CEMA, the umbrella organisation for Europe’s machinery trade organisations, undertakes a monthly review of sentiment within the agricultural machinery industry, and its latest barometer report for July indicates that there is not a lot of cheer to be had.
It noted that: “The current situation has reached a new low: the gap between a worsened current situation and a significantly better evaluated future situation has widened considerably.”
What many hoped would be a short lull in sales while farmers dealt with the headwinds of poor weather and reduced commodity prices is now turning into long-term trend that is starting to cause concern.
High stock levels concern CEMA
One of the more problematic aspects that is constantly being mentioned by manufacturers is the issue of high dealer inventories and the backlog in the distribution system that it is causing.
According to CEMA, stocks are still very high, although there is considerable variation across the EU. Poland is said to have particular problems, while the situation is a lot easier in Spain.
Stocks of used machines have also risen considerably indicating that farmers are more inclined to work with what they have rather than take on board new machines which still have a cost, albeit lower than buying new.
Keeping it simple
This year has seen a move by some manufacturers to reduce the cost of their products by removing various features that add to the expense but, as they admit, also add to the complexity which, on busy farms where there is not the time for full familiarisation with the systems, may actually detract from their utility.
Pottinger’s latest Jumbo forage wagon is a case in point, while John Deere’s recently launched 6M series offers basic transmissions right up to 250hp.
So far, little mention has been made in the trade of the effect that this downturn will have on machinery development, but it may turn out to be significant.
There is a general assumption within the manufacturing industry that the way forward is paved with digital systems taking over much of the human input, and this would not be unreasonable, as bigger machines with more potential for setting and adjustment do require a great deal more input from the operator.
Yet, that belief might now have run into the harsh reality of a limited interest in digital assistance, and the associated expense, at farm level.
This is far from being proven, but the fact that companies are not automatically bolting the whole digital experience on to larger machines is telling.
Further layoffs expected
Naturally, the reduction in sales is being downplayed, but there is no escaping the fact that CEMA has found that almost a quarter of the companies surveyed are currently applying short-time working, and sales expectations for the second half of the year remain very low.
Redundancies are already taking place with John Deere being put under the brightest of spotlights, but they are quietly taking place elsewhere too with a degree of uncertainty over future employment levels throughout the industry.
64% of companies plan to reduce their temporary/non-contract staff and 27% of their full-time employees, according to CEMA.
Manufacturing industry everywhere does rely a great deal on temporary labour, as it gives flexibility to companies when trying to manage a workforce during periods of fluctuating demand, and we are now seeing the downside of that arrangement.
Agriland understands that one major player is planning further significant cuts before the end of the month, but this has yet to be confirmed by the company.