Higher commodity prices continue to benefit the financial returns of the agri-business industry. When farmers have strong free cash flow, input and machinery dealers have always benefited. Like any other industry, when farmers have no money the spending clamp gets put on pretty tight.
You don’t have to look any further than the tractor sales data for the first quarter of 2013 to see how strong commodity prices have benefited tractor sales in the United States.
It will really be interesting to see if the strong 2013 tractor sales will continue through the rest of the year. With sales in the United States being up 11.2% year to date over 2012, many manufacturers are not yet convinced but are optimistic. The planting delays in the United States could play a significant role in where the YTD comparison number is by fall.
Judging by the 1st quarter 2013 AGCO earning report last week, the increased industry sales of tractor units is translating into higher profit as well. According to AGCO:
Excluding unfavorable currency translation impacts of approximately 2.7%, net sales in the first quarter of 2013 increased approximately 8.4% compared to the first quarter of 2012.
Like seed manufacturers, tractor manufacturers struggle to not get over optimistic with how good things are. As of right now though, it appears that farmers and tractor manufacturers are prospering well.