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plans for farm machinery purchases graph

Is now the time to buy?

Published on 7/29/2020 on

Several factors have influenced producers’ machinery buying decisions in 2020. While some have presented challenges, others have created opportunities to invest.

The ag economic outlook for the year started with a projected $3.1 billion increase in net farm income, according to the U.S. Department of Agriculture (USDA). Then COVID-19 hit, disrupting demand and supply chains.

Pressured purchase decisions

plans for farm machinery purchases

“At the beginning of the coronavirus crisis, I sensed some producers were worried they wouldn’t be able to get the equipment they needed,” says Texas AgDirect territory manager, Richie Harris. “Those concerns seemed to impact buying habits from March into early May.”

“We saw some producers pull the trigger on equipment purchases and head into their dealership in fear they wouldn’t be able to trade or that the equipment they wanted would get sold,” he says.

Since then, producer sentiment regarding large capital investments has improved. In June, the Purdue/CME Group Ag Economy Barometer reported the Farm Capital Investment Index recovered to a reading of 60 – 10 points higher than May and 22 points higher than the low reached in April.  

For the last four months, the barometer has asked producers about their plans to make farm machinery purchases in 2020 compared to a year ago.

According to the report, “responses to this question suggest producers’ plans for machinery purchases dipped noticeably during April and May, but recovered to their March level in the June survey, which, on the surface, appears to be consistent with the improvement observed in the investment index.”

Rate driven market

farm capital investment index

Despite equipment manufacturer labor shortages and the temporary closure of brick-and-mortar marketing outlets, Harris says one factor has remained a constant driver in producers’ equipment purchases – low interest rates.

“The activity we’ve seen in the new and used equipment categories over the last six months has largely been rate driven, and refinancing has been huge.” says Harris. “Earlier this year, we saw a large uptick in cotton picker and stripper purchases and a decent number of trades.”

“Producers are used to uncertainty and the high and low swings in the market, it’s low interest rates that have made it a great time to buy,” he says.

Whether you plan to purchase new or used equipment, or are interested in refinancing, Harris recommends taking advantage of interest rate savings before the opportunity passes.

“Why wait when you can get a low fixed rate on your equipment for the next five to seven years? There’s no time like the present to buy or refinance.”

Lower your rate and learn more about AgDirect loan, lease and refinancing options by contacting your local FCS Financial office.

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