Industry Trends And Developments - Americas Machinery Outlook - FEB 2017

BMI View: Machinery sales growth in the Americas will diverge as South American growth outpaces North American growth. Improving macro conditions and government policy will help drive sales in South America, while North American growth will be confined to lower horsepower tractors for now. Over the coming years, big data and the 'Internet of Things' will be key features of the machinery market.

Poor Short-Term Prospects In The US...

North American tractor sales will underperform South American tractor sales through early 2017 for a number of reasons. First , grains prices will generally average lower in the coming two to three years compared to previous years, as the global market remains comparatively well supplied. This will lead to lower farm incomes, which will continue to curb demand for new machinery, especially higher horsepower tractors. Indeed, aggregate US farm net cash income is expected to fall to USD66bn after reaching a high of USD129bn in 2013. Relatively strong incomes in the livestock sub-sector have helped support demand for smaller size tractors, and sales of tractors under 100 horsepower (HP) have outperformed sales of tractors over 100HP in recent months.

Further Contraction Likely
United States - 7th District Total Farmland Values, % chg y-o-y
Notes: The Seventh District includes Illinois, Indiana and Iowa. Source: BMI, Bloomberg, Federal Reserve Bank of Chicago

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