INDUSTRY
March Features:
n AEM Perspective
Fasten your seatbelt for
ag market’s thrill ride..........................1-2
INSIGHTS
FOR
THE
Ag
Executive
|
MARCH
2016
Fasten your seatbelt for
ag market’s thrill ride
Join AEM at Hagie in the Hawkeye State.... 2
n Technical Innovation
Mobile technology in ag:
is safety content next?............................ 3
n Global Business
Latin America: High Interest Rates,
Growth Decline........................................ 4
n Advocacy & Legislation
On guard: 2016 ag legislative strategy .... 5
How’s the campaign affecting
AEM members?....................................... 5
“Just like an amusement park thrill
ride, the ag equipment market has
its ups and downs, sharp turns and
thrilling speeds that keep our hearts
pumping, ready to anticipate the
next drop or incline.”
n Market Intelligence
USDA farm income forecast.................... 6
U.S. ag equipment exports...................... 7
AEM ag equipment sales report
and analysis........................................... 8
Demand, planning, inventory.................. 9
‘Very strong’ market potential in Africa....10
n Commodity Classic
Commodity Classic 2016:
more equipment, more technology........ 11
n Leadership
If it’s right for the customer, it’s right for
the dealer and for the manufacturer..... 12
n Manufacturer Alert
New ruling on EU REACH could increase
financial risks to OEMs, supply chains....13
n Standards
Who’s on first when it comes to
ag standards development?................. 14
American Society of Agricultural
and Biological Engineers...................... 15
Questions/comments : [email protected]
Industry Insights for the Ag Executive
J
ust like an amusement park thrill ride,
the ag equipment market has its ups and
downs, sharp turns and thrilling speeds
that keep our hearts pumping, ready to
anticipate the next drop or incline. And
for some of us who have witnessed these
fluctuations over the years, today’s market
is just as exciting and unpredictable.
Let’s take the 1970s, for example. Looking
back, dealers were experiencing great
prosperity, anticipating big sales and even
bigger returns. As a result, they built huge
sales facilities (oftentimes referred to as Taj
Mahals) and had no reason to think the
growth wouldn’t continue.
But the boom of the 70s was short lived.
I started my career in sales in the early
80s selling financing options to dealers. At
that time I can’t even count the number of
dealers I would talk to one week, and the
next week I would drive by to see empty lots
and “for sale” signs out front. This was a
steep down cycle and it was a very difficult
time for the industry.
Now if we wind the clock forward to 2010,
we see a similar pattern emerge. Despite
a small, recessionary dip in sales, the
business was trending upward again. Back
on that roller coaster, the industry was
hearing the click, click, click as it started to
travel upward, bringing with it an industrywide sense of anticipation and excitement.
And this incline was impressive! It lasted
through 2013, and actually until the
summer of 2014. The thrill and expectation
were tremendous and new equipment sale
heights were realized. Until, that is, the
industry crested over the inevitable top of
the market incline in the fall of 2014.
continued, page 2
1
AEM Perspective
Technical Innovation
continued from page 1
Join AEM at Hagie
in the Hawkeye State
Fasten your seatbelt for
ag market’s thrill ride
And here is when we all screamed!
Unfortunately, we didn’t know how steep
the down slope was going to be. We
had no idea that in two years the sales
of larger tractors and combines would
drop 50 percent. And as the market was
making very difficult decisions and trying
to adjust to the dramatic shift, farmers and
manufacturers alike were holding on to
their hats experiencing a downward rate
none of us on the ride could have expected.
(Of course the dairy and livestock sectors
were enjoying this ride, waving hands in
the air as they still enjoyed good sales and
revenues, until the ride caught up with
them, too.)
And here we are today, waiting for that
plunge to level off, just as it has so many
times before. And of course we’ve had
other twists and turns on the ride, including
Section 179 in 2014 and 2015, the Farm
Bill and of course the panic on the RFS
mandate. And believe me, these issues are
making huge impacts on our ride, jostling
us from side to side with no end in sight.
Added to this are the dynamics of the used
inventory and how long it will take to move
it through the system. We worry about crop
insurance to cover catastrophic losses
and what that could mean to equipment
manufacturers. And we also get those really
quick bumps on the rollercoaster that are
2
based on commodity prices, which are
influenced by a whole host of unpredictable
factors, including the weather.
So when will this ride level off? Have we
reached the bottom? As Jim Walker of
Case IH, Todd Stucke of Kubota, Linda
Salem of Great Plains and Leif Magnusson
of CLAAS noted at the recent AEM Outlook
panel, we are much more comfortable
with the ride now that we’ve all had time
to adjust to it. We are better prepared and
have leaned in to meet the dips and cork
screws yet ahead. Production and budgets
have been right-sized to appropriately reflect
the trends, some of which are still tilting
south, but in a manageable slope. Programs
have been set up to help push out excessive
inventories, and plans are being put into
place to meet the demand when we see it
coming back at us over the horizon.
Is the ride over? Nope. And thank goodness!
After all, I think we’ve come to appreciate
the thrill of the highs and the challenge of
the lows, twists and turns. But, keep your
seatbelts fastened! n
Charlie O’Brien
AEM senior vice-president
and ag sector lead
[email protected]
Hagie Manufacturing Company in
Clarion, IA is hosting a regional AEM
membership orientation at their facility
on April 21. This half day session will
be an excellent opportunity for AEM
members to ensure they are getting
maximum value from their membership
and to network with peers and AEM
staff alike. The agenda includes:
• State of the ag and construction
market update – Benjamin Duyck,
director market intelligence
• Plus AEM Services & Hot Topics —
• Legislative: spray drift, RFS,
rural wireless, etc.
• Product Specific Market Data:
statistics
• Technical & Safety: ag roadways
issues, Ag Industry Electronics
Foundation, etc.
• REACH Materials Management,
Conflict Minerals & RohS
• Trade shows: Commodity Classic,
ConExpo/Conagg, others
• AEM Annual Conference,
Product Safety Seminar
• Global Business Development
Data & Services
Join us at Hagie or at one of the other
sessions being held across the country
at industry events and AEM member
facilities throughout the year. For
questions contact [email protected],
414-298-4108.
Brian Voss
Agriculture &
member services
AEM Ag Executive Advisor
Mobile technology in ag: is safety content next?
A
survey taken by Farm Journal Media
reports that 87 percent of farmers will
own a smartphone by 2016. I’ll admit, that
number caught me by surprise. Most of my
focus lately has been on the construction
industry and its use of technology as it
relates to safety training. It didn’t occur to
me that farmers would be so fast to adopt
mobile devices too.
It makes sense though. Farmers use
sophisticated technology on their
equipment, and now have time while in
their cabs to access data - so why wouldn’t
they use smartphones and tablets to do
that? Most of the smartphone apps the
Farm Journal article references deal with
weather, livestock, crops and commodities.
But it got me thinking: When it comes to
mobile tech on the farm, what about safety
content? Wouldn’t an app that featured
safety best-practices for equipment
operations be just as valuable?
Most manufacturers provide apps for
the equipment they sell, however, many
of those deal with asset management,
maintenance and operations. And while
equipment manufacturers always provide
communicating with the millennials on
their terms. It would seem fairly safe to
say that the millennial farmer entering the
ag industry would expect to access safety
information, as all other information, on a
mobile device.
Many other questions arise when
considering the specific type of mobile
“Farmers use sophisticated technology on their
equipment, and now have time while in their
cabs to access data - so why wouldn’t they use
smartphones and tablets to do that?”
safety materials with every machine
they produce, most of that literature
has traditionally existed in printed form.
Within the last few years, much of that
same content is now provided on the
manufacturer’s website. If it is, does that
content exist as a downloadable app, or
is it a web-based? If it is web-based, is it
mobile-friendly?
And then there’s the question about
millennials, whom we expect to be taking
over the farms, skipping a generation. Our
industry needs to be marketing to and
Industry Insights for the Ag Executive
user who works on a farm. Unlike the
construction industry where new employees
must be trained, operators of traditional
family farms have typically grown up
working the equipment. Does that mean
they couldn’t benefit from safety messaging
delivered through their phone? And what
about contract farm employees? Are
immigrant workers adequately trained
in equipment operations such as skid
steers or even grain bins? Is safety content
available to these types of workers through
mobile devices, or is it provided to them in
printed form? Does the content need to be
provided in more than one language, and
does technology delivery of that content
make that easier? Ag equipment safety
training is probably still conducted on the
job or online, but might providing safety
content through a mobile device enhance
protection for the worker, the employer or
the manufacturer?
As you can see, there are more questions
than answers at this point. I think everyone
would agree that information regarding
safe operation of ag equipment should be
accessible through technology in some way.
We see evidence of business data being
leveraged in powerful ways when accessed
through smartphones and tablets. Does
the future of equipment manuals, training
materials and other types of safety content
also lie in mobile delivery? Only time will
tell. The only certainty is that technology will
continue to advance, evolve and disrupt the
way we access information - regardless of
the industry. n
Jaime Vos
AEM Safety
Materials Manager
[email protected]
3
Global Business
Advocacy & Legislation
Latin America: high interest rates, growth decline
Excerpts from our Latin America Advisor:
L
atin America is continuing to experience
a massive slowdown. Economic growth
is stagnant as regional GDP is thought to
have contracted in 2015. Experts expect
regional growth to amount to a sluggish
0.1 percent in 2016. However, forecasts
place growth at 2.3 percent for 2017,
indicating a recovery. This rebound will
be slow, as multiple countries attempt
to stabilize their economies.
Inflation is a problem throughout the region
as well. Most countries have experienced
increases in their domestic levels, which
causes central banks to increase interest
P
residential election years are not known
for their active congressional sessions,
and this year is quickly shaping up to be
no different. However, while there will
be limited opportunities to advance key
legislative priorities such as the TransPacific Partnership trade deal, there is
cause for concern that opponents of crop
insurance subsidies and the Renewable
Fuels Standard (RFS) will try to use the
quiet year for mischief.
attempt to further cut farm programs.
Ag led by example and saved billions with
elimination of direct payments. It’s someone
else’s turn now.
The last quarter of 2015 saw the ag
community rally together to beat back a
mysterious budget proposal to cut the crop
insurance program by over $3 billion. At the
end of the day, those cuts were removed.
But the signal was clear: The 2014 Farm
Bill is not safe. Indeed, even the President’s
proposed 2016 budget called for over
$18 billion in cuts to crop insurance over
the next 10 years.
Brazil and Venezuela continue to drag
down the region. Brazil looks to contract
by approximately 3 percent and Venezuela
by 8 percent. As the region’s largest
economy, Brazil’s decline is affecting all of
Latin America.
Venezuela is in the midst of an economic
nightmare. Inflation figures range from 180
to 800 percent. The country began printing
high denomination bills, which will no doubt
drive inflation up even higher and continue
to reduce the value of the bolivar. A gas
price hike of 6000 percent was recently
instituted, but this will do little to stop
product shortages, electricity rationing, and
a complete lack of political stability. Due to
a lack of reforms, the country looks to sink
further into the abyss. A government regime
change and updated monetary policy are
needed for stabilization before the
situation worsens.
On guard: 2016 ag legislative strategy
rates to level inflation. For 2017, inflation
is projected to substantially decrease to
15 percent for Latin America as a whole.
The drop in commodity prices has
significant economic impact in several
countries. Prices for oil, a significant export
in Brazil, Venezuela, and Ecuador, continue
to plummet. At current levels, budgets will
have to be revised to account for shortfalls
in revenue. In addition, diversification is
needed. In the case of Venezuela, where oil
represents 95 percent of exports, a drastic
change in revenue structure is necessary.
Values for copper, tin and oil have all
dropped by more than half, even more
drastically in the case of oil. This slowdown
has reduced GDP growth, export revenue,
and available funding for public works.
Private investment is becoming more and
more necessary.
You can find more information in our Latin
America Ag Advisor, with the next issue
due out in June. To subscribe and receive
updates on the region, go to http://www.
aem.org/newsletter. For more information,
contact AEM Global Business Development
Coordinator Barbara Schumacher at
[email protected]. n
Few bills are expected to advance this
year, but Republican leaders have voiced
a commitment to returning to regular order
on appropriations bills. A moving USDA
appropriations package is ripe terrain for
budget hawks to target the last remaining
farm safety net program for reductions
despite the voluntary cuts the agriculture
Committees made in the last Farm Bill.
The battle to protect the RFS will also be
waged in the shadows this year. Already
ethanol’s opponents have moved to attach
anti-ethanol amendments to a moving
energy legislative package; but because
of our efforts as part of the Fuels America
Coalition, none of them were even brought
up for a vote. However, we have every
reason to believe they, too, will use the
appropriations process as a tool to modify
or outright repeal the RFS.
AEM’s I Make America signed up
hundreds of new grassroots supporters at
the recent National Farm Machinery and
Commodity Classic shows, combining the
farmers’ voice with that of manufacturers.
Again, we are making our industry’s voice
heard and no challenge to this important
piece of American domestic energy
production will be unmet.
While the prevailing political winds make
2016 a year to play defense, AEM is
working to prepare the ground to retake
the offensive. A new congress and
administration can be fertile territory for
such priorities as tax reform, rural wireless
broadband expansion, and trade legislation.
AEM is planting those seeds now. n
AEM and our allies aren’t taking any
chances. We are working the halls of
congress to ensure everyone knows we
are on alert and stand ready to defeat any
Nick Tindall, AEM Director,
Government Affairs
AEM Senior Vice President,
Government & Industry Relations
Nick Yaksich (left) met with Indiana
congressional candidate Kip Tom on
Capitol Hill. Tom is a prominent farmer
in Indiana and has been an industry
ally. He faces a competitive primary on
May 3, and has the support of AEMPAC
and several AEM member companies.
How’s the campaign affecting AEM members?
AEM Chair Leif Magnusson spoke at the January 2016 Agrievolution
Summit held in Istanbul. About 150 presidents, CEOs, academics
and industry stakeholders from around the world learned about ag
equipment market opportunities and were able to make connections
with representatives from those regions. The next Summit will be held
in October 2017 in Quindao, China in conjunction with the China
International Agriculture Machinery Exposition. Besides the Summit and
the trade show, manufacturers will have the opportunity to connect with
Chinese dealers and distributors through a roundtable event. For more
on Agrievolution, go to www.Agrievolution.com.
From our AEM Advocacy Insider, a few takeaways
• Moving Up: Infrastructure
– Both Clinton and Trump
talk frequently about their
interest in reinvesting in
infrastructure, bringing
more attention to the issue
on the campaign trail.
• Moving Down: Trade – A central thrust of
Trump’s campaign has been his opposition to
trade agreements like NAFTA or TPP. Though
Clinton is regarded as somewhat pro-trade, her
statements in opposition to TPP (as currently
written) and her strong support from organized
labor would make it difficult for her to embrace
more robust trade policy if elected.
• Moving Sideways: Ethanol – Ted Cruz managed
to win Iowa despite considerable opposition from
pro-ethanol groups and a rare public opposition
from popular Iowa Gov. Terry Branstad (R). Cruz
is less of an immediate threat now that he’s
faded somewhat as a candidate, but his Iowa
win has emboldened opponents of renewable
fuels in corn-growing states.
For more information, contact [email protected]
4
AEM Ag Executive Advisor
Industry Insights for the Ag Executive
5
Market Intelligence
Market Intelligence
USDA farm income forecast
U.S. ag equipment exports
n February 9, the USDA released its initial 2016 estimates for
U.S. farm income and finances. As expected, the weakness in
the ag sector is forecasted to continue as farm sector profitability
is estimated to decline for the third straight year. Net cash farm
income is forecast at $90.9 billion, down about 2.5 percent from
2015. Net farm income is forecast to be $54.8 billion in 2016,
down 3 percent. This makes the 2016 net farm income the lowest
since 2002 and shows a drop of 56 percent from its recent high
of $123.3 billion in 2013. Net cash income and net farm income
are calculated differently. The former is a better financial indicator
for the farm, while the latter is more useful for macro-economic
assessment.
U.S. agricultural equipment exports drop
13.5 percent in 2015
O
E
xports of U.S.-made agricultural equipment dropped
13.5 percent in 2015 compared to the previous year, for a total
$7.4 billion shipped worldwide per U.S. Department of Commerce.
Asia and Central America closed out 2015 with gains while
nearly all other regions recorded double-digit declines, led by
South America.
AEM market analysis overview
Agricultural equipment exports continue to be down for the third
year in a row, though the decrease in 2015 was not as strong as the
29.2-percent drop in 2014. When we look at quarterly change, the
decrease in the fourth quarter of 2015 (3.9 percent) was the lowest
year-over-year decrease since the fourth quarter of 2012. The initial
results of our fourth-quarter North American agricultural Equipment
Industry Conditions Trends Survey, which tracks the perceptions
of member manufacturers, shows that 77 percent of respondents
who exported goods indicated their exports were either declining or
remained somewhat stable.
Cash receipts are forecast to fall $9.6 billion (2.5 percent) in 2016,
led by a $7.9-billion (4.3 percent) drop in animal/animal product
receipts and a smaller $1.6-billion (0.9 percent) decline in crop
receipts. Nearly all major animal specialties—including dairy, meat
animals, and poultry/eggs— are forecast to have lower receipts, as
are vegetables/melons and feed crops. While overall cash receipts
are expected to decline, receipts for several commodities—
including turkeys, cotton, rice, sorghum, oil crops, dry beans,
potatoes, and sugarcane/sugar beets are forecast to rise by at least
1 percent in 2016. Direct government farm program payments are
projected to rise $3.3 billion (31.4 percent) to $13.9 billion in 2016
in response to the expected price environment.
The global economy is experiencing a long-term slump in
commodity prices which has put downward pressure on
agricultural exports. In early February, the USDA indicated U.S.
farm income is expected to continue its decline into 2017. External
headwinds such as the global economic malaise combined with a
strong U.S. dollar ushering in a new normal makes it appear the
declines will continue further into 2016.
A drop in overall production expenses is forecast for 2016,
cushioning the decline in cash receipts. Multi-year reductions in
farm production expenses are infrequent; it happened last over
1984-86. The $3.8-billion (1 percent) forecast decline in 2016
follows an estimated $10.1-billion decline in 2015. Before then,
production expenses increased, on average, 9 percent annually
(in nominal terms) from 2010 to 2014. Changes in input (expense)
prices typically lag commodity price upswings and downswings.
In 2016, the drop in expenses is expected to alleviate, but not
completely offset, the drop in cash receipts, and ultimately lead
to tighter margins. The decline in expenses for 2016 is driven
primarily by lower spending on feed, fuel, and fertilizer, which
outweigh expected increases in spending on hired labor, interest,
and property taxes/fees.
Exports by top 10 countries
The countries buying the most U.S.-made agricultural machinery
during 2015 (by dollar volume) appear in the chart below. n
For more information like this or for import/export
statistics reports focused on your products and
countries please contact AEM Director of Market
Intelligence Benjamin Duyck at [email protected]
THE BELOW CHARTS ILLUSTRATE A ROLLING 4 QUARTERS VS. PREVIOUS 4 QUARTERS
FOR COUNTRIES WITH > $25 MIL./YR IN EXPORTS
Top 10 Countries - US Ag Equipment Exports
Top 10 Growth Countries - US Ag Equipment Exports
Country
Last 4 Qtrs
Prev 4 Qtrs
% Change Country
Last 4 Qtrs
Prev 4 Qtrs
% Change
CANADA
$ 2,181,725,147 $ 2,635,907,431
-17.2% CHINA
$ 471,009,514 $ 319,426,491
47.5%
MEXICO
$ 1,018,343,116 $ 920,308,142
10.7% SAUDI ARABIA
$
62,340,276 $
50,672,092
23.0%
AUSTRALIA
$ 624,555,055 $ 640,138,955
-2.4% BULGARIA
$
28,288,557 $
25,101,576
12.7%
CHINA
$ 471,009,514 $ 319,426,491
47.5% HUNGARY
$
37,407,246 $
33,295,396
12.3%
GERMANY
$ 255,450,742 $ 292,777,809
-12.7% MEXICO
$ 1,018,343,116 $ 920,308,142
10.7%
BRAZIL
$ 207,614,290 $ 407,149,838
-49.0% CHILE
$ 152,550,128 $ 145,498,492
4.8%
FRANCE
$ 198,681,310 $ 203,552,258
-2.4% FRANCE
$ 198,681,310 $ 203,552,258
-2.4%
SOUTH AFRICA
$ 166,902,877 $ 241,087,135
-30.8% AUSTRALIA
$ 624,555,055 $ 640,138,955
-2.4%
UNITED KINGDOM
$ 157,152,769 $ 174,363,314
-9.9% ECUADOR
$
32,837,255 $
34,045,377
-3.5%
CHILE
$ 152,550,128 $ 145,498,492
4.8% ROMANIA
$
28,268,294 $
29,777,505
-5.1%
Global Total
$ 7,363,267,346 $ 8,512,299,122
-13.5% Global Total
$ 7,363,267,346 $ 8,512,299,122
-13.5%
The value of total farm sector equity is forecast down by
$54.9 billion (2.2 percent) in 2016, as farm sector assets are
seen declining and debt levels increasing. A main driver behind
this is the value of real estate which is forecasted to go down by
$28.8 billion (1.2 percent) The balance sheet changes result in a
worsening of farm solvency measures, which nevertheless remain
near historic lows. Liquidity positions have likewise deteriorated,
on average. n
Source: USDA Farm Income Forecast Highlights
Source: U.S. Census / AEM Market Intelligence
6
AEM Ag Executive Advisor
Industry Insights for the Ag Executive
7
Market Intelligence
Market Intelligence
AEM ag equipment sales report and analysis
Demand, planning, inventory
Initial results from AEM’s Q4 2015 survey of agriculture members:
U.S. Unit Retail Sales
Beginning
February
YTD — February
Inventory
2016
2015
%/Chg
2016
<40 HP
5,992
4,747
26.2%
40< 100 HP
3,135
2,963
2015
%Chg
Feb 2016
11,349
9,485 19.7%
77,454
5.8%
6,971
7,037 -0.9%
38,077
1,649 -41.7%
2,658
4,406 -39.7%
10,479
2WD Farm Tractors
100+ HP
Total 2WD Farm Tractors
962
10,089
4WD Farm Tractors
158
Total Farm Tractors
10,247
Self-Prop Combines
163
9,359
7.8%
280 -43.6%
9,639
6.3%
328 -50.3%
20,978 20,928
0.2%
126,010
473 -29.6%
840
21,311 21,401 -0.4%
126,850
333
582
673 -13.5%
795
Data courtesy: Association of Equipment Manufacturers Statistics
Small and mid-size trends continue
Farm tractors <40hp reported a growth of
26.2 percent in February 2016 compared to the
same period last year. YTD, this category has
experienced a 19.7 percent increase- a strong
start to 2016. Farm tractors 40<100HP once
again reversed their trend resulting in 5.8 percent
growth year over year, bringing the YTD result to
-0.9 percent. When combined, the segment sales
outperformed their 5 year average (2011-2015),
but this was clearly driven by the smaller equipment.
The expected decline in 2016 farm income and
in particular the 4.3 percent decline in livestock
receipts will not benefit this segment.
Demand and planning
W
hile there was some improvement in the Net Rising
Index (NRI) Demand in Units of Parts and Whole
Goods, the indexes still came in negative at -9.1 and
-43.6, respectively, indicating year over year decreases
in demand. The NRIs were up from -30.6 and -67.3
in the previous quarter. While still negative, the market
consensus for the year over year decreases waned a bit.
43.6 percent of respondents felt demand for Parts and
Supplies had remained unchanged and 23.6 percent
for goods. When asked about the market, respondents
answered with terms like “difficult”, “sluggish”, and
“terrible”. One respondent did indicate that the market
is a mix based on which segment they look at. Similarly,
another manufacturer noted that lower milk and beef
prices were hurting his new equipment sales.
Source: AEM Market Intelligence – North American ag Equipment Trends report.
To more closely analyze the trends within whole goods
and components/attachments, the survey included
questions regarding the work backlog, production
and new orders. Overall, these numbers look fairly
negative, with most respondents indicating falling orders,
production and work backlog. However, now that we
have multiple quarters worth of data, we can see that the
situation appears to be improving for the Whole Goods
segment. While the NRIs would still be negative, there
are less respondents indicating falling production, new
orders and backlog and more respondents indicating
growth or particularly stability. Similar trends cannot be
found for the Components/Attachment segment.
To receive the final results of this survey, please contact
Benjamin Duyck at [email protected].
Source: AEM Market Intelligence – North American ag Equipment Trends report.
Inventory levels
Large farm tractors sales
continue to suffer
Moving into 2016, there was some hope for the
production ag categories as January put down
only single digit declines. This month’s numbers,
however, reverse that trend back to 2015 as the
market experienced a -41.7 percent decline in 2WD
tractors > 100HP and a -43.6 percent year over year
decline in 4WD tractors. Both categories are seeing
the result of the lower commodity prices and still
suffer from the large amounts of used inventories
in the marketplace. n
Dealer inventories continue to be a lynchpin in the ag
equipment industry downturn and we see that its high
levels are one of the major constraints in the economic
malaise. Compared to the previous quarter, more
survey respondents are indicating inventories at the
dealership level are decreasing, as the NRI came in
around -18.5, up from -29.16 last quarter.
Even though more respondents feel the dealers are
shedding inventories, there is more and more market
consensus that the current level is still considered too
high. Even though there are more respondents that feel
the inventories are decreasing vs. increasing quarter
over quarter, 66.7 percent feel that inventories are
staying about the same. n
Source: AEM Market Intelligence – North American ag Equipment Trends report.
8
AEM Ag Executive Advisor
Industry Insights for the Ag Executive
9
Market Intelligence
Commodity Classic
‘Very strong’ market potential in Africa
A
frica holds
great market
potential for
agricultural
machines,
according
to a recent
survey among
171 manufacturers of farm equipment
conducted by the Agrievolution Alliance – a
global network representing manufacturers
of agricultural machinery – on behalf of
World Bank.
According to the responses, 42 percent
of manufacturers surveyed indicated
that Africa is already a ‘very important’ or
‘absolutely essential’ market for them today.
Only about 12.5 percent discarded Africa
as a potential market. Looking towards the
future, almost half of the manufacturers
surveyed felt the African market will reach
‘great’ or ‘very strong’ potential. This
number grows to 75 percent if we expand
the horizon to 5 -15 years.
Today, companies are still facing strong
challenges. Naturally, in order for Africa to
reach its full potential and for companies
to get more involved in the market,
these issues must be dealt with. From
a government perspective the survey
indicated a strong requirement for more
political regulation, less corruption and a
stronger supporting infrastructure. It was
stated that the financial markets need
to mature with a strong banking system
providing credit to farmers. Also, farmers
themselves need to be made more aware of
technology and the changes in agricultural
methods. Finally, the survey indicated
that the ag equipment industry itself must
become more serious about business in
Africa and develop a strong dealership
network. Companies need to get to know
each other and the market through
trade fairs.
Survey results stated that public-private
partnerships (PPPs) are an essential
element of the metamorphosis of the
African ag equipment market. These
partnerships will be able to address the
structural challenges holding the market
down. More than half of the respondents
indicated that PPPs are ‘very important’
or ‘absolutely essential’ for sustainable
mechanization.
The survey was completed by 171
companies from 16 countries including:
Austria, Brazil, Canada, China, France,
Germany, Hungary, India, Italy, Japan,
Korea, South Africa, Turkey, Ukraine,
United Kingdom and United States.
T
he 2016 Commodity Classic,
held March 3-5 in New
Orleans, was the biggest and
best ever, thanks in part to the
addition of AEM as an official
Affiliate. The equipment
manufacturers’ perspective
was heard along with that of
the commodity groups as AEM
Ag Sector Board member Bill
Hurley of AGCO joined leaders
from National Corn Growers
Association, American Soybean
Association, North American
Wheat Growers and National
Sorghum Producers in a panel
discussion at the General
Session. Bringing farmers and
equipment manufacturers
together serves to enhance the
show and to strengthen our
common voice on policies and
issues that affect us all.
ZimmComm New Media
ZimmComm New Media
Agriculture in Africa is a key contributor
to overall growth, accounting for about 20
percent of GDP. According to the World
Bank, by 2030, Africa will have half a billion
more mouths to feed. In 2013 the Food
and agriculture Organization of the United
Nations (FAO) stated that Sub-Saharan
Africa (SSA) is the only region in the world
where the number of agricultural workers
is very low compared to other regions. Not
only that, but it also has access to very few
tractors. In Central Africa, 80 percent of
cultivated land is worked manually. Based
on the current state of African agricultural
mechanization and the amount of cereal
currently being imported (30 percent), this
poses great opportunity for the agricultural
equipment industry.
Commodity Classic 2016:
more equipment, more technology
Agrievolution:
The Agrievolution Alliance is the
global voice for agriculture equipment
manufacturers, representing more than
6000 companies around the world.
10
Made up of 13 organizations, it was
established in April of 2012 to facilitate
collaboration within the agriculture
equipment manufacturing industry among
important agricultural regions of the world.
For more information, please visit
www.Agrievolution.com. n
AEM Ag Executive Advisor
Industry Insights for the Ag Executive
11
Leadership
Manufacturer Alert
If it’s right for the customer, it’s right for
the dealer and for the manufacturer
Todd Stucke
U.S. senior vice
president, sales,
marketing and product
support, Kubota Tractor
Company
T
odd Stucke, U.S. senior vice president,
sales, marketing and product support
at Kubota, grew up on a family farm
growing potatoes. One pivotal memory is
of his dad planting potatoes right near the
house, while the rest of them were inside
celebrating his brother’s birthday. All Todd
wanted to do was ride on the tractor with
his dad - not be at the party. When his dad
came in, he distinctly recalls him saying,
“There will be a day when we won’t even
have to drive the tractor, it will drive itself.”
As he got older, Todd and his five brothers
learned what hard work really meant. He
remembers the days before chemicals,
when they would hoe weeds all day on
their 2000 acres in western Ohio. As the
seasons changed, they moved to digging
potatoes. At some point, Todd decided
he wanted to take a different path. After
high school, he attended college, but was
unable to complete his degree due to a
death in the family that prompted his return
to the farm. Five years later, he accepted
an offer from New Idea, and returned to
evening classes to complete his degree.
Todd earned both Bachelor’s and Master’s
degrees in Business Administration from
Indiana Wesleyan University, graduating
both magna cum laude. He spent 23 years
with New Idea and AGCO before joining
Kubota in 2013.
As seems to be the trend, your millennial
nephew will be taking over the family
farm. What do you feel the biggest
changes will be with millennials
taking over?
In running the farm, I communicate
with my dad, brother and nephew. The
way I communicate with each of them is
completely different: I have to pick up the
phone to get a message to my dad; I mostly
use email with my brother; and if I want to
get in touch with my nephew, it has to be
via text. I think the core values remain the
same, but the technology and means of
communication are different.
You still run the financial side of the farm
together with one brother who handles
operations. Why do you choose to still
be a part of that while also maintaining
a demanding career in business?
I had a chance to sell out to my brother.
I chose not to because it allows me to be
more effective in my job; it helps me to
consider the customer’s perspective more
fully when making business decisions. If
it’s right for the customer, it’s right for the
dealer and for the manufacturer, as well.
When you started with Kubota, was there
anything in particular that struck you
about the company?
The focused drive toward engineering
excellence and quality is very much a core
competency and sets Kubota apart. I did
not realize the strength of the brand, or
how strong Kubota products are in their
various segments. Kubota is much more
than a tractor company and we maintain
leadership in several categories: we are
#1 or #2 in several product segments;
we make world-leading diesel engines;
we build environmentally compatible
water treatment products, and more.
As an industry leader in the under 40HP
tractor segment, Kubota has had some
exciting developments in recent years.
Can you tell us about those?
We entered the hay tool market with the
acquisition of Kverneland. We just launched
our 170 HP M7 tractor and recently
introduced a skid steer loader. We hold a
leading position in utility tractors and are
looking to expand that and our turf business
to the commercial side. This diversification
helps us to keep balanced among the
various sectors. We are also in the process
of moving our headquarters from California
to Texas. This move will create operational
efficiencies, bringing us closer to our
customers and allowing us to serve them
better from a more central location and
time zone.
Kubota has been an AEM member for
45 years, and you serve on the AEM
and Ag Sector Boards. What do you
see as the biggest benefit for Kubota?
In the past, Kubota’s main AEM focus was
statistics, but we’ve now taken a more
active role. We were a small shortline
company, but as we grow, we have a
responsibility to help lead the industry.
Being engaged through AEM gives us
a stronger voice.
In his time at Kubota, Stucke has helped
establish a strong philanthropic program,
partnering with Farmer Veteran Coalition.
Through its Geared to Give program,
Kubota helps military veterans – many of
them first generation - pursue a future in
farming by donating new equipment and
providing other support. Todd spends his
spare time with his wife and two adult
children and keeps in shape by running.
And although he doesn’t have much time
to drive tractors these days, he takes great
pleasure in having a part in bringing his
dad’s futuristic vision of “a tractor driving
itself” to life. n
“(Running the financial side of the farm) allows me to be more effective in my job;
it helps me to consider the customer’s perspective more fully when making business decisions.”
12
AEM Ag Executive Advisor
New ruling on EU REACH could increase
financial risks to OEMs, supply chains
EU importers and suppliers of products are now subject to REACH “articles” obligations in respect to each
individual component of a product rather than to the product as a whole.
Q. What has
changed?
A. The 2006
REACH
regulation
originally stated
that the basis for
compliance with
REACH was a
fully assembled
article, or “A
product with a
shape, surface
or design that
determines its
function to a
greater degree
than its chemical
composition.”
According to the new Once An
Article Always An Article (OAAAAA)
interpretation of REACH in September
2015, the basis for compliance is
any article incorporated into the fully
assembled product; in other words,
a bolt or gasket is an article. A hose,
pump, transmission and every other
assembly or sub-assembly are all
articles as well, and every component
within them must be evaluated as an
article.
Q. What does OAAAAA mean
for my company?
A. It means that – more than ever –
your company needs to obtain full
material disclosure in regard to every
substance that is 1) incorporated
into components that are, in turn,
incorporated into your fully-assembled
products and 2) used by your
company and its suppliers in their
manufacturing processes.
Industry Insights for the Ag Executive
It also means that “diluting” your
product, i.e. adding more metallic
weight that does not contain identified
Substances of Very High Concern,
is no longer a viable method for
demonstrating compliance. Obtaining
full material disclosure is increasingly
the only way to demonstrate
compliance and to reduce your
financial risk.
Q. In the near term, what is likely to be
my biggest REACH risk?
A. Spare parts that you ship into the EU
to help maintain your products and/or
as after-market sales.
Q. My company is based in the US. The
EU doesn’t have any jurisdiction over
us. Why should I be concerned?
A. Your importers and end customers in
the EU are legally liable under REACH.
To protect themselves, they may
refuse to accept your products or to
place them on the EU market unless
you can document the substances
in your products. Recently, an OEM’s
importers delayed accepting product
until the substance documentation
was provided by a supplier. In a similar
vein, AEM is seeing a growing number
of flow-down clauses within purchasing
contracts from customers. These
clauses require REACH compliance
and, more specifically, substance
documentation.
Q. Where can I get help with full
material disclosure and REACH
compliance?
A. AEM can help. AEM’s Market
Access Pathway (MAP) program
assists companies with the entire
data-collection process, including
low-cost training. It also offers a data
standard and data exchange system
that is recommended by an industryrepresentative committee under AEM’s
umbrella. Contact John Wagner for
more information [email protected]. n
13
Standards
Standards
Who’s on first when it comes to
ag standards development?
W
ith all the activity surrounding
telematics and farm management
systems, it’s sometimes difficult to identify
all the right players. Are groups overlapping
on effort? Are they working together
efficiently?
To address these questions, ASABE
hosted an Organizational Alignment in
Standards Development meeting following
their Agricultural Equipment Technology
Conference (AETC) in Louisville, KY last
month. The interested parties identified the
following goals for the session:
•P
rovide awareness of the roles of
respective organizations
•E
ngage the right experts to minimize any
duplication of effort
American Society of Agricultural and Biological Engineers (ASABE)
Organization
Role
Membership
AEF – Agricultural Industry
Electronics Foundation
Electronics
Industry
AEM – Association of
Equipment Manufacturers
Industry
support,
Public policy
Industry
AgGateway
Business
processes
Open
ASABE – American Society
of Agricultural and Biological
Engineers
National
standards
Open
ISO – International Organization
of Standardization
International
standards
Open
The American Society of Agricultural and
Biological Engineers (ASABE) has initiated a
revision to its previous adoption of international
standard ISO 4254-13:2012, ANSI/ASABE
AD4254-13:2012, agricultural machinery —
Safety — Part 13: Large rotary mowers. ISO
4354-13 specifies the safety requirements and
their verification in the design and construction
of towed, semi-mounted, or mounted large
rotary mowers. It applies to mowers with single
or multiple cutting elements with a cutting
diameter of 1,000 mm or greater for any
single cutting element assembly, mounted on
a propelling tractor or machine. It is intended
for agricultural mowing equipment designed
for shredding crop residue, grass, and small
brush by impact.
ASABE has initiated a project to revise ANSI/
ASAE S396.2, Combine Capacity and
Performance Test Procedure. The standard
is being revised to clarify wording and to
consider the incorporation of new practices for
performing loss testing on combine harvesters.
ANSI/ASAE S396.2 will also be compared with
ISO 8210:1989, Equipment for harvesting
-- Combine harvesters -- Test procedure, to
determine whether information from the ISO
document should be included in S396.
• Identify key alignments for present and
future work
Is your company leader the next AEM Hall of Famer?
The organizations in the chart contributed
to this meeting and provided input in their
respective roles. An overview of the roles of
each contributor was presented in an open
discussion to inform attendees and answer
questions.
One of the highlights from the session was
an excellent overview of the national and
international organization structure and how
the work activities of the different groups
make the way to the standards committees.
Discussion on standards development
often begins in AEM technical committees,
for example, and AEM helps facilitate
working relationships between organizations
like AEF and AgGateway. This lays the
groundwork in creating guidelines and
business processes in order to take that
work and develop it into national standards
and ultimately international standards
through organizations like ASABE and ISO.
The diagram above was also presented.
It helps to illustrate some of the areas of
activities between AEF and AgGateway
and how smoothly they work together on
farm management systems. At the top of
14
Do you know an off-road ag equipment industry leader who
consistently delivers superior results? Someone who goes above
and beyond to move the industry forward? A leader whose
accomplishments seem almost... superhuman? If so, it’s time for
you to reveal his or her secret identity to the world, because the
AEM Hall of Fame nominations are now open!
AEM is accepting nominations for individuals who represent the best
and brightest in the off-road equipment industry. The new awards
form is now open online, and nominating your hero is free and easy.
The nominations deadline is June 6, 2016. You can nominate one
candidate or a group of candidates for the award.
For more information and insider tips visit www.aem.org/HallofFame.
the diagram it illustrates the combinations
of machine to machine communications
where AEF focuses much of its efforts. But
as we progress further down to the center
area, we can see how the activity starts to
transition between AEF and AgGateway
project teams. Only with well-coordinated
working relationships can progress be made
without overlapping and creating a waste
of efforts. The lower section represents
the management systems farmers use to
effectively run their farm business activities,
the primary focus of AgGateway. n
Mark Benishek,
AEM AEF technical
director
[email protected]
AEM Ag Executive Advisor
Winners receive:
• Complimentary registration for winner
and one guest to attend the 2016
AEM Annual Conference Finale
Dinner & Awards Ceremony.
• Recognition and esteem from the
industry and your peers.
• A distinguished award preserving
their legacy.
Questions? Contact AEM’s Jordanne
Waldschmidt (414-298-4152;
[email protected]).
On behalf of our 475 ag industry members,
IS A PROUD SUPPORTER
OF NATIONAL AG DAY
Visit aem.org/agriculture
to learn more.
Industry Insights for the Ag Executive
15
6737 W. Washington St., Suite 2400
Milwaukee, WI 53214-5647
AEM Ag Executive Advisor
@aemadvisor
AEM.org
Printed on Recycled Paper
Association of Equipment
Manufacturers on LinkedIn
Visit AEM.ORG/SAFETYSEMINAR
for more information and to register.
Product Safety & Liability Seminars
April 18-21, Crown Plaza Chicago O’Hare
Registration is now open for AEM’s Product Safety & Compliance and Product Liability seminars!
This year’s event will provide the same great essential, mid-level and advanced content you’ve come to
expect. Be sure to stay for the Liability conference, which will feature product defense experts presenting
on various topics including: Assessing product warnings in litigation, Top ten product liability litigation
pitfalls, and How product manuals, instructions and other collateral materials matter.
Get the latest on:
• Euro Stage V Emissions
• Telematics Technology
•
•
ew ag standards like Operator’s Field of Vision, Self-Propelled Machine Stability
N
Using social media to promote safe use of products
Product Safety & Compliance:
$650 AEM Members
$850 Non-Members
(subject to AEM approval)
$130 Spouse/Guest
Product Liability:
$250 AEM Members
$530 Non-Members
(subject to AEM approval)
Don’t delay! Register now and secure your spot at the premier conference designed specifically for
product safety professionals in the equipment manufacturing industry. Visit AEM.ORG/SAFETYSEMINAR today.
16
AEM Ag Executive Advisor