Equipment Sales Falter as Farm Income Slows, Tariffs a Concern, Say Regional Feds

Farm equipment sales are slowing alongside the downturn in farm income, creating a headwind to overall U.S. investment activity, said the Beige Book, a summary of economic conditions in Federal Reserve Bank districts. In discussing agriculture, the St. Louis Fed said some businesses were building inventory in anticipation of potential tariffs on imported goods.

Lower commodity prices and high production costs were pulling down net farm income, a measure of profitability, for the second year in a row. Farm-state lawmakers pushed for congressional approval of billions of dollars in payments to farmers in economic relief.

“Conditions in the farm economy remained subdued and many contacts cited declines in farm equipment values as a growing concern,” said the Kansas City Fed. The Chicago Fed said farm equipment sales this fall “were slow given falling prices for trade-ins and sticky high prices on new equipment.” In its summary of U.S. economic conditions, the Beige Book, issued last week, said farm equipment sales “were a notable headwind to overall investment activity, and several contacts expressed concerns about the future prices of equipment given ongoing weakness in the farm economy.”

Sales of farm tractors were down by nearly 14% and combines by 23% so far this year compared to 2023, said the Association of Equipment Manufacturers in a report issued last month.

The St. Louis and Dallas Feds said delays in enacting the new farm bill were a major concern. Congress was expected to extend current law for a year as a way to allow time to work on a farm bill during 2025.

“Contacts expressed uncertainty about the new farm bill in light of the upcoming change in administration, fearing needed farm safety net programs could be held up,” said the Dallas Fed. In the mid-South, said the St. Louis Fed, “Uncertainty about the passing of the next farm bill, high borrowing rates, and potential disruptions in international trade were the main concerns of farmers.” Progress on the farm bill was deadlocked in disputes over increases in crop subsidies, cuts in SNAP, and access to climate mitigation funds.

Agricultural conditions remained weak in the northern Plains, said the Minneapolis Fed. “Farm income expectations for 2024 continued to be for a decline from 2023, as corn and soybean prices remained below year-ago levels,” said the Chicago Fed. The Kansas City Fed said above-average yields per acre for corn and soybeans “could boost revenues, but profit opportunities stayed narrow,” and the Dallas Fed said lower crop prices put a strain on farmers while benefiting livestock producers, who feed grain to their animals.