinery buying decisions to a degree, believes Mr Moroney.
"There is a new discipline among farmers who have off-farm jobs," he says. "Now, they really can not afford a tractor or handler that may or may not start in the morning – it has to start if they are to be on the job in time."
This may partly explain the rise in new tractor sales over the past years, which have climbed from 1848 in 1997 to 2762 in 1999 – the highest figures in 10 years.
Conversely, purchases of second-hand imported tractors have dropped in the past four years – from an estimated 3800 to 3300 last year. The strength of the UK pound has made tractors from this traditional source increasingly expensive, especially in comparison with new tractors brought in from fellow "euroland" states.
In addition, the availability of second-hand tractors from the UK has eased in line with the substantial fall in new tractors sales there.
Irish farmers are also appreciating the extra performance, output and potentially lower costs of operating more powerful tractors. Average horsepower sold is now approaching 100hp, with 130hp tractors becoming the typical mainline power unit on tillage farms. Contractors are looking at 180hp and beyond to maintain their power and performance advantage.
While machinery dealers welcome the extra sales traffic they see in their showrooms and yards, less welcome is the increasing difficulty they have finding good workshop fitters and parts staff. Irelands booming economy is largely to blame – wages are more attractive elsewhere.
"For individual dealers, it is a real difficulty, and one that has spin-off problems for farmers and contractors if it takes longer to get tractors and machinery serviced or repaired," Michael Moroney points out. "A survey of FTMTA dealer members revealed an immediate need for 55 mechanics and 25 spares people."
The association has launched a recruitment initiative, in Ireland, the UK and into eastern Europe (notably Poland) in the hope of finding the people its dealers need.
"Wages will have to reflect, to some extent, what people can be paid doing other jobs in other industries," adds Mr Moroney. "Inevitably, that will put upward pressure on future service and other support charges." *
FTMTA secretary Michael Moroney.
1999 3300 2762
1998 3000 2318
1997 3000 1848
1996 3600 2233
Source: Farm Tractor & Machinery Trade Association