Canadian farm equipment market expected to be softer in second half of 2018

In the 2017 Economic Snapshot of Canada equipment sector, FCC Ag Economics forecasts for total tractor sales and combine sales were relatively close (total tractor sales projected 13.1% vs. 15.4% actual, combine sales projected 27.3% vs 23.9% actual). 4WD sales are typically more difficult to predict given its complement to seeding units. Our forecasts for 2018 will likely be different given the current global trade environment.

The demand for new equipment is highly dependent on the health of the agricultural economy. During the first half of 2018, Canadian farm equipment sales have had moderate growth, averaging close to 5%. Rising interest rates, price pressures on farm equipment, slow growth in farm revenue along with a weaker Canadian dollar is expected to lead to softer farm equipment sales in the second half of 2018.

FCC Ag Economics expects farm equipment sales to be flat to lower for the remainder of 2018:

• Overall total tractor sales are projected to increase 1.4%.
• 4WD tractors sales are projected to decline 6.4%.
• Combine sales are projected to decline 6.9%.

2019 farm equipment sale projections:

• Total tractor sales falling 1.6%
• 4WD tractor sales falling 12.5%
• Combine sales falling 12.8%

Sales are expected to slow due to trade uncertainties around commodity prices and from lower expectations for crop yields due to the dry growing conditions in Canada. As a result, Canadian crop receipts are expected to have moderate growth of 2% in 2018 and 1.3% in 2019 reflecting the slowdown in both 4WD and combine sales in both 2018 and into 2019. Increased production over the last several years has supported crop receipts and farm equipment sales. Livestock receipts particularly those of beef and dairy operations are also a good indicator for 2WD horsepower tractors, reflected in our projections for overall total tractor sales to remain relatively flat. Livestock receipts are expected to grow 3% in both 2018 and 2019.

At the current time moderate growth in farm cash receipts means softer farm equipment sales. Despite a slowdown, relative to five-year average total tractor sales remain in-line with their five-year average of 25,829 units sold. We continue to expect both combine and 4WD tractor sales to normalize between the 2000-2007 and 2013-2017 period averages. Combine sales averaged 1,347 units during the 2000-2007 period and 2,341 units sold in during the 2013-2017 five-year average. Similarly, 4WD tractors averaged 633 units sold during 2000-2007 and averaged 1104 units over the past five years.