What’s driving combine prices higher?

The race has been on since the mid-1950s to develop generally bigger and better combines to match the labour-saving need and increased scale of crop farms with each passing decade. Combines are ranked by engine horsepower (hp) capacity into 'classes’, and all of the major brands have recently brought to market Class 10 machines capable of producing over 680 hp. Along with increased horsepower and more capacity comes higher price tags. Not every farm will want or need the largest capacity machine available on the market, so manufacturers offer a range of sizes. Other factors besides capacity driving up the price of combines in Canada include:

1. technology
2. inflation
3. market demand
4. exchange rates 

The level of technology has increased dramatically and newer machines are equipped with GPS, computer sensors and a range of automatic features. Figure 1 clearly shows the long-term impact of inflation. The spread between the nominal cash price in the smooth black line and the real inflation adjusted price in the red line (with the triangles) keeps getting wider. Even though the price of a combine has increased in real terms, general inflation in the economy has contributed substantially to acceleration of sticker prices.

Many combines sold in Canada are manufactured in the U.S. and so the exchange rate has an effect on prices as well. Combine prices seem to be more suppressed when the Canadian dollar is strong vis-a-vis the U.S. dollar, such as the period from 2010 to 2012, than when the Canadian dollar is weak.

Higher prices do not seem to have affected combine sales in Canada, at least not yet. Around 1,800 new combines are sold each year in Canada on average. Increased market demand led to higher sales each year since 2020 (see Figure 2). Factors such as good crop prices and record high farm income likely buffered the impact. In addition, some 2023 sales may have been pulled ahead in advance of the federal government’s gradual phase out of the Accelerated Capital Cost Allowance, which began in 2024.

Surprisingly, recent data from the Association of Equipment Manufacturers show combine sales in Canada up 5.7% year-to-date in July, while U.S. sales are down nearly 18% year-to-date. Sales in Canada for the month of July 2024, however, are nearly 28% lower compared to July 2023. This may indicate tougher market conditions ahead.

Can combine capacity continue to increase? Is there a limit or an optimal size for a large combine? As technology allows these machines to approach full autonomy, will the economics of ownership change in the years ahead? These are all interesting questions. Larger farms and bigger combines may mean a smaller market for combines in the future.