Research From Cyclicals Team

• 2024 farm equipment spending expected flat or down yy for all 6 sources, because of pressured 2023 profits and other spending priorities
• High upfront price plus subscription model discouraging farmers from investing in DE’s See & Spray technology
• 2024 technology spending expect flat or up yy for 5 of 6 sources, with focus on drone spraying, soil sampling

2024 Farm Equipment Spending Expected to Decline YY
Farmers expect 2023 to be a profitable year, but for different reasons. Some reported yields have been better than expected despite drought, and others expect crop insurance to support profits. One even reported plans to purchase equipment before year-end to lower his tax burden. However, profitability is expected to compress yy, creating an environment of greater scrutiny around 2024 spending. One farmer said, “2023 was most expensive crop we’ve put in, [and we are] not selling as high as we hoped for. [Income is] still OK as [inputs] are mellowing a little more.” All six sources expect to spend a similar amount or less yy on farm equipment during 2024 because seeds, crop protection and fertilizer will be higher priorities. The cumulative impact of steep equipment price increases during the past few years was also cited as a deterrent to equipment spending plans.

Quotes
“Last year was the best profit-wise due to crop insurance and extremely low rent. It would be hard to repeat that. Profits will be down, but I’m still optimistic, hedging a lot of grain.”

“It’s been an expensive year to put stuff in the ground, and as dry as it’s been, there’s a lot more increase in irrigation costs.”

“Short of Deere [& Co.] coming with 0% financing, I plan to be down 80% in [equipment] spending for 2024. I normally spend short of $1 million each year, and if I spend $250,000 [in 2024], that would be a stretch. I don’t need anything. I’m sitting well with late-model, low-hour equipment, and interest rates are high.”

“On the machinery side, we are decreasing our 2024 spending. [We will] get rid of half of the harvest fleet and will have more custom harvesting done on the farm. The annual [price] increases in the machinery market are kind of what jumpstarted this process.”

“We’re not looking at much equipment [spending in 2024]. This economy is really starting to [be terrible] and it’s coming home to roost here locally. … I’m not crying in my soup, but it is subdued from what it was.”

“Spending on farm equipment for 2024 should be ‘none,’ ideally; it might even be down because we don’t plan to purchase anything big like planters or sprayers.”

Deere’s See & Spray Not Gaining Traction
Sources reported limited enthusiasm for Deere’s See & Spray, citing the subscription pay model as the biggest deterrent. One said, “With See & Spray, you spend $3 more an acre after buying the equipment. You can be so efficient, you go broke. The dollars and cents just will not pencil on some of this stuff. Then you have the chemical management aspect of it, too.”

Sources also said the chemical management savings from See & Spray have yet to be proven. One said Farmers Business Network Inc.’s Greeneye is a close competitor to See & Spray, but does not require a subscription. “FBN’s Greeneye … has better features and options than Deere [See & Spray], but Deere has more engineers and technicians, so there’s more reliability with Deere. But Greeneye is ‘buy it, own it, use it, and we’ll support you,’” the source said.

Quotes
“We’re not ready to make the jump to See & Spray technology. We run a pretty heavy pre-emergent program, so we’d only be able to utilize See & Spray about 15%–20% of the time. We are just taking a step back and giving Deere some time to get it figured out.”

“With See & Spray, you own it, but then pay a per-acre use. Really? It’s getting harder and harder to buy new equipment. You just can’t spend that kind of money on a sprayer [and] justify it.”

“The See & Spray has two tanks on it: One is residual, and the other is weed killer. I don’t like to put residual down on second pass, so it would cost me more with the See & Spray, and I’m not interested in a subscription on top of that.”

“With Deere’s See & Spray, I have to purchase the system — for not a small amount of money — and then have to pay a fee per acre to use it. … I’m not paying Mother Deere another penny.”

“I just priced a new sprayer for $1.1 million, and that was without subscription for See & Spray. It ends up knocking it out of the average farmer’s category. I understand the reasoning for a subscription — we pay subscription for a lot of things in our daily lives — but I’m not a huge fan.”

Drones and Soil Testing Top Interest in Technologies
Five of six sources expect their 2024 technology spending be flat or up yy, driven by purchases of soil testing equipment and investments in drone spraying technology. (Hylio Technologies Inc. was one drone brand specifically mentioned.) Opinions varied about electric farm equipment: Some discussed the potential benefits, but most agreed electrified large farm equipment would cut down on durability and run times in the field, which would be a disadvantage during harvest. Farmers also voiced frustration around the lack of one company to meet all of their data management needs.

Quotes
“If it turns out spray drones can do a better job than a ground rig, I’d buy one. I’m currently renting spray equipment for $15,000, plus my time to run it. A drone would be $30,000–$35,000, and I could see real value. In the next five years I will probably own one. [SZ DJI Technology Co. Ltd.’s AGRAS] T40s are the ones to have.”

“We are doing our own soil testing, so we ended up buying a probe and globe and other stuff.”

“We talked about trying live read soil samples that can give you instant, in-the-field readings in 30 seconds. We haven’t tested that yet, but it’s pretty appealing to change lead time on soil samples from one week to instantly. … ChrysaLabs [Inc.] is the one we’ve been researching.”

“To make a combine electric and work it for 18 hours a day and several miles from the charging station probably isn’t feasible. However, a skid loader could see as an electric application.”

“Straight electric is no way to go on high-horsepower equipment. On little things around the farm, like lawnmowers and tree trimmers, it would be awesome, but equipment in the 500-hp space is not realistic.”

“We are constantly bombarded with farm management systems, but all operations are so unique and we do everything so differently. I can’t say we’re very excited about any of them. We are using Dropbox [Inc.], [Microsoft Corp.’s] Excel and a little bit of [Alphabet Inc.’s] Google Sheets.”

“I’ve been trying to develop our own AI platform … but I couldn’t and I came dangerously close to scrapping it all, and then I began to realize how much Deere had it tied into their ecosystem and I wasn’t able to do some things I wanted to do. I keep looking for that next farm management system, other than FBN, Deere or [Bayer AG’s] Climate FieldView or getting a subscription to Ag Leader [Technology Inc.’s] SMS, but just haven’t found that next new [thing].”

Mixed Reaction on AGCO-Trimble Deal
Four of six farmers said equipment market share has remained steady during the 2023 crop year. The other two said AGCO Corp. and Claas KGaA mbH have continued to gain share at the expense of Deere and CNH Industrial N.V., driven simply by dealer relationships. “We have a Claas combine, and they are gaining ground with neighbors in a 25-mile area. They have really good salesmen and really good customer service,” one said. Another said his local Claas dealership can get parts easier than Deere, and Claas combines are gaining traction because of their cleaner, higher-quality grain samples. However, another farmer said his local CNH service department was unstaffed and harvest equipment was not getting shipped in a timely manner. Farmers had differing opinions on the potential impact that AGCO’s recent announcement to acquire 85% of Trimble Inc. will have on market share. One said, “Trimble is terrible. AGCO’s system is terrible, too, so maybe they wanted to buy something as equally as bad to make it better.”

Quotes
“I’m trying a Claas combine next week. It’s cheaper than Deere, but I won’t buy it — I would lease it — because the resell is poor. CNH is still losing. I think they will have a day in the sun with Raven, but locally, CNH is struggling with bad dealers. … One of CNHI’s shops only has one guy where there should be 15.”

“This spring, we got a Case quad because it was cheaper — a lot cheaper. I would get rid of it tomorrow, after being in it. There’s a reason I run green equipment; I’m not impressed.”

“If CNH figures this Raven thing out, that would be their saving grace — same if Trimble can get figured out [by AGCO]. I’m not extremely optimistic.”

“I think [the Trimble deal] will be good. AGCO seems to be gaining U.S. market share. Acquiring Trimble could end up being a long-term positive for them. It will make probably those that were just tied into the Deere ecosystem rethink some things.”

Equipment Lead Times, Availability Continue to Improve
Farmers said lead times and availability on most equipment improved, mirroring trends identified in OTR Global’s July Farm Equipment report. Dealers are starting to carry stock, though farmers said what is available is not always in the desired configurations. “Dealers are now able to place orders for large equipment inventory, and there will be a brand new tractor sitting there. It’s not like there are 100 sitting there, but it’s not hard to find,” a farmer said. Another said if one dealer location does not have it, usually another will.

Quotes
“Lead times are improving. You can get a new combine for next week. If you wanted a new quad track, you can’t get one, but wheeled tractors you can get in. Deere is still shipping combine heads to dealers, and dealers don’t want them. My dealer told me they had a dozen coming that they couldn’t cancel.”

“I think availability is starting to improve. You could order a strip-till bar and get it for springtime.”

“It depends on what a guy is looking for. There are plenty of used combines, but tractors are hit and miss depending on what you are looking for.”

“I ordered a Deere quad track [tractor] back in June, and it’s not here yet — they think it may be here in December.”