Healthy harvest drives sales of new farm equipment

Western Canadian farmers are using proceeds from a good harvest last year to buy more new agricultural equipment after years of settling for used as prices of U.S.made machinery rose due to the stronger American dollar.

Both Cervus Equipment Corp. and Rocky Mountain Dealerships Inc. are reporting increased earnings thanks to higher profit margins and manufacturers’ incentive payments on sales of new equipment in 2017 versus 2016.

“In our agricultural segment, the customer-focused sales efforts of our team further benefited from positive harvest results in our geography and windows of favourable U.S. exchange rates,” said Cervus CEO Graham Drake in a conference call last week.

“The resulting 20 per cent increase in new equipment sales set a record .... The outlook for 2018 is positive with Canadian producers in good financial health as reflected in early indicators of sustained industry activity.”

He cited the improved outlook in announcing an increase in the company’s quarterly dividend from seven to 10 cents per share.

Rocky Mountain Dealerships is also banking on Canadian farmer optimism this year, said CEO Garrett Ganden, noting continuing good prices on solid crop production and a harvest last fall that wasn’t hampered by late-season wet conditions as it was in 2016.

He said he doesn’t think farmers will divert money to storage solutions despite ongoing complaints about railcar availability to get their crops to market. “Farmers across the Prairies are still pretty happy, pretty robust as to what 2018 is going to look like,” he said on a conference call with analysts last week.

“The rail issues have been ongoing issues over the last number of years. It does always seem to get resolved at some point.”

Cervus reported revenue from new equipment sales rose 20 per cent to $447 million in 2017, while used equipment sales grew by five per cent to $247 million.