Machinery Makers See Increased Demand 'Across the Board'

Machinery Demand on the Rise

Companies have seen increased demand across the board in the Farm and Construction Machinery sector. Several factors are combining to create a good earnings season for many companies within the sector. Emerging and developed markets have both seen strong growth in the recent quarter. While many companies have focused most of their investments on emerging economies like China, Latin America has actually been one of the strongest markets recently. Countries there, especially Argentina and Brazil, have experienced high double digit growth in equipment sales as compared to last year. Some economists predict the global economy will grow 3.5% next year, with 6.5% growth in emerging markets. The weak U.S. dollar has also been helping sales for American companies.

On the agricultural side of things, machinery companies have seen a huge boost from growing corn prices. Demand for corn has been high due to a projection that 37% of this year's crop will be used for bio-fuels. It's expected that the profits gained from high prices should trickle down to the Farm and Construction Machinery sector as farmers look to upgrade and repair equipment they had been putting off due to weak markets.
Renewed levels of spending are also taking place in the mining equipment industry. After putting off upgrades and repairs due to weak commodity prices, miners are beginning to spend money on equipments now that coal, copper, and iron ore prices have recovered.

U.S. Farm Tractor, Combine Retail Sales Surge in October

According to the Association of Equipment Manufacturers, total U.S. farm tractor unit retail sales were up 20.3% to 14,648 in October from 12,177 in the same month in 2009. Larger, more powerful four-wheel tractors surged in October, with unit sales up almost 83% compared to last year.

For the year, this segment of the farm machinery market was up 26.9%. Year-to-date farm tractor sales through October were up 4.1% compared to the first 10 months one year ago.

Combine unit retail sales were up from 895 in October 2009 to 1,112 units this year or 24.2%. Year-to-date combine sales increased from 8,342 last year to 8,816 in the current period or 5.7%.

Deere & Company notes in its most recent farm machinery outlook that with support from healthy farm cash receipts, solid commodity prices and low interest rates, industry farm-machinery sales in the United States and Canada are forecast to be up 5 to 10% for the year with much of the strength concentrated in larger equipment.

Thursday, November 11, 2010
Source: Monitor Daily