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Greetings from Pennsylvania,
By Ron Reed, 2006 AIMRA President
Spring
has arrived here in the mid-Atlantic region. Now all we need is some rain.
We have had an unusually dry winter and early spring so far. It always
seems that in the agricultural world, weather is the number one topic. In
our part of the country, as I’m sure in a lot of others, the big news this
past month was the announcement of Gehl Co. exiting the Ag industry. What a
shock! It was a sudden announcement (even their sales force was caught off
guard), but was it sudden in coming? I don’t think so. They have had more
and more companies making products for them the last several years. They
were also rumored (or for real), on a few occasions, to be for sale.
I have
said for many years, that as both farmers and dealers have disappeared, the
one thing that hasn’t happened is products disappearing. Oh yes,
manufacturers have closed, or they merged with someone else, or they were
bought out, but it always seems that the product remained to be
manufactured. So the same number of products is sold to fewer farmers and
fewer dealers. That may not be the case with Gehl. Their announcement was
to phase out of the business within 60 days. Some company may come along to
purchase them, or individual products may be sold off, but for now, what an
opportunity for those of us who sell competing products. Do you sell forage
boxes, forage harvesters, manure spreaders, grinder mixers, or hay
equipment? There are dealers that are looking to fill these
voids.
As many
of us that have lost lines over the years, sometimes fortune falls upon us
if we but seize the moment.
Good
selling,
Ron
Reed, President
Ag Equipment Sale
Update
Agriculture equipment sales were mostly solid in the first
quarter of 2006, but softer crop prices and jitters about potential cuts in
federal farm funding could slow business the rest of the year, according to
manufacturers and dealers. Soaring energy and transportation costs are
cutting profit margins for farm equipment makers and dealers. Steel product
prices are also mostly higher, after surging across the board in
2005.
Retail
sales figures compiled monthly by the Association of Equipment
Manufacturers (AEM) show farm wheel tractors (two-wheel) of at least 100
horsepower rose 7.9% in March compared to a year ago, but fell 8.4%
year-to-date compared to the same period of 2005. All other categories
posted positive results. The under-40 horsepower category rose 1.8% in
March and 2.9% in the first quarter. Tractors of 40-to-100 horsepower rose
4.5% in March and about the same in the first quarter. Total tractor sales
were up 3.5% in March and 2.2% in the first quarter. Combine sales jumped
32.9% in March and 9.7% in the first quarter.
“The mood this year is certainly not euphoric," said John
Smylie, Senior Vice President of the AEM. “There's expectation that the
market will be flat to slightly down from where it was last year.
Commodities prices are not favorable for producers because of oversupply,
so there is no great rush to buy equipment. Demand has not caught up with
2005's record soybean crop and banner corn production. In addition,
uncertainty over federal funding levels in the 2007 farm bill
reauthorization is casting a pall on sales. We've got a humongous budget deficit,
and certainly the Congress will be looking at a variety of ways to reduce
that," he said. “The farm bill may see money allocated differently
among the various titles, and overall funding levels could be cut.”
Phil Kaster, President of Kasco Manufacturing in Shelbyville
, Indiana , which makes drills,
seeders and attachments for larger machines, said March sales were up about
5% compared to a year ago, and first-quarter business was also slightly
better than the same period of 2005. “Drills and seeders aimed at niche
markets like East and West coast grape growers, food plots for wildlife,
pasture renovation and landscaping are selling well, but demand for the
more traditional, large planting equipment attachments is slipping after
strong sales in 2005. Last year the farmers had a very good year,” Kaster
continued. “They are good at spending money when they make it. I think some
of the farmers are more cautious this year, and some of their purchases are
down.” Still, Kaster expects 2006 should be an ‘up year’ and added that
Kasco is expanding its workforce. “But the question of farm subsidies looms
large,” he said. “I think a lot of equipment is bought with that type of
money; money that's coming from Washington
. Kasco prices probably won't increase until August. Prices
last rose by 5%-7% in August 2005, the second of two hikes in 2005 due to
higher steel costs. Steel prices now are mixed, but energy costs suggest
higher material prices are on the way; scrap metals and welding wire are
already higher,” he said.
A manufacturer of crop sprayers and hay and forage products
said volume is about steady compared to a year ago, but the market is
tougher and margins are harder to maintain. “We're providing incentives to
sell,” said John Miller, executive of Miller-St. Nazianz located in St.
Nazianz , Wisconsin , which sells
to corn, soybean and dairy farmers. “These include cash discounts,
buy-downs of retail contract interest rates and free interest for a limited
time. Corn and soybean prices last fall were not as strong as 2004, and
milk prices have dropped considerably in dairy areas like Wisconsin.
The prospect of reduced farm subsidies is ‘unsettling the
market. Our larger equipment has been more sensitive to subsidies and
incentives than the smaller."
Miller expects decent sales through the first half of 2006,
but he is not as confident about the second half, as crop and milk prices
sink further. “The company raised prices by 4% this year on some products
that required updated engines to meet environmental code. Another price
hike may come in August,” he added.
“Some steel prices have risen this year, and hydraulic
components also cost more,” Miller said. “Precision farming, or the
satellite application of crop spraying and harvesting, is trending higher.
Meanwhile, farm consolidation continues, the equipment keeps getting
larger, the unit numbers keep dropping, and the expense of the equipment
keeps going up.” Miller also stated that he expects his Ag equipment sales
to dip 10%-15% in 2006 compared to last year. Comparisons are tough, as
year-end sales in 2005, and especially in 2004, got a boost from expiring
tax incentives for capital equipment investment.
On the retail side, a farm equipment dealer in central New
York said 2006 is off to a slow start.Bob Frazee, owner of Cazenovia
Equipment in Cazenovia, NY, and president of the North American Equipment
Dealers Association, said first-quarter Ag equipment sales at his eight
stores were off by about 30% from 2005, but there are signs of a slight
rebound. “A lot of our customers have delayed their purchases until the
very last minute,” Frazee said. “Until they were ready to go to the field,
they weren't ready to make the commitment to replace equipment. Mild winter
weather should push up the start of planting season by a couple of weeks,
and could support sales,” he said. Softer commodity prices, particularly
for dairy, are hampering Frazee's business now. Rising fuel and fertilizer
costs and higher interest rates also weigh in. Manufacturers have passed on
their higher input costs for transportation and fuel to retailers, but
Frazee cannot always raise his prices by the same percentage. “Our profit
margins are getting squeezed pretty significantly," he said, and added
that his freight costs have raised 20%-25% from last year. Frazee said he
has postponed capital investments, like replacing delivery trucks, and
servicing and material handling equipment, because of higher borrowing
costs.
A wholesale distributor of after-market components based in North
Dakota said his business is up about 18% compared to the
first quarter of 2005, and prospects are good for similar or better gains
through the year. “We had very strong buying through the winter
months," said Joseph Jandrisch, Owner of Degelman Industries in Minot
, ND , and a director on the board
of the Farm Equipment Wholesalers Association. “Sophisticated farmers
planned ahead. Corn industry sales are strongest, and grain-related
business is finding support from the right balance of precipitation since
last fall,” Jandrisch said. His larger-machine component sales are trending
upward as farm consolidation continues and smaller, ma and pa farms fade.
A wholesale distributor of after-market components based in
said his business is up about 18% compared to the first quarter of 2005,
and prospects are good for similar or better gains through the year. “We
had very strong buying through the winter months," said Joseph
Jandrisch, Owner of Degelman Industries in, and a director on the board of
the Farm Equipment Wholesalers Association. “Sophisticated farmers planned
ahead. Corn industry sales are strongest, and grain-related business is
finding support from the right balance of precipitation since last fall,”
Jandrisch said. His larger-machine component sales are trending upward as
farm consolidation continues and smaller, ma and pa farms fade.
Jandrisch noted that Degelman has raised prices 3%-4% this
year. In 2005, steel costs and a weak U.S. dollar sent prices spiking by an
average of 20%; steel prices have since leveled off and the dollar has a
firmer tone. “The company ventured into foreign exchange hedging about 18
months ago because of wild swings in the dollar,” he said. “The objective
was to take the currency risk out of the equation, which we've done; we're
probably about even."
John Deere's monthly retail commentary described a solid
March. Utility tractor sales for the industry gained 7%, and Deere's gained
more. Row crop tractor sales rose 13% for the industry, but Deere's fell by
a single digit. Four-wheel tractor sales grew 18% for the industry, and
Deere's grew more. Combine sales climbed 35% for the industr, and Deere's
sales outperformed.
Deere said the U.S.
farm sector remains in sound overall condition.
Still, industry sales of Ag equipment should fall about 5% from 2006 on
concerns over input costs like fuel and fertilizer and a slight decrease in
cash receipts. Farmers should benefit from debt levels that remain under
control and from rising land values, according to Deere.
Past President’s
Thoughts, By Bobby Hadskey, 1994 AIMRA President
Recently I had the pleasure of adding my son, Ryan, and my
cousin, David, to the Short Line Sales family. I couldn’t help but reflect
over the past thirty years of where I was at this time in my career. How
does one impart this information to these two young men without sounding
preachy? While I truly thought my raising and educating days were over with
my son, I realized how wrong I was! They need to understand the importance
of cultivating relationships with dealers, understanding the marketing
department of companies, and communicating with credit departments.
I realized that this can best be shown by example. As we
travel together day after day, I want them to understand the importance of
these people in their lives. They are our bread and butter, friends,
confidants, and often they just need someone to listen. There will be lots
of days with no orders and no time to eat. There will be lots of days with
shipping delays, credit delays and incorrect equipment. However, there will
be lots of days with good orders, good lunch and good conversation.
It is equally important to stand by your word and promise, as
your reputation is your livelihood and is what will give you entrée when
you most need it. After years of sales, I think back on the importance of
these relationships in my life. I have often shared my dealers family
sadness, illnesses, hard times, but still maintain a closeness that will
always be there through mutual respect. How I share these lessons with
these new salesmen should not be a challenge, but an automatic reflex, and
if they are able to live some of these experiences, they will be better for
it. I pass on to you the importance of integrity, patience, compassion and
above all, the ability to listen.
Board of Director Column, By Miller Hadskey,
2006 AIMRA Treasurer
An often repeated theme for speakers and columnists talking to
reps is to preach about change. They tell Reps change is coming and about
how we should embrace it and be ready for it, or else. But they hardly ever
say what the change might be. So the net result is that I end up feeling
uneasy. I think I have seen a shift in the job description of a Rep that
warrants mentioning.
Closing a deal is the number one job that any salesman should
try to improve, but there is another job that is becoming increasingly
important. I am not talking about the tasks our companies are always
pushing, such as time management and forecasting. I am talking about
service. I call it a job because that’s what it is, and it is not a job we
get paid to do. Service is important because the only thing rising faster
than machinery’s price and complexity are farmer’s expectations.
Helping customers with service, from initial setup to trouble
shooting problems in the field, is a hard thing to do. That is why it is so
valuable to farmers, dealers and manufacturers. Sometimes a fix can be as
easy as reading the manual to somebody, but often it can be very complicated
and humbling. There is more to it than test book product knowledge. Knowing
what the book says does not replace knowing how the pieces interact in the
machine and in the dirt. Nobody enjoys trying to make something work
correctly when you have an irate farmer looking over your shoulder and you
don’t know what to try next. It is human nature to try and avoid that
situation. It is easier to tell them to call the factory every time, but
the only way to learn service is to go out and get your nose blooded a few
times, figuratively speaking. Resolving a problem once makes it easier the
next time. You will learn something every time you help someone with a
service issue.
During the time that a customer has a major problem is an
opportunity to earn respect from dealers and customers, even if everything
does not work after the first fix. I went to help a dealer get a very
expensive machine going a few weeks ago and we had all kinds of trouble.
Every now and then the farmer’s dad would show up and make snide comments
about how they paid all this money and it won’t even work. He had been
crawling in and out of a bottle all afternoon. They only thing that would
have been worse is if the farmers wife had been there telling everybody how
stupid they all were, which I have had happen. At the end of the day the
farmer was happy with the machine and I thought the dealer was going to
kiss me. Now of course he called us up bright and early the next morning
and the problem had returned. But after some research we had him fixed up
by the end of the day. That dealer will remember the efforts of Short Line
Sales when it is order writing time. Giving a customer attention when they
need it most lets them know that you and the manufacturer stand behind the
sale.
There are drawbacks. As I said before, it is another job
that you don’t get paid to do. It is a job that requires a lot of the most
precious thing we have, our time. Dealers can come to depend on you too
much. We have one dealer who thinks we are his service department. Once a
farmer has your cell phone number and figures out that you know what you
are talking about, he is liable to call anytime, anywhere. Do not dwell on
these things as negatives. Think of them as flattery.
The way I was taught, a Rep’s job description is whatever
needs to be done, and often that includes service. I know now there are
salesmen who do not think service is part of their job. Because the
farmer’s expectation of performance is so high, we all need to do a better
job of selling and servicing to make ourselves indispensable to the dealers
and manufacturers. We do not have to just do a better job than the next
short-liner; we have to do a better job than the majors. A Rep who is not
afraid of service problems is the kind of salesman that a dealer wants
calling on them and the kind of Rep that manufacturers will want to employ.
That is how being a good serviceman can buy some job security. Reps are not
paid directly to do service work, but it does pay in the long run.
AIMRA Conference in Mini Apple
This year’s AIMRA
Conference is scheduled for November 5-7 in Minneapolis
The headquarters
hotel is the Minneapolis Hilton – in the heart of the city. Look to the
AIMRA website in coming months for program updates. A pre-conference
marketing brochure will be mailed out in early July, as well, but for now
circle the dates on your calendar.
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