It was 1985, and the tractor outside Kalvesta Implement was almost pleading for a buyer.
Hayes Baldwin was doing everything he could to move tractors at the dealership in northeast Finney County during the 1980s. A dealership in Iowa said they’d take the brand new White 2-180 tractor with front-wheel assist off his hands: They had a buyer. But Hayes wanted to see if he could move some revenue and asked if they’d give him a few days.
“I can remember the tractor sitting there. My dad parked it outside the front doors, with $35,000 written in the window with shoe polish,” said Hayes’ son, Bruce Baldwin.
But as the farm crisis of the era wore on, Hayes Baldwin couldn’t find any takers.
“He had to call the dealer in Iowa and let them have it,” said Bruce, who now is at the helm of one of Kansas’ oldest implement dealerships.
Three decades later, folks like Baldwin are grappling with the beginnings of another farm crisis that is sweeping across rural America.
Just a few years after farmers were reaping record rates for U.S. crop and cattle prices, a surplus of commodities has caused prices – and farm income – to tumble.
The bumper crops, along with a stronger dollar, which makes U.S. farm commodities more expensive overseas, has all contributed to the downturn in the farm economy.
Already, some Kansas bankruptcy lawyers are preparing to file more bankruptcies this year than the past as farmers, who increased their debt load in the good years, are watching prices deteriorate.
“You have a diminishing revenue that is supposed to be able to support higher debt-to-asset ratios, and that is not a good mix,” said Ed Nazar, a member of Hinkle Law Firm who is the Chapter 12 Bankruptcy Trustee for the U.S. Bankruptcy Court for the District of Kansas.
As farmers cut back, the despondency caused by slumping prices for crops and livestock is starting to hit Kansas’ rural towns. With farmers tightening their belts, less money is trickling to Main Street, from the diners to the dealerships.
Baldwin has been thankful that a string of good harvests has brought record yields for some farmers, which has helped sales.
But while he feels fortunate, “We aren’t seeing the spendable cash that we have had in the past,” he said, adding he can only be hopeful that end-of-year sales will pick up as farmers visit with accountants.
Still, he said, “I can’t say that it is all roses. Usually by this time of year, I have four to six combine pre-sales. I have none.”
“Where do we go from here? That is the six-million-dollar question.”
A new report from the Association of Equipment Manufacturers shows that large farm equipment sales, which include combines and tractors, are down more than 20 percent from October 2015. Caterpillar’s third-quarter sales and revenue slid 16 percent.
AGCO, which has a manufacturing plant at Hesston, also is feeling the strapped economy. In a quarterly report issued this fall, AGCO’s North American net sales were down 8.5 percent for the first nine months of 2016, compared to the same period last year. Large tractor sales were down 11 percent, and sales of combines – the Gleaner is manufactured in Hesston – were down 20 percent.
Don Hornung, president of CrustBuster/Speed King, a Spearville company that makes planting, material-handling and harvesting equipment, wasn’t optimistic, either.
“It’s the roughest I’ve seen it since the 1980s,” said Hornung.
Randy Veatch, vice president of sales for Straub International, said the past seven years have been some of the most extreme he has ever seen since getting into the equipment sales business in 1992. The period has gone from record highs to a downturn that began around January 2014.
“That stumble is the biggest extreme I’ve ever seen,” he said, adding, “It’s ugly, without a doubt.”
Also, said Veatch, there has been more equipment repossession in the past 24 months than he has experienced in 15 years combined, adding it isn’t a huge number, but there is an uptick.
Meanwhile, the dealership group closed two of its seven stores this year, largely due to the economy. One was in Marion, the other Larned.
It’s not a decision they made lightly, he said.
“It is a gut-wrenching decision,” Veatch said. “You have to look at the customers and the employees there. It isn’t as easy as taking a pin out of the map.”
The agriculture economy cycles every five or six years, he estimated. But he doesn’t see this cycle ending at least for a few years.
“Go drive around the country – everywhere there is a pile of grain outside,” Veatch said. “The elevators have grain in them. Even if we have a normal crop or a below-normal crop, I think we still have another year for all of this to work through the system. We aren’t widely optimistic for 2017 to fill our lots back up.”
While farmers are cash-strapped, equipment dealers are finding ways to flow revenue.
Veatch said his company was offering higher discounts on parts and services. He also routinely meets with customers and his sales reps to talk about the operation’s equipment plan and situation.
He also added that for those farms that are looking to purchase equipment during this time, “there are some tremendous values in equipment, many with low interest and extended warranties to help maintain risk during this period.”
Mike Bergmeier, president of South Hutchinson’s Shield Agricultural Equipment, said his company has a slight advantage because it doesn’t make big machinery. Shield makes replacement parts, and Bergmeier sees that as a good opportunity in a tough agricultural economy.
“We know new equipment isn’t going to sell well, so we are looking for opportunities for our parts,” he said.
Shield Ag has long sold high-quality fertilizer knives and shanks, along with no-till and minimum-till planting and drilling equipment and tools, through its Acra-Plant division. One product, said Bergmeier, is an undercutter blade that can be used in minimum till operations for weed control while still implementing conservation on the land. The undercutter slices under the surface to sever weeds while leaving the residue on the surface. Thus, it gives farmers an alternative to spraying expensive chemical on their crops – especially when prices are below $3 a bushel.
“When it is costing them $25 an acre per pass, they are looking at other ways to go,” he said of chemical costs and weed control.
Shield also manufactures the ABM Flexo Guard, an accessory for combine headers to help maximize milo harvest, and is also a distributor for a new product that was developed in western Kansas: ARRO, an innovation that is retrofitted to existing corn heads so they can be used to harvest sorghum, sunflowers and other crops.
In an up market, a farmer might spend $100,000 on a milo header – but not in this economic climate.
“Those are opportunities we look at in a down market,” he said.
Bruce Baldwin said his implement dealership began selling Gleaners around 1926, making it one of the oldest Gleaner dealerships in existence.
“We know my grandfather bought a brand new Gleaner from the previous owners (Norton Brothers) in 1926,” he said.
His father, Hayes, bought Kalvesta Implement in August 1950 from Vern Norton as a way to stay on the farm yet diversify the operation.
The dealership survived the Great Depression and the 1980s, and Baldwin knows these lean economic times also will cycle.
Baldwin considers ways he can cut back, but added he already runs a tight ship – both on his own farm and at the family dealership. As an independent AGCO, Claus and Great Plains dealer, he doesn’t have the overhead of some firms. Moreover, his shop, which is always stocked with parts, continues to stay busy.
His good inventory of parts is one reason for his customer base.
“These guys are going to repair things that in the past they replaced,” he said, later adding, “With grain piled everywhere like it is, I can’t say anything will change immediately.”