Economic concerns plague equipment buyers, but financing provides security

?By Nathan Webber

The uncertain economic climate we’re experiencing across Canada in 2024 is sure to impact ag equipment users in the coming year. Talks of recession early on, inflation, muted economic growth for the first quarter of the year and looming talks about rate changes are all on our minds. But these issues are compounded for Canadian farmers, who are also experiencing unique financial challenges. As I’ve travelled the country early this year for equipment trade shows, I’m hearing talk of these specific challenges:

??????? The consolidation of dealerships

Last year, RealAgristudies surveyed farmers on the cost of consolidation. Ninety percent of farmers say that they are concerned about consolidation in the agriculture industry. Canadian farmers had the greatest concern about consolidation of equipment dealers, with 66 percent saying it has a negative impact.?

This isn’t a new trend, but it has accelerated in the last few years.? As mom-and-pop owners age out of the business, the opening of new businesses proves cost prohibitive, as service capabilities have increased requirements and dealer networks buy up and consolidate dealerships. With little competition, these networks are then able to set prices and repair costs.

????? Falling commodity prices

We started the year with a 52-week low in the commodity price of spring wheat, soy, corn and canola. In fact, Farm Credit Canada said in March that the year dawned with the weakest prices seen in recent years. For example, they report canola was down 38 per cent. They don’t predict further tumbles in commodity prices, but looking into next year don’t see an improvement either. Western margins will especially face pressure this year due to global grain competition. Though fertilizer and fuel costs are dropping from their industry highs, those costs are still proving difficult for farmers, as well.

?????? Essentials: land prices and workers

Equipment dealerships aren’t the only consolidated asset. Land is harder to come by and pricier to buy or lease for farmers who want to expand their enterprises. Fewer entities own larger swaths of land. But falling commodity prices and rising rent because of land scarcity mean very small margins for farmers.

?Another major force is the lack of farm workers. Farmers are aging out of the profession far faster than new people join the profession. According to the Canada Ag Human Resources Council, there will be 85,000 job vacancies across agriculture-related industries by 2030, if current employment trends hold true. Finding workers is time consuming and sometimes fruitless, and the cost of labor continues to increase.

?All of these pressures—land and employee costs, commodity prices, and dealership consolidation—mean it’s prudent for farmers to keep cash in hand this year and have fixed costs where they can. Equipment is one area these costs can remain a constant, and Meridian OneCap can help. Farmers who finance their agricultural equipment through one of our vendor partners can preserve capital with 100% financing. We’ll match terms to your budget and seasonal revenues and have competitive rates.

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Nathan Webber is the National Accounts Program Development Manager?at Meridian OneCap.