Farm Credit Canada (FCC) is expecting demand for farm equipment to continue to be strong in 2023, FCC’s farm equipment market outlook said. The market will be strong as it weathers rising interest rates and a weakening Canadian dollar.
“Producers will benefit from strategic planning as inventory levels for farm equipment remain below pre-pandemic levels, something we expect could continue through 2024,” J.P. Gervais, FCC’s chief economist, said in the release. He noted tractor inventory levels are down 42 per cent and combines are down 47 per cent from the five-year average.
The outlook also said the used equipment market has seen increased demand because of the pandemic-related shutdowns. With limited availability of new equipment and parts, producers were adapting by having additional used equipment available for parts if needed, it was noted.
Equipment manufacturers are expected to increase production of new equipment due to the changing economic environment providing the opportunity for inflationary pressures in the used equipment market to moderate, the release said.
“Most new tractors and combines sold in Canada are manufactured south of the border, so an expected depreciation of the loonie through 2023 should lead to price increases on farm machinery,” Gervais explained. “This is also the result of inflationary pressures in the supply chain that occurred in the last half of 2022.”
While the depreciating loonie makes new tractors and combines more expensive, producers can take some solace in the fact that a depreciating loonie also has a positive effect on farm commodities destined for export, the update said.
Strong commodity prices will continue to support the demand for farm equipment, offsetting the impact of higher interest rates and a lower Canadian dollar. The used equipment market is expected to stay robust for most of 2023 and into 2024, the release said.
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