Year-end sales equipment sales strong, despite inflation
Year-end purchases of farm equipment seem strong, according to partners in Lake County International, founded in 1962 at Madison, South Dakota, and operated as a one-site dealership by the Bloom family.
MADISON, South Dakota — Jeff and Tom Bloom are celebrating their family’s 60 years in the implement business. That’s a lot of year-end conversations with farmers about their equipment needs, and 2022 is looking brisk.
Jeff, 65, and Tom, 55, have co-owned Lake County International since 1986, at Madison, South Dakota. The single-store business has 22 employees — 18 full-time and four part-time. It serves customers in a 35-mile radius including a good chunk of east-central South Dakota — the Lake, Moody, Miner, and McCook and those around them.
The Bloom family in fact was in implement business first at Huron, South Dakota, and then branched out to Madison 1962. Jeff graduated high school in 1975 and immediately came into the business.
“I worked here at the dealership with my father, spent all of my ‘young years’ learning the business,” Jeff said. Tom joined the business after high school.
He remembers business starting out good in the late 1970s, but the sharp downturn to 1983 and 1984. His father at times wrote him a paycheck “but told me not to run to the bank and cash it,” he said.
“The ag equipment business is definitely a cyclical business,” Jeff said, noting it’s better today.
The big picture
Equipment demand is looking strong lately. The Association of Equipment Manufacturers, a North America-based international trade group, in a Nov. 14, 2022, report said combine harvester sales showed double-digit gains in the U.S. and Canadian markets in October 2022, while total tractor sales fell in both countries. U.S. ag equipment sales were above the five-year average for the third month since April 2022, according to the AEM.
U.S. self-propelled combine sales grew 77.4% in October, to 1,678, with year-over-year monthly increases for five consecutive months. Year-to-date sales were up 16.2%, according to the report.
All U.S. tractor sales segments above 40 horsepower grew, according to the AEM monthly report. The 100-plus horsepower units were up 25.5% and four-wheel-drive units up 9.4%. (Total farm tractor sales fell 10.8% for the month of October, compared to 2021, dragged by a 23.6% decline in “sub-40 hp” tractors. )
“We’re happy to see farmers being able to take advantage of the technology on modern harvesters and tractors,” Curt Blades, AEM senior vice president, industry sectors and product leadership.
Pretty good shape
Jeff Bloom said farmers today are interested in equipment, but many are worried about inflation. Generally, most are working from a strong equity position. Interest rates are rising to the 7.5% level, but — so far — they don’t have the 20% annual interest rates the Blooms saw in the 1980s. Many tax incentives have been created to help farmers purchase equipment.
“Those incentives are still there,” Jeff said. “It still makes sense for the farmers to buy, and to be able to write-off, those purchases. A lot of them buy at the end of the year.”
Lake County International sales have been “consistent,” since 2017 and 2018, Jeff said.
“We haven’t grown exponentially in the last few years,” he said. “In 2010, 2011 and 2012, we had really good growth.”
The average age of equipment in his eastern South Dakota trade area seems to be getting a bit older – “probably older than most people like.”
Of course, the Blooms and many of their customers remember when a 715 International combine — sold from 1971 to 1979 — was $15,000.
Today, the company’s largest Quadtrac is more than $500,000.
And the largest International combine — equipped with a bean head and a corn head — costs in the neighborhood of $1 million.
“That’s just a hard pill to swallow for a lot of our producers, when they come in to trade in the combine they’ve had for five or six or seven years, and now are looking to updating,” Jeff said.
But, on the other side of the coin, today’s bigger, more capable equipment allows a farmer to combine a quarter-section of land in two or three hours, and then do the tillage work in the same afternoon.
“How long did it take to do a quarter of land in 1945?” he said.
As pricetags have gone up, farmers have repaired machines.
“We’ve seen our service department and parts department stay awfully busy because people have chosen to fix-up,” he said. “But, still a lot of demand for equipment we’re able to get. In some cases we can’t get everything we want.”
Lake County International is a single-store operation, which is a little out of the ordinary, Jeff said.
“We’ve been able to stay up with the time," he said.
The Blooms sense a lot of pent up demand for the large equipment, as demonstrated in the AEM report.
“We have about the same amount of equipment on-order that we’ve always had,” he said.
“We have more equipment coming in with the customer’s name on it,” he said. “They’ve already pre-spoken for it. It’s coming for a customer or a farm. The ‘tire-kicking’ came six to nine months ago so that we can make sure we have it on for their season of use. There’s a lot of information out there available, at the dealerships or online, for them to do ‘virtual tire-kicking.’ That’s occurring an awful lot anymore. People are doing their homework. They’re seeing what’s out there, what’s available. They can also see what products are performing.”
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Lake County International would like to have more equipment than they have on the lot.
“There is no way we can really sustain not being able to get equipment until two weeks before the customer, the farm producer, is wanting to use it,” he said. “We have to have prep time to train and get them up to speed with the equipment that they’re using in the field.”
Some equipment is coming in just before the time customers are needing it, and it’s creating some stress.
“Supply chain issues,” he said, speculating on the reason. “It’s all kind of the product of COVID, two years of being off, not having production of equipment. We’re just coming back. I don’t see a quick fix. I think we’re 12 months out before we’re going to start seeing products. Computer chips what most companies are blaming (delays of) equipment on.”
The strong 2022 crop figures into whether farmers are in the mood to buy.
“Right here, in our five-county area, things were pretty good,” Jeff said, of the crop. Yields were “down from the bumper years,” but not far to the south it was far tougher. Forty-five bushel per acre corn and 20-bushel per acre soybeans weren’t uncommon.
“It’s not that easy to make those purchases when you don’t have that income, and don’t have the bushels,” he said, quickly acknowledging that crop revenue insurance protection would help help drought-stung producers “round out what they didn’t get” for crops.
On Nov. 4, 2022, Lake County International was hosting John Schuver, 60, from Granville, Iowa, and his brother Mark “Junior” Schuver, 57. They had made a two-hour drive to Lake County International to look at a new Gehl ALT750, a telescopic, articulate loader. The machine has a telescoping arm that reaches 198 inches at full bucket extension. John Schuver noted that a loader like this could do all sorts of things on the farm’s 3,000-head feedlot (officially, “Poverty Acres Feedlot”). The machine would cost roughly $100,000, but they’d use it every day for loading manure, loading silage and moving bales.
John said equipment inflation is of concern, but this year’s corn yields ranged from 250 bushels to 270 bushels an acre, and soybeans averaged 85 bushels.
“The price has been good the last few years, and you can tell you by the (farmland) ground prices,” he said.
In one sale this fall, a field sold for $26,000 an acre. And later another parcel for $30,000 an acre. It’s hard to know where it’ll all end, he said.
“You’re kind of waiting for that ‘hit.’” John said. “Interest rates are going up and are going to start taking a toll. But if it stays dry it’s going to be completely different, maybe, next year.”