Strong demand for farm equipment is expected to continue in 2023, as the market weathers rising interest rates and a weakening Canadian dollar, according to Farm Credit Canada’s (FCC) farm equipment market outlook.
Producers will benefit from strategic planning as inventory levels for farm equipment remain below pre-pandemic levels, something we expect could continue through 2024. Tractor inventory levels are down 42% and combines are down 47% from the five-year average. This equipment demand is supported by strong farm cash receipts, while inventory is hampered by the supply chain disruptions we saw over the past two years.
The used equipment market has seen increased demand because of the pandemic-related shutdowns. With limited availability of new equipment and parts, producers were adapting by having additional used equipment available for parts if needed.
Equipment manufacturers are expected to increase production of new equipment due to the changing economic environment providing the opportunity for inflationary pressures in the used equipment market to moderate.
As for new equipment, the Canadian dollar has a direct impact on equipment prices. Most new tractors and combines sold in Canada are manufactured south of the border, so an expected depreciation of the loonie through 2023 should lead to price increases on farm machinery. This is also the result of inflationary pressures in the supply chain that occurred in the last half of 2022.
While the depreciating loonie makes new tractors and combines more expensive, producers can take some solace in the fact that a depreciating loonie also has a positive effect on farm commodities destined for export.
Strong commodity prices will continue to support the demand for farm equipment, offsetting the impact of higher interest rates and a lower Canadian dollar. The used equipment market is expected to stay robust for most of 2023 and into 2024.
Farm equipment sales for 2023 are projected higher for high-horsepowered tractors, combines and implement sales driven by strong crop receipts. Look for sales to rise anywhere from 8% for 100-plus-horsepowered tractors to as high as 19% for combines. Sales of Canadian agriculture implement manufactured equipment could raise as high as 32% in 2023. The sale of smaller tractors, which are largely driven by the health of the Canadian economy, are expected to slow by around half a percent in the coming year.
A solid equipment investment plan should be on your to-do list as demand rises throughout the year. A low inventory and the depreciating loonie will make purchasing challenging.