Re: Decline Of US$ ~~ Potential Effect On Tractor Prices
Originally Posted by AxleHub
The dollar exchange rate to other currencies is ever-changing. It's important to notice that the dollar is not in a 32 month pattern of decline, it's merely in a very short term roller coaster pattern of value.
Farmers have historically been astute in holding various commodities to counter balance each other. If you have some gold or silver or copper the can balance out. But also to be noted, when our dollar is lower it's easier to export and easier debt repayment.
Lastly, in a global marketplace we also need to see that our trade in units increase in value just as prices of new units do and because our equipment lasts many years - any pricing changes up or down balance out over time.
You're right of course that the dollar moves up and down quite often . . but thankfully today w are no longer shackled by energy being always foreign supplied. And foreign tractor makers have certainly gotten a great deal of U. S. Based facilities established also.
GOOD POST, AXLEHUB.
In January 2017 the Wall Street Journal US/$ index was $93.94. Today it is $85.67, a decline of 9.1% since January.
Few publicly traded equipment manufacturing companies manage 4% net, net, net profit margins, so it is hard for me to comprehend how a 9.1% decrease in the purchasing power of the dollar can be absorbed when asian components are 60% - 70% - 80% of 18-horsepower to 70-horsepower tractors commonly considered here.
I think tractor price increases of at least 5% but more likely around 7% are probable in January 2018, assuming the dollar continues to skid.
I understand some components are manufactured in the USA, which is why I do not expect 9% or 10% prices increases.
I have been wrong a few times in my life, guessing the future of exchange rates. However, the dollar decline has been steady during 2017. The trend is your "friend" in foreign exchange markets.
Whether January 2018 price increases will come via increased MSRPs or decreased promos, or some combination of the two, we will see. Tractor demand is strong, often six week waits for popular tractor models. No reason for an asian tractor producer to let the dollar's decline eat into profit margins during favorable market conditions for sellers.
And, of course, tractor prices may not move at all.
