Farm Credit Canada (FCC) had recently released a report indicating that farm equipment sales in Canada are projected to decline throughout 2025. The slowdown in the market is being attributed to several factors, including low commodity prices, high equipment costs, and lower overall profits for farmers.
Leigh Anderson, senior economist at FCC, explained that farmers are increasingly focused on cost-saving strategies, with many opting to delay equipment purchases or reduce their overall equipment expenses. "Farmers are looking for ways to stretch their budgets," Anderson stated in the report. "As demand for farm machinery softens and prices adjust, there may be opportunities for producers who are looking to invest in new farm equipment."
At the start of the year, demand for farm machinery surged, particularly for combines and four-wheel-drive (4WD) tractors. This initial boost in demand was partially driven by reduced sales in the U.S., allowing manufacturers to prioritize deliveries to Canada. However, the report forecasts a decline in sales for the rest of the year and into 2025, with sales of new equipment expected to soften. The projected decline is expected to be less severe than the downturn seen in 2024.
Sales Forecast and Trends
The report predicts that sales of combines will fall by nearly 7% in 2025 compared to the five-year average. Tractors in various horsepower categories are also expected to see declines, with tractors between 40 and 100 horsepower anticipated to drop by almost 21%, and those under 40 horsepower by nearly 29%. Tractors over 100 horsepower are projected to experience a more modest decline of just over 6%.
The early arrival of new equipment has led to a rise in trade-ins, which has also impacted the used equipment market. Sales of used machinery have decreased by about 20% compared to the same time last year, as more farmers trade in their older machines in exchange for newer models.
Global Impact on Machinery Production
The challenges facing Canadian farmers are echoed in the U.S., where agricultural income has also been sluggish. This has led American manufacturers like Deere & Co. to reduce their production, with projections indicating a decrease in net sales of about 10-15% across all machinery segments. Other major manufacturers like CNH Industrial and AGCO have also adjusted their profit expectations in response to the difficult market conditions.
Opportunities for Future Investment
Despite the predicted slowdown in equipment sales, there is a glimmer of opportunity for farmers who may be looking to upgrade their machinery. As sales slow down, it’s anticipated that machinery inventories will build up, and prices will continue to adjust throughout the year. Additionally, a potential reduction in interest rates could ease the financial burden on farmers, making it easier for them to purchase new equipment.
While crop prices are expected to remain low, strong cattle prices are expected to provide a boost for beef producers, potentially encouraging them to upgrade their equipment. However, many cattle producers are still recovering from previous years of drought and high feed costs, which may impact their ability to make large investments in machinery.
Looking Ahead
Farm equipment sales in Canada are poised for a challenging year in 2025. While it’s clear that economic pressures are dampening demand, the market also presents opportunities for producers who are ready to take advantage of favorable pricing and inventory adjustments. The coming year will likely be a time of significant market recalibration, with Canadian farmers facing both challenges and potential opportunities as they navigate through these tough times.
