Ag equipment industry update.Name: Charlie O'Brien
Title: Vice President of Agriculture Services, Association of Equipment Manufacturers (AEM) since 2007, Milwaukee, WI
Career: Before joining AEM, he had been with John Deere Credit his entire career.
Education: B.S. University of Wisconsin-Madison; MBA Drake University
AM: How is the farm machinery business?
CO: Any outlook is complicated by today's economic difficulties, but the past two years have been good for manufacturers of 2-wheel drive Tractors 100-HP-and-over, 4-wheel-drive Tractors and Combines. These product categories have all seen double digit growth, helped by increased energy demands, increased commodity prices and increased net farm income.
AEM is not in the forecasting business, but survey results from our interim 2009 Outlook, completed in mid-February 2009, shows that expectations for U.S. sales of 4-wheel-drive Tractors and 100-HP-and-over 2-wheel drive Tractors run from flat growth to a 10% drop in 2009, depending on product types.
Combines have maintained their growth rate over the first two months of 2009, but predictions are for decreases through the year compared to the past two years.
Smaller tractors with less than 40 HP are down 18% in the first two months of 2009 and could continue that trend.
Opinions are split on credit availability, but dealers are facing inventory, financing challenges and the credit crunch doesn't help product movement through distribution channels.
As we can see, compared to other market sectors in this current economic crisis, agriculture is the place to be. The record debt-to-asset ratio is extremely positive. Price increases on all fronts create volatility, yet the last two years show overall industry strength. The USDA's most recent net farm income projection of $71.2B is still above the previous 10-year average.
These factors suggest that the agricultural sector is still fundamentally in good condition.
AM: What services does AEM provide?
CO: The AEM Board of Directors mandated improving and expanding AEM's Ag Services, and we're moving ahead with matters that will interest Agri Marketing readers.
AEM Ag Services has a long history of providing industry input to standards and advocating safety advancements in the Ag industry. For example, AEM has worked with its allies to spread the implementation of Roll Over Protection Structures and safety lighting and marking on tractors, and its offers a downloadable pictorial database for safety symbols.
AEM is currently gathering data towards assessing the true cost of Tier 4 compliance under regulations imposed by the California Air Resources Board. The AEM Washington, D.C., office advocates for industry oil issues including Tier 4, the Farm Bill, ag equipment depreciation, and renewable/sustainable energy investment as well as international concerns such as free trade and the current Russian safeguard on the importation of combines.
AEM is also heavily engaged in working with other industry groups to develop ISOBUS standards for agricultural vehicles and implements across the globe.
AM: What is the AG Flash Report?
CO: Each month, AEM equipment members report the number of tractor units by horsepower range and combines that are shipped to their dealers in the U.S. and Canada. Each manufacturer's individual data, of course, is kept in the strictest of confidence. AEM then aggregates the data and issues the Ag Flash report.
It is a key data point for the manufacturers as well as others in the ag industry because it indicates the level of purchasing activity in the marketplace. The information is available to the public and be accessed at the AEM Web site: www.aem.org.
AM: What are AEM's new initiatives?
CO: AEM is expanding its ag initiatives to better serve the industry. We believe in doing our part to provide our members and our allies the biggest benefit for dollars spent, which brings us to our new AEM trade show, AGCONNECT Expo. The inaugural AGCONNECT Expo is slated for January 13-15, 2010 (previewed on January 12 by special admission) at the Orange County Convention Center in Orlando, FL. See www.agconnectexpo.org.
The show will provide a global Platform for North American agribusiness, with meetings and event co-locations at the show providing-maximum value for all participants.
DLG (GermanAgricultural Society), organizer of Agritechnica, theworld's largest agriculture machinery show, recently entered into a long term alliance with AG CONNECT Expo.
A comprehensive registration process will capture the demographics of our attendees, enabling us to better meet the needs of our attendees in future years, and providing manufacturers and producers with an easy swipe-card method of maintaining contact. The show is set at an indoor, professional venue--with internet cafes and fully outfitted press room--providing a true gathering place for the industry. The education program and the interconnection at AG CONNECT Expo will make the comparisons to other global agriculture trade shows unavoidable.