Ag
downturn felt in implement sales
by Liza Berger
Wednesday, June 23,
1999
Paul Buck, 53, an agricultural implement dealer in Somonauk,
southwest of Aurora, has stopped ordering new equipment and is no longer
taking in used machinery.
He's selling more lawn and garden equipment than $150,000 tractors and
combines.
The current agricultural downturn, spurred by crop surpluses, weather
and sagging markets in other countries, is reminiscent of the early
1990s.
According to Mike Boehlje, a professor of agricultural economics at
Purdue University, when there's a farming downturn, implement dealers
are the first to feel the crunch.
Jim Gast, owner of Gast International Inc. in Joliet, a Case
dealership, agrees. "What impacts them impacts me," he said. "They have
to buy fertilizers and seed. They don't have to buy tractors."
This year, Gast has sold eight tractors. Normally, at this time he
would have sold 12 to 14.
Buck, who has enough planters to last him two years and enough
tractors to last him one, thinks the farming depression might get worse
before it gets better. His sales of farm equipment are down two-thirds.
If it were not for his consumer goods, he'd be out of business, he said.
The big ag implement companies also are struggling. Deere &Co.
reported a quarterly earnings drop of 56 percent. Caterpillar Inc., with
40 percent of its business in farm equipment, had a 52 percent drop in
profits in its latest quarter.
Some seasoned dealers say they won't go out of business anytime soon,
partly because they have broadened their lines to include lawn and
garden equipment.
Ag equipment now makes up only one-third of Dave Gieseke's business
in Hampshire, northwest of Chicago. The rest is golf, turf and consumer
products. He's sold only two heavy equipment units this year, down from
seven last year.
One lesson he learned from the last farming recession was to reduce
inventory, said Gieseke, 42. "No dealers carry a big inventory," he
said.
Inventory is costly. Dennis Gearhart, owner of a Deere dealership in
Rockford, has $1 million in used combines. "They're all drawing
interest," he said.
Some dealers are turning to e-commerce to supplement sales. "It's an
interesting new development where dealers supply to where they can sell
it at a higher price," Boehlje said.
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