Another successful season is complete, and from all reports it sounds as though it was a bountiful harvest. Yields were excellent. Harvest conditions were normal, for the most part; a little rain slowed it down some, but not for long. The biggest concern I’m aware of is that soybeans were dry but the stems were green, causing tough harvesting conditions. But when yields are as high as reported, most producers will gladly put up with the inconvenience.
There was a lot of worry at the beginning of harvest season about potential parts shortages and equipment delivery delays, but it sounds as though most dealers made it through the season without any major obstacles on the supply side. Unfortunately, supply chain issues persist — affecting most brands of equipment from short lines through major manufacturers.
When I talk directly with dealers, most of them have the same problem: they are out of equipment to sell. Some manufacturers are already out of tractor allotments for 2022 and are beginning to sell 2023 equipment. This becomes a troubling game as prices are expected to increase and customers will have to be forewarned before it becomes a problem. So far, it seems customers are understanding of the price hikes — but if grain markets were to take a tumble, you can be sure that attitude would change in a hurry. It will be a very delicate balancing act for dealers.
In a previous issue of the Retailer, I mentioned that dealers were beginning to rethink their method of paying salesmen. With equipment shortages slowing down sales, it’s challenging to pay commission-based when sales aren’t being completed. Due to this issue, many dealers are moving to a salary-based pay system. While this is probably the only option available right now, dealers should be cautious how they approach it with their salesman. Make sure your salesman understand that once equipment becomes available again — which it will — normal pay processes will be reinstated.
Is history repeating itself…..again?
I vividly remember my Dad ordering a new tractor during the fall of 1971, expecting it to arrive before planting season the next spring. If any of you are old enough to remember this slice of history, you’ll remember that there was a small ‘explosion’ going on in the ag production world at that time. Hybrids of corn were becoming much more productive and yields were growing exponentially. Drought resistance was also being bred into the hybrids, and the dryland farm I grew up on was suddenly seeing yields progress from 60 bushel per acre to 100 bushel per acre.
This increase in yield along with steady market prices was creating a huge demand for farm equipment, and manufacturers could not keep up. The horsepower and technology race with farm tractors was also beginning, and farmers were eager to improve their crop production, both on the land they were currently farming and any extra land they could buy or rent. That tractor my Dad ordered in the fall of 1971 finally arrived in the spring of 1973, and it even wasn’t the one he originally ordered. Another customer had backed out of a deal and the tractor was close enough to what he wanted to purchase that he accepted it. Stories just like this one were common in those years.
Unfortunately, in the late 1970s and early 1980s, inflation reared its ugly head and the agriculture boom came to a sudden halt. Land prices — which had been escalating rapidly — suddenly turned the other direction. I remember a customer of mine in 1978 had purchased irrigated land at the crazy price of $3,300 per acre, only to foreclose on the loan and sell at auction in 1981 at $1,500 per acre. A lengthy stretch of tough farming conditions followed for several years: the 1983 payment in kind (PIK) year, followed by two more years of depressed prices, and finally the real dilemma — deflation, or as economists called it, stagflation. I lost many customers during those years, and I often wondered if my business would survive.
As I look at the current economic conditions, I’m concerned that we may be headed in that direction again. Looking at today’s economy, it’s hard not to be optimistic.
But when I look over the horizon, I see the old nemesis – inflation – raising its head and preparing to teach the economy a lesson one more time.
I hope we are able to endure it better this time than in the 80s – and I hope we can dodge the double-digit interest rates this time.
Breakfast at the Capitol
Since the Nebraska Capitol building is still undergoing major renovations, our Nebraska Legislative Breakfast will be held in a new location this year. It will take place at the Scottish Rite building in the center of Centennial Mall on January 20, 2022. Watch for your invitation with directions to the facility. Hope to see everyone then!