FCC: Farm equipment outlook strong, inventory tight
September 15, 2021 By Farm Credit Canada
Overall demand for farm equipment is projected to remain strong due to a combination of elevated grain and oilseed prices and low interest rates. However, drought in Western Canada and supply chain disruptions create uncertainty for 2022, according to Leigh Anderson, senior agricultural economist with Farm Credit Canada (FCC).
Four trends Anderson recommends monitoring in 2022 are:
- Supply chain disruptions: Global supply chain disruptions have impacted the farm equipment market, but what remains unclear is how long they will last;
- The Canadian dollar (relative to the U.S. dollar);
- Interest rates: Contrary to expectations that the Bank of Canada would raise rates in a recent announcement, interest rates remain historically low and attractive for producers looking for equipment financing. The Bank of Canada overnight rate is expected to increase in the second half of 2022 as the Canadian and U.S. economies recover; and
- Farm revenues: Commodity prices remain strong. This year, Canadian crop production has been a tale of two extremes: drought conditions in the west and above-average crop production in Eastern and Central Canada due to timely rains.
Equipment inventory is anticipated to remain tight in 2022, so producers may have to re-evaluate equipment replacement plans. |READ MORE