Dealers, farmers more optimistic going into 2001

On the snow-streaked prairie south of Greeley, Terry Conwell rumbles his hulking John Deere tractor to life. It sputters and belches black smoke.

“It’s old,” the third-generation grain farmer says of the tractor. “I bought it used, and I’m due for a new one. I got the engine fixed up instead because my banker says I need to be cautious.”

For Conwell and most other agriculturists in the region, caution has become an all too familiar business maxim. He is “cautiously optimistic” when making predictions for the upcoming planting season. He is cautious not to label recent upswings in cattle and hay prices as “good signs of what’s to come.” But mostly he is cautious with investments in the historically unpredictable agricultural industry.

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And while caution may bode well for fiscal security on the farm, it tends to erode profits and baffle business strategists in the fiercely competitive farm-machinery market. Tethered stiffly to commodity prices, the machinery market’s trends usually mirror the economic tide on the land. And in 2000 — after a three-year agricultural slump — local farmers watched that tide recede yet again, left to wonder if profitability will ever again flow onto their Front Range farms.

All told, local farmers parlayed about 50 percent of their fiscal 2000 revenues from government subsidies, according to the Colorado Department of Agriculture. So their guarded behavior seems justified.

But farm-equipment statistics tell a much more textured story than simple bad and good. Some sectors of the market — mainly compact or low-horsepower tractors — thrived in 2000. Overall, farm wheel tractor sales actually spiked by 9.7 percent from 1999, according to Equipment Manufactures Institute statistics.

“We actually had a fairly good year,´ said Richard Homrick, operations manager at Longmont Farm Supply.

A reflection of local land-use trends, which continue to slip toward balkanization, Homrick and other retailers bolstered their 2000 profit margins with low-horsepower machinery sales, targeted primarily at small-acreage farmers, he said.

“The Northern Front Range used to be heavy agricultural,” he said. “But now those plots are being subdivided into 15- to 50-acre lots. So while the big farms may hesitate to buy a new 200-horsepower tractor, the new farmers with smaller plots will need to buy the smaller machines.”

Consequently, many local retailers have been shifting their inventories to accommodate the torrent of new business and pad their pockets against losses in other areas. That market, “can’t hold up forever,” though, warns Ken VanWhy, co-owner of VanWhy and Sons Inc. in Pierce. “You can try to cater to the small-acreage people now, but their income is limited as far as what they can do in the long run.”

Still, despite skepticism and soaring gasoline and fertilizer costs, the industry’s entire 2001 economic canvass is already looking rosier than anyone had anticipated.

It might not, “reach the record year we had back in 1997,´ said Duane Wallin, president of Bi-State Machinery Co. in Greeley. “But I’m hearing more optimism (from farmers) going into this year than I’ve heard in a long time.”

Early large-equipment sales figures support Wallin’s claim. Several local machinery retailers are reporting first-quarter sales — typically the slowest all year — to be far above normal.

“I’ve sold more large equipment this year than ever,´ said Dale Leach, owner of Fort Collins-based GreenLine Power Ltd. “A lot of people are making large capital investments; I mean over $100,000.”

The explanations for the sudden burst in consumer confidence vary. Some local experts attribute the investments to farm expansion, suggesting that as mid-sized farms crumble under economic pressures, the neighbors who buy them up are forced to dole out capital to manage the additional acres. Others argue that projected shifts in crop production nationally — a forecasted dearth in potato and corn yields — are encouraging enough to put farmers on the offensive.

Whatever the cause, though, 2001 is looking surprisingly lucrative. Even the saturated used-equipment market is starting to look up, Wallin said. Plagued recently by a deluge of used inventory from bankrupt or retiring family farmers, Front Range machinery retailers have been forced to stomach a 10 to 40 percent price glut in used-equipment sales for the past two years.

Still, retailers admit that it is too early to call 2001 a banner year. Glaring obstacles, sparked by agriculture’s slide toward consolidation and fragmentation, still loom on the economic horizon.

“The big farmers aren’t here anymore,´ said Conrad Hopp, sales manager at Longs Peak Equipment Corp. in Weld County. And last year’s numbers show it.

Case in point: Sales for tractors operating at under 50 horsepower soared while sales for planters and harvesters plunged to new record lows, some down as much as 48 percent.

Consider also the surplus of used equipment and one glowing conclusion emerges, said Jerry Alldredge, an agronomist for the Colorado State University Cooperative extension in Weld County.

“The middle-acreage farmers are falling out,” he said. “We’re seeing those guys that are on the margin go under like never before.”

It’s an old story, though. For the past decade the concentration of agricultural land has been divided into small ranches and expanded into large mega-farms, moving rapidly away from mid-sized family farms, Alldredge said. Today, a small number of big-revenue generators — those farms that gross more than $1 million a year — accounts for 65 percent of state agriculture sales, up from just more than 50 percent a decade ago, according to Colorado Department of Agriculture statistics.

So what’s the bottom line for 2001?

“I think commodity prices have finally hit bottoms,” Wallin said. “So if this early optimism keeps up we could be looking at a very good year for agriculture.”