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Stocking up for spring.


Manitoba farmers are on a buying spree, investing in tractors, combines and other cultivation equipment, application chemicals and seed with a frenzy rare in the 1980s. High cereal grain prices are part of the reason, but so is a winter snow accumulation that promises an end to the parched late eighties. Farmers' optimism will be tested from planting to harvest, but, for now, the farm supply industry is flourishing.

Prairie farmers ended 1988 with crops that were, in areas hardest hit by the drought, little more thans tubble. World grain prices reflected poor harvests in the United States and Canada. Current prices for top grade wheat, says John Morris of the Canadian Wheat Board, are up 50 percent over prices at the same time a year earlier. Barley prices have risen even further. A year ago, barley sold at $60 per ton; now it's $120 per ton.

Weather, the least plannable of farmers' variables, looks benevolent as 1989 begins. Heavy midwinter snows on the ground suggest an end to the drought of 1988. For Arthur Cavenagh, a farm equipment dealer who farms 1,400 acres just north of Winnipeg, the heavy ground snowcover implies that there will be much more rain in 1989 than fell in 1988. "The fact we're getting precipitation is significant. From 1813 to 1967, there were no two consecutive years of drought in Manitoba. So this is the year we'll bet on a good crop."

Professional meteorologists are not quite as confident of adequate rain in the 1989 crop year, still several months away at the time of writing. "There is not necessarily any connection between precipitation received this far and precipitation that will occur in months to come," explains John Bendell, superintendent of Environment Canada's Winnipeg Climate Centre. But hope springs eternal and even a scientist like Bendell admits to a hunch, "Last year, dry weather preceded dry weather. This year, we hope that wet weather will precede more wet weather."

To date, snowfalls have been heaviest in areas south of the Trans Canada highway. These were areas that had some of the driest weather in 1988. Although most of the snow already on the ground will evaporate or runoff into rivers, much will fill dugouts and sloughs maintained by farmers in the most arid regions.

Farm equipment dealers have sensed their market's mood and are decidedly happy. Says Keith Hopwood, owner of Cedar Acres Farm Equipment in Winnipeg, "We see a 30 percent increase in demand compared to 1988 and a 60 percent increase compared to 1987. There have been low sales of equipment for the last eight years and now farmers just have to buy."

The evidence of higher demand for tractors and other heavy cultivation equipment is not hard to spot. Dealers are ordering more equipment and offering smaller discounts to clear their back lots. Some dealers confide that they prefer to keep their risks down and instead just order product once they have substantial deposits from customers. But aggressive dealers are ordering to ensure they get equipment at the end of everlengthening waiting lines.

In Brandon, Greydon Hanna, sales manager for Westman Equipment Corp., adds that the avalanche of tractors that were dumped on the market as Massey and International Harvester reached the end of their financial ropes has ended. "When those companies dumped their products on the market, prices of everything competitive dropped 25 percent. That's over now and we're sure we can sell our $35 million of inventory."

Perhaps the surest sign of health in the farm equipment business is the rising price of used implements. Says Emil Cherewayko, general manager of Great West Motors in Dominion City, "Prices of good, used product is up 25 to 30 percent since last year. Farmers who want to hedge their bets can go for a combine that's had good maintenance. One that's five years old would go for $75,000 to $100,000 compared to $210,000 for a new, top end model." Perhaps more importantly, in a market in which new equipment is hard to get, used equipment on the dealer's back lot is ready to drive away. And, with shrinking discounts for new equipment, the prices of used equipment are attractive. Predicts Rick Blight, a Portage la Prairie equipment dealer, "If dealers have trouble getting product, used equipment prices will take up the slack." In 1987, he notes, "Demand for used farm machinery was at an all time low."

Seed and chemical dealers report increased demand and, accordingly, they are raising many of their prices. Dan Lindgren, marketing representative for Canadian See Coaters Ltd.--a firm that applies fungicides to planting grains--says his firm has confirmed business for 1989 up by 10 percent compared to what it was in 1988. Fertilizer dealer Don Kitson, regional sales manager for Westco, a chemical firm owned by the three prairie wheat pools, confirms that his sales, too, are up by 10 percent even before the growing season begins.

The wild card in projections for sales of farm equipment and supplies is interest rates. Economists examining the state of the American economy are predicting that interest rates will have to rise if current U.S. internal budget and external balance of payments deficits are to be controlled. Any rise in U.S. interest rates would be rubber stamped and passed onto Canadians by Ottawa's own monetary policies. For now, fears that the U.S. economy may slow down in the third and fourth quarters of 1989 are restraining interest rate increases. Equipment dealers like Brandon's Westman continue to be able to offer factory financing at what amounts to a factory-subsidized rate of 7.5 percent. As long as those buying incentives can be maintained, increased of equipment purchase carrying charges will be held in check.
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Title Annotation:farm equipment dealers in Manitoba
Author:Allentuck, Andrew
Publication:Manitoba Business
Date:Apr 1, 1989
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