Investment decisions ahead

Dave Bergmeier

More favorable grain prices and improved livestock prices over recent months are encouraging signs for producers who may be looking to add equipment to improve their operation’s efficiency.

Experts who study trends have taken note of lower interest rates and better business climate.

The Creighton University Rural Mainstreet Index has shown the rural economy is gaining strength though it remains below the pre-pandemic levels, according to Ernie Goss, Jack A. MacAllister Chair in Regional Economics at Creighton University’s Heider College of Business and a frequent contributor to High Plains Journal. His assessment at the end of January included:

• For a fourth straight month, the farmland price index advanced above growth neutral. The January climbed to 56.3, its highest level since July 2013, and up from 55.0 in December. This is first time since 2013 that Creighton’s survey has recorded four straight months of above growth-neutral farmland prices.

• The January farm equipment-sales index rose to 54.5, its highest reading since April 2013, and up from 50.2 in December. After 86 straight months of readings below growth neutral, farm equipment bounced into growth territory for the last two months.

Michael Langemeier, associate director of the Center for Commercial Agriculture, said that in north central Indiana, net farm income per acre was the highest since 2013. With profit margins slightly above the average since 2007, and 2021 promising better things, “This could be the year for equipment purchases,” said Jim Mintert, director of the Center for Commercial Agriculture and a professor in the Department of Agricultural Economics at Purdue University.

However, bankers in the Rural Mainstreet Index did note concerns about excessive inflation possibility of higher long-term interest rates. Other concerns were a return to stricter regulatory environment plus uncertainty on tax policy with a new administration.

Farmers and ranchers have many considerations as they plan ahead the upcoming year and beyond. In another encouraging sign the Equipment Leasing and Financial Association in its trends for 2021 has noted that businesses are expected to spend more than $1.8 trillion in capital goods or fixed business investment.

The Association of Equipment Manufacturers noted in its predictions report for 2021 some of the spending decisions will revolve around touchless services including remote diagnostics, remote control automated monitoring, enhanced predictive and remote maintenance and more intuitive and context-driven user interfaces.

Original equipment manufactures will shift from selling technology to unlocking and providing valuable services. Data sharing will continue to grow in importance and that may mean forging new partnerships. Sustainability is more than lip service; it involves greater focus on efficiency.

All of these trends and others play a part in how today’s producer has to look at his multi-year plans. Equipment dealers—from the full-line to short lines—today are offering incentives for new and used machinery from tractors, combines and specialized equipment, which can allow the producer to be able to take into account future trends.

The dealers are the unsung heroes for providing essential services that producers need as well as important employment to help rural communities. To their credit the owners of those essential business have been adaptive and understanding of farmers’ needs and challenges.

Producers can have confidence that as they invest to upgrade their operation, they are part of a connected team that shares their same values.

Dave Bergmeier can be reached at 620-227-1822 or [email protected].