With steel in shorter supply and demand pushing prices up, the pressure is on manufacturers to hold the line on prices. That in turn is putting pressure on many farmers to make their equipment-buying decisions earlier.

The availability of some types of steel is now on an allocation basis.

"This puts pressure on all manufacturers, especially the short-liners," says Greg Embury, vice president of sales and marketing for Kubota Tractor Corp. "Actually, we see the situation as less of a steel shortage than a price issue, but everybody realizes we're in a competitive environment and is trying to hold down prices."

Echoing that opinion is Dennis Hann, director of distribution and dealer development for CNH America (Case IH and New Holland), who has been with the company for 26 years.

"Manufacturers are having to find ways to be more efficient," Hann notes. "For example, they can use more plastics for shielding and hoods. And if they know how many combines have been ordered, they can make bulk purchases of steel and get the best deal."

Another issue on the horizon is rising costs for tires.

"Prices for rubber is becoming a real challenge," Hann says, and he also expects more pressure on copper for wiring and on other metals. He cites several examples of price increases: hot rolled steel and iron ore have doubled in price, scrap steel is up over 50 percent, finished bars are up 35 percent.

"The global economy, especially demand in China and India, is leading to shortages and currency fluctuations that are hard to predict," Hann said.

Agreeing with that analysis is Barry Nelson, manager of public relations for John Deere's Worldwide Agricultural Equipment Division.

"China is buying a lot, throwing everything into uncertainty," Nelson says. "The variability in oil and steel supplies and prices add to the uncertainty."

Another factor, Embury points out is that, "The falling dollar and the 'yen squeeze' mean that it takes more dollars to import materials." That affects where manufacturing is done.

Even with these global pressures, agribusinesses are finding plenty of incentives to buy now. Embury cited three: "Commodity prices are up so farmers have more money to invest in equipment. Second, there are strong government incentives to buy. Third, the astute farmer knows that when he reads in the newspaper about steel and petroleum prices going up, it's smart to make purchases sooner than later."

Hann also recommends placing orders early.

"You may need to pay a percentage ahead as a down payment, but the advantage is that you can lock in the price," Hann says.

He sees tractors being purchased at the end of the season, four to six months ahead of the next planting season. Combines are purchased up to eight months before the season and corn planters are often ordered from July through September, so they're ready for next spring.

Even with these pressures, manufacturers reported success in 2004.

"The market was up, so it was a great year," reports Embury. "The economy is robust and is running well." Nelson echoed that sentiment, adding that it was a record year for Deere & Company. "USDA reports show a record year for ag equipment sales, and that's certainly been true for John Deere."

John Deere, Case IH, New Holland and Kubota will be among the more than 500 exhibitors at 2005 Western Farm Show coming up Feb. 26 to 28 in the American Royal Complex in Kansas City, Mo.

Date: 1/27/05

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