Farmers have been taking advantage of a positive financial position to invest in new equipment.
The agricultural credit market is riding several positive trends into 2022, according to Brady Brewer, assistant professor of agricultural economics and Todd Kuethe, associate professor, Schrader Endowed Chair in Farmland Economics at Purdue University.
Low interest rates are prompting farmers to acquire capital assets. If farm loan demand increases, banks appear to have a sufficient stockpile of funds available to loan.
"However, there are some negatives at the moment as bankers are reporting higher rates of non-payment from farmers. This would indicate that the liquidity positions of farmers may be deteriorating as they have less cash on hand to pay off current debts."
Deteriorating liquidity and uncertain Federal Reserve interest rate policy will be key drivers in 2022, they said.
Net farm income increased 19.6% in 2020 and was forecast to jump another 19.5% in 2021, according to the Association of Equipment Manufacturers (AEM), noting that net farm income is at its highest level since 2013.
Farmers have been taking advantage of their good financial position to invest in new equipment, according to the AEM.
Retail sales of two-wheel-drive farm tractors in the U.S. increased 10.2% in 2021 over 2020 (led by a 24.1% jump in 110 HP-plus tractors) while sales of four-wheel-drive tractors and self-propelled combines surged 18.3% and 24.7%, respectively, for the year, according to the AEM.
In Canada, sales of two-wheel-drive farm tractors increased 19.1% (led by a 33.6% surge in 100 HP-plus tractors), while four-wheel-drive tractor sales jumped 32.7% and self-propelled combines increased 23.1%.
AEM members expect most key farm equipment categories will experience similar growth this year.
Available industry data show sales of ag machinery in the U.S. were expected to climb 21.2% in 2021. Growth this year is forecast at 5.2%, followed by a 3.4% increase in 2023, the AEM said.
"Farm economy looks good this year, I don't see that as being a big issue unless we see a big spike in diesel/petrochemical prices and that may have a negative effect," CEAT's Loethen said, noting that farmers seem to be spending money now.