Agricultural equipment sales soar in South Dakota
SIOUX FALLS (AP) — Good years in agriculture have led to a boom in farm equipment sales in South Dakota.
Tax receipts from sales of tractors, irrigation equipment and other agricultural machinery went from $12 million in 2005 to $41 million last year, the Argus Leader reported. The increase helped the state through the Great Recession of 2007-2009, said Jim Terwilliger, chief economist in the governor's budget office.
"During the recession, if we didn't have the type of performance we had in the ag economy, it would have been even more difficult than it was in terms of the impact on the state budget," he said.
The tax rate on farm equipment rose from 3 percent to 4 percent in 2006. South Dakota State University Economist Matthew Diersen said there are other reasons for the tax revenue increase: a decade of lean years in farming led to a pent-up demand when crop prices began to rise in 2006; farmers are investing in new technology such as GPS navigation systems; and as farms get larger, farmers are buying bigger equipment.
"As farmers have to try to produce more bushels — because that's what the market's been demanding — they've been adopting new technology, and that technology costs more money," Diersen said.
It is possible that the 15-20 percent annual growth of the past decade could continue, Diersen said, but he is betting on a slowdown or even a reversal. Crop profitability shows signs of being lower this year, he said.
"If you don't have those high returns, you don't have the flexibility to go out and purchase," Diersen said.
Ron Weiss, spokesman for New Direction Equipment in Sioux Falls, said he expects the good times to continue.
"We feel that there's a lot of optimism," he said. "As long as people keep consuming meat and dairy products — which we don't see that stopping any time soon — there are trends up and down, but we're optimistic. We feel there's a lot of indicators showing it will remain solid."