China-US Trade Tensions: US farm equipment retailers experience drop in sales

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Purchases of farm equipment in the U.S. are down sharply and some farmers say the current trade disputes and low commodity prices are the main reasons. But at least one equipment dealer in the state of Colorado says he sees some hope on the horizon. CGTN's Hendrik Sybrandy reports.

Dave Hazlett is a busy man lately. This Service Tech at 21st Century Equipment in Fort Morgan, Colorado has no shortage of combines and other machinery to work on.

OWEN PALM CEO, 21ST CENTURY EQUIPMENT "As the fleet gets older and older, our parts sales and our service departments get busier and busier."

Owen Palm runs 16 John Deere dealerships in Colorado and Nebraska. He says his customers are largely in fix-it mode these days when it comes to their farm equipment.

OWEN PALM CEO, 21ST CENTURY EQUIPMENT "It's really been our new sales that have been impacted."

These are challenging times for American agriculture. Record crops have driven down commodity prices for the past five years or so, a trend reinforced with China no longer buying U.S. soybeans. Then steel and aluminum costs went up a year ago.

OWEN PALM CEO, 21ST CENTURY EQUIPMENT "That's when President Trump announced the first round of tariffs and everything came to a screeching halt at that point. Deere experienced increased costs of materials. They passed those costs on to the dealer and the dealer, of course, tried to pass those costs on to the customer."

And many customers put new purchases on hold. The US Commerce Department says farm equipment experienced its sharpest drop in sales in three years in the first quarter of 2019.

HENDRIK SYBRANDY FORT MORGAN, COLORADO "John Deere first predicted that farm equipment sales would grow by four percent this year. It's since downgraded that to two percent which means $464 million less in tractor and harvester purchases."

TERRY TRIM COLORADO FARMER "This is a brass washer and these are nuts and bolts."

Terry Trim had just driven 80 kilometers to buy parts for her wheat combine when we met her.

TERRY TRIM COLORADO FARMER "We don't buy new, we buy used and we fix them and that's the way it is."

She says lots of farmers, in this capital-intensive profession, do the same.

GEORGE LACOEUR LOUISIANA FARMER "Machinery costs go up. A $750,000 cotton picker and a $500,000 combine. It's tight. It's tight."

OWEN PALM CEO, 21ST CENTURY EQUIPMENT "The drop in commodity prices has put a lot of pressure on balance sheets and I think our customers are getting a lot of pressure from their lenders not to make any major capital purchases."

Palm held off on hiring for a while but has started aggressively recruiting potential employees. He has plans to upgrade several of his stores. With lots of farmers eager to take advantage of new technology, like artificial intelligence, in their operations, he believes his industry is finally moving into a replacement cycle.

OWEN PALM CEO, 21ST CENTURY EQUIPMENT "We're optimistic that this is going to pass and that we're on to better days."

Stable prices and trade certainty equal farmers who are ready to spend. Until then, the service techs will have their hands full. Hendrik Sybrandy, CGTN, Fort Morgan, Colorado.