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In my travels over the past few months there is a common theme among dealers—they have too much inventory. Over the past three plus years, dealers have gone from inventory shortages to surpluses of inventory. Dealers have had orders placed with manufacturers for two years that have not been fulfilled until now. That means that the orders placed for equipment two years ago, a year ago, and the current years worth of orders have all been arriving on dealers lots all at once. It seems that the manufacturers were finally able to get the components they have been waiting on for so long to complete whole goods orders and this has created a surplus of equipment.

There are still a few manufacturers out there that are having supply chain issues, but the majority have worked through this issue. The dealers that carry a line of equipment that are still struggling with completing the manufacturing process have said they are light on inventory. This has affected their sales numbers and market share in their area because other manufacturers have been able to shore up production shortages and get machines out to their dealers.

Customers get tired of waiting for new machines, so they switch brands because of availability. This makes it very difficult for the dealer that is waiting on machines, because once a customer leaves for another brand, it is very tough to nearly impossible to get them back.

The continual push from manufacturers on their dealers to fulfill the market share quotas is not helping the situation either. Dealers are faced with much higher interest rates (around 8% currently) on floor plan equipment which makes the carrying cost that much more expensive. Most dealers on the agricultural side of the business are stating farmers have a lot of grain in their bins, but they are holding tight on selling that grain and trading equipment until there is more stability in the
grain markets.

The construction dealers have said that business has remained steady. The only drop off they have seen is with the smaller construction companies or the businesses that have smaller jobs such as sidewalks, driveways, etc. The larger construction companies have sizeable contracts that will keep them busy for the next 3 to 5 years. There is still
a lot of building going on, especially in the urban areas.

Worldwide sales for AGCO, CNH, and John Deere for the 2nd quarter were all down double-digit percentages. Agriculture and turf are down, but the construction markets continue to be strong.
Over the past few months, we have seen some of the larger multi-store dealers in the US put equipment on auction, trying to reduce their inventory by the tens of millions of dollars.
Yes, that is correct, tens of millions of dollars.

Some of the losses that I have been hearing from those auctions are in the millions. For example, take a one-year-old X9 1100 combine with 350 engine hours that retailed on a dealer’s lot a year ago for $850,000 is now selling on an auction this year for $450,000.

When dealers sell equipment on an auction and the equipment is bringing significantly less money, it sets a new value for that equipment and devalues the equipment on their lot they are retailing along with other dealers’ equipment.

The idea is that if a dealer sells now, they avoid a bigger loss later down the road. It is not fun being in the position of owning or running a business and losing money. Right now it is about mitigating risk and minimizing the loss that the business is going to take because dealers are in the cycle of having too much inventory and need the cash flow to keep the doors open.

Dealers are still optimistic about the rest of this year, but not as optimistic about 2025. They are buckling up for a bumpy year next year and trying to get their house in order by reducing inventory.

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