New Tractor Sales Are Declining

[ovrszd]

I think there is still a lot of latent demand for CUTs. The price on new or used wouldn't have to drop much for demand to pick up again. Financing cost is another matter.

I believe for the buyer that requires financing, there's a LOT of pressure on expendable cash now. Their daily cost of living has went thru the roof. So, initially they cut back on luxury spending. Maybe they don't go out to eat as much? If they cut one a week they will save $200-$300 per month. If they quit stopping at the "Coffee Shop" each morning before work they will save $200-$300 per month. If they quit buying clothes on a whim instead of when they need them they will save $50-$100 per month.

So, simply applying these changes will free enough expendable cash to buy the tractor.

Problem is they have already made those cuts just to keep the bills paid. Now they are down to cutting more serious expenditures. Pretty soon luxury spending is out of the question. Buying a tractor? No way.

I'm afraid that's where we are now. The working class Americans are going to come out of this Winter in the worst financial condition they've saw in years. Maybe in their lifetime.

Danger Will Robinson.

 

[airbiscuit]

I don't disagree about the working class,but there's plenty of weekend warriors who would still like a CUT, and will be tempted if the price drops a bit.

 

[ovrszd]

I don't disagree about the working class,but there's plenty of weekend warriors who would still like a CUT, and will be tempted if the price drops a bit.

We shall see.

You just described the very people I'm talking about. They don't need a CUT or they would already have it. They simply "would still like a CUT". Gonna hafta find more unnecessary spending to eliminate.

 

[airbiscuit]

We're probably pretty close to being on the same page. I'm talking about the dual income suburbanites who have high paying jobs and maybe recently purchased some property. The siren song of owning a CUT can be pretty strong. much the same as ATVs and UTVs. I'm still waiting to see bargain priced ATVs.

 

[Buppies]

Think prices will stabilize but as far as coming down not that much

 

[rScotty]

Think prices will stabilize but as far as coming down not that much

I think so too. Retail prices should drop, but won't. It would be nice if prices would drop immediately, because in the past that has seemed to be one of the necessary first steps toward curing a recession.

But for prices to fall, dealers would have to be willing to drop prices and take a loss. Many dealers just can't do that.

So I figure that dealers will be the first to be hurt. Their customers can do without a compact tractor, but the dealer cannot do without the customer. Dealers are the first ones in line to be damaged when customers can no longer afford to buy.

From there, the pain travels slowly back up a long economic pipeline that began years before when metal was refined to someday become a tractor. Each step toward turning that metal into a tractor represented an investment that was made and a future repayment that was expected. None of those costs change as easily as retail prices do. Probably they won't change fast enough to save some dealers from closing their shop.

Dealers should cut prices to move more units - and a few will - but most simply won't be able to afford to do so. They have their own costs.

Here's a thought: John Deere is domestically produced, politically connected, and has been around long enough to have seen this cycle affect their dealers and customers before. In fact, several times.
I wonder if that gives them an advantage?

rScotty

 

[airbiscuit]

I suspect that John Deere and Kubota will let the Mothership cruise along, but I wonder what the up and comers (Kioti, LS, Mahindra, etc.) do. They liked gaining market share during the pandemic, and are going to want to continue to build their brand. Additionally, they are not going to want to see their dealerships close, and have to rebuild a dealer network. Finally, they are going to want to keep their factories busy.

I don't know what strategies they might want to pursue, but I'll bet there are lots of discussions about how to make lemonade out of all this

 

[5030]

We're probably pretty close to being on the same page. I'm talking about the dual income suburbanites who have high paying jobs and maybe recently purchased some property. The siren song of owning a CUT can be pretty strong. much the same as ATVs and UTVs. I'm still waiting to see bargain priced ATVs.

Don't hold your breath. With almost 50% of the working class not working and on the government dole, I don't see that happening. BTW, it's not sustainable.

 

[5030]

John Deere is domestically produced, politically connected, and has been around long enough to have seen this cycle affect their dealers and customers before.

So is Kubota at least for their under 50 horse tractors. Keep in mind that JD has slowly eliminated the 'mom and pop' shops for multi dealer dealerships.

Gonna be a bust, I have no doubt. My dealer don't depend on small tractors, their business is large units and repairs.

 

[5030]

but I'll bet there are lots of discussions about how to make lemonade out of all this

Lemonade gets rancid when warm...

 

[Hay Dude]

Think prices will stabilize but as far as coming down not that much

Part of the results of runaway inflation is to have prices roar upward from the existing price, then settle in between the base and the peak.

Buyers are relieved when the price comes down from the peak and happily buy, even though the price is still much higher than the base.

 

[PreacherM]

I heard from one person (who imports containers of outdoor furniture) that the costs for shipping a container went from 5k pre-covid to 22-25k last year. Currently said it's around 7k now. His feeling was that the customer will eventually see prices drop but will take some time. I'm not expecting any prices to return to 2019 levels, without major recession.

 

[ovrszd]

Here's a thought: John Deere is domestically produced, politically connected, and has been around long enough to have seen this cycle affect their dealers and customers before. In fact, several times.
I wonder if that gives them an advantage?

rScotty

I am 71. Retired 11 years. Debt free.

My Grandson is 22. Self employed. Bought a house 2 years ago.

Which one of us can best handle the pending situation?

Same economic rules would apply to JD versus a younger company.

 

[2manyrocks]

The upcoming Fed 12/14-15 meeting will show whether they will continue raising rates to bring inflation down as previously announced or not. Their rate increases have slowed real estate transactions in middle Tennessee. My guess is it will take another year to see if the 2020-2022 run up in prices will reverse themselves or if we'll just have a stagnant market in which sellers ask too much and buyers can't pay what sellers are asking.

 

[ovrszd]

The upcoming Fed 12/14-15 meeting will show whether they will continue raising rates to bring inflation down as previously announced or not. Their rate increases have slowed real estate transactions in middle Tennessee. My guess is it will take another year to see if the 2020-2022 run up in prices will reverse themselves or if we'll just have a stagnant market in which sellers ask too much and buyers can't pay what sellers are asking.

Good post!!!

 

[rScotty]

I am 71. Retired 11 years. Debt free.

My Grandson is 22. Self employed. Bought a house 2 years ago.

Which one of us can best handle the pending situation?

Same economic rules would apply to JD versus a younger company.

Well, since you asked I'll attempt an answer. It helps that like yourself I've been around long enough to to see changes in the economy as normal cycles. Us oldsters can handle the situation because we have learned to adapt to whatever cycle we are in.

Your grandson's being self-employed and buying a house 2 years ago strikes me as a similar good position. That was a good time to buy and it seems always a good thing to be self employed.

I was self-employed at 24 when a downturn came along. I laid off about a third of my employees and began to do more of the grunt work myself in the evenings. No problem. Worked more hours is about all. Enjoyed the change from being a full time boss. After awhile the cycle turned up again. My guess is your grandson will do something similar.

So since you asked, I think both you and your grandson are equally well positioned to handle the pending situation.

That just leaves the bulk of the middle of the US population who are neither old and rich and wise - or young, energetic, and able. They have a real problem & I've no idea what they should do.

But I do know that simply blaming their problems on bosses, politicians, or economic cycles doesn't lead to a solution.

rScotty

 

[nova3930]

The upcoming Fed 12/14-15 meeting will show whether they will continue raising rates to bring inflation down as previously announced or not. Their rate increases have slowed real estate transactions in middle Tennessee. My guess is it will take another year to see if the 2020-2022 run up in prices will reverse themselves or if we'll just have a stagnant market in which sellers ask too much and buyers can't pay what sellers are asking.

It helped us personally a bit. Seller dropped the price on a piece of commercial land we'd been considering to move it along. For our purposes the difference in interest rate is minimal, especially since we'll have to refinance in 3-5 anyway....

 

[ovrszd]

Well, since you asked I'll attempt an answer. It helps that like yourself I've been around long enough to to see changes in the economy as normal cycles. Us oldsters can handle the situation because we have learned to adapt to whatever cycle we are in.

Your grandson's being self-employed and buying a house 2 years ago strikes me as a similar good position. That was a good time to buy and it seems always a good thing to be self employed.

I was self-employed at 24 when a downturn came along. I laid off about a third of my employees and began to do more of the grunt work myself in the evenings. No problem. Worked more hours is about all. Enjoyed the change from being a full time boss. After awhile the cycle turned up again. My guess is your grandson will do something similar.

So since you asked, I think both you and your grandson are equally well positioned to handle the pending situation.

That just leaves the bulk of the middle of the US population who are neither old and rich and wise - or young, energetic, and able. They have a real problem & I've no idea what they should do.

But I do know that simply blaming their problems on bosses, politicians, or economic cycles doesn't lead to a solution.

rScotty

I must have not described the situation very well. My Grandson and I are not in the same position. Not even close to the same position.

My basic point was in regards to debt ratio. It's a killer in bad times. Remember the early 80s? Farmers went broke by the dozens when interest rates approached 20%. Had they been debt free they would have thrived then. Their cash would have purchased excellent assets at a value price.

 

[scootr]

I doubt dept free farming even exists. Very few people living dept free too. In fact records show the average American is carrying more dept today than anytime in the last 10 yrs

 

[ovrszd]

I doubt dept free farming even exists. Very few people living vept free too. In fact records show the average American is carrying more dept today than anytime in the last 10 yrs

Yep. Even my large farmer friends borrow the money to put in a crop.

I think the increased debt ratio for the average American is an indicator of their overspending. That is going to bite them hard thru the next couple years.