Rising equipment costs strain farm budgets

Trump tariffs could further drive up equipment prices in 2025

Over the past two years, the cost of new farm equipment has increased at a faster rate than farm revenues, resulting in equipment costs taking up a larger portion of farm income. This has led to weaker sales in the farm equipment market, according to Farm Credit Canada, Economics.

Projections indicate that farm equipment sales will remain sluggish through 2025 as farmers face lower commodity prices, high equipment costs, and reduced profitability.

However, the decline in sales is expected to be less significant than in 2024, with 4WD tractor sales expected to remain above the five-year average.

This trend is not exclusive to Canada; farmers in the U.S. are experiencing similar challenges. In response to low demand, U.S. equipment manufacturers have reduced production levels.

The used equipment market has also been affected by this weak demand, resulting in increased inventories. Some dealers have resorted to selling surplus stock at auctions for lower prices.

This trend is expected to continue in 2025, with more used equipment being auctioned off.

While prices for new equipment may not drop significantly, the ongoing weak currency exchange rate could push prices even higher in Canada warns FCC.

Additionally, any potential tariffs would further drive up equipment prices.

Figure: Farm equipment costs remain high compared to revenue

Source: Farm Credit Canada, Economics