“This is certainly completely disruptive to our equipment dealers that are using the CDK platform,” said John Schmeiser, president of the North American Equipment Dealers Association, Canada.

Tech firm CDK’s software was taken offline last week after a cyberattack by the BlackSuit ransomware group. CDK is being asked to pay tens of millions of dollars by the hackers. Reuters reports that the company expects dealers to be offline until at least June 30.

CDK provides business management software to dealers of all makes of farm equipment, so major dealers of John Deere, CNH and are working without digital systems across the country. CDK is also the leading provider of management software to automobile dealers and thousands of those dealerships are offline.

CDK says it has 15,000 North American dealers on its system.

Wawanesa, Man. farmer Jeff Elder said he was able to get the parts he needed at a Rocky Mountain Equipment dealership in Brandon, however staff were relying on memory to find parts or looking them up on their phones.

“They had resorted to writing down orders on paper,” said Elder via text. “He couldn’t invoice me and said I would receive an invoice by email whenever they could get that done.”

Rocky Mountain Equipment declined to comment.

“Everything is being done manually,” said Schmeiser. “You can just imagine the amount of time that our dealerships are spending on manual processes.”

Parts are tracked and managed through digital inventory systems.

“We have to actually know where the part is, in, in a bin, to go out and find it and fulfill that customer’s order without using our computer system to tell us where it is or how many that we have on order.”

Invoicing also has to be manual, said Schmeiser.

Equipment can be sold, but the process is manual and inventory isn’t available on a computer system. Tracking orders is also challenging.

Farmers are spraying and preparing combines for harvest so dealers continue to work as best they can.

“We can’t shut down the business, we have to take care of the customer,” Schmeiser said. “Dealers are really managing through this as best as they possibly can.”

Schmeiser said the situation will be a wake up call for the industry and will place even more emphasis on cyber security.

“I think as an industry as a whole, this whole situation is going to be looked at, at every sector, from the manufacturer point of view and the equipment dealer,” he said.

“We’re asking our customers or farm customers to be a little bit patient with our dealers, as we work through this problem. This is this is an issue that is not only frustrating for our equipment dealers, but can be frustrating for our customers as well.”

—Headline updated June 26.

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Ernst & Young has been named the appointed receiver for the case, according to a court order dated June 11. The document names both Leon’s Manufacturing and Ram Industries Inc. as debtors.

The Bank of Montreal, which submitted the application for receivership, says the named companies owe over $16.6 million.

The bank had initially set out repayment demands with a deadline of Aug. 9, 2021. The companies then made “satisfactory arrangements with BMO for BMO to agree to continue to make credit available,” according the bank’s affidavit.

The companies failed to meet their obligations in winter 2023, and a new repayment deadline was set for Jan. 31, 2024.

The owing companies consented to a receiver being appointed in spring 2024.

BMO’s affidavit further pointed to the companies’ difficulty meeting payroll and utilities payments, as well as 15 creditor judgements registered against Leon’s Manufacturing since Aug. 1, 2023.

In April 2024, the Western Producer noted several legal claims filed against the company from farmers who said they had purchased equipment that they had not yet received.

The company had accumulated years of similar complaints, the Western Producer and Manitoba Co-operator reported as early as 2020. As of January 2024, farmers had registered complaints with the Saskatchewan agriculture ministry, Better Business Bureau and Alberta Farmer’s Advocate Office. The latter said it had been hearing those reports for two years. Farmers complained of paying deposits for equipment that then failed to appear for months or years.

Those with questions about the receivership or who want to file a claim can contact 780-441-4237 or mark.shtay@parthenon.ey.com, according to a notice posted by Ernst & Young.

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In March of 2021 Rite Way Manufacturing acquired Morris Equipment. In mid May of this year the company announced the launch of a new parent company, Superior Farms Equipment Ltd., which it says will “bring together the rich legacies” of both equipment brands.

The two brands will continue to operate under the new parent company, but the firms says they will begin transitioning their product lines to Rite Way SFE, Morris SFE and ProAG SFE.

“We are thrilled to unveil Superior Farms Equipment and unify the companies to better serve our customers,” said Cameron Johnson, Chairman and CEO of SFE in a press release. “This transition is an exciting step.”

The combined companies will continue to be operated by Rite Way president and CEO Heather Forbes.

“Forbes will be supported by the long-term management teams at Rite Way and Morris, and together we are well-equipped to build on the legacies of each company and continue to grow our business through our existing dealers and customers,” the release said.

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The slower equipment sales are a knock-on effect of corn and soy prices dropping to more than three-year lows as U.S. farm income plummets and equipment makers and dealers are forced to pivot quickly after a period of booming business.

Reuters interviewed ten equipment dealers, mostly in the U.S. Midwest, as well as farmers and analysts, who said low crop prices combined with persistently high interest rates are deterring farmers from purchasing machinery. As farmers make fewer purchases, inventories of equipment are swelling, cutting into profits for dealers and big manufacturers alike.

Manufacturers Deere and CNH Industrial struggled to keep up with the strong demand for tractors in 2022 when farm income hit a record high and pandemic assistance payments gave farmers extra money to upgrade their fleets. Now both expect slower sales to hit their bottom line this year.

Josh Gruett, dealer principal at Waupun Equipment in Waupun, Wisconsin, which sells farm, construction and other equipment, said his inventory has risen 30 per cent to 35 per cent since the end of 2023.

The excess of unsold machinery prompted Gruett to halt new orders from companies including CNH, AGCO, and Polaris in hopes of balancing supply and demand, he said.

In April, inventory levels of high-horsepower tractors (300 and above) in the U.S. surged by almost 107 per cent year-over-year, with combine inventory experiencing a 17.63 per cent increase, according to Sandhills Global, a market research firm specializing in tracking used inventory for industrial manufacturers.

Slashing prices

Chris Tanner, a fourth-generation farmer, said some dealerships in his town of Norton, Kansas, have slashed prices up to 30 per cent with an added incentive of zero percent interest to move machinery off their lots.

“They’re heavily discounting combines and tractors—but after coming through a drought and experiencing poor prices we don’t have the money to spend,” Tanner said.

The pain has also spread to those who sell spare parts.

Guy Robinson, is a parts manager at Dekalb Implement Company, which sells Deere equipment in DeKalb, Illinois

During the peak years of the pandemic, Robinson said, the combination of supply chain troubles and rising demand made getting everything from parts to equipment to farmers “a nightmare.”

And then demand began falling off in late 2022, he said.

About 30 miles south of Robinson’s dealership, Aaron Rogers, retail location manager at AHW, another Deere dealer in Somonauk, Illinois, said zero or low percentage financing is a popular way to try to bring in customers.

“If you can get a good interest rate, that’s what’s driving the market right now,” he said. Offering lower financing rates to sell inventory can result in a loss for dealers, but carrying unsold machinery can prove costlier.

Manufacturers give dealers free financing on equipment for a limited period while they sell it, but once that expires, dealers have to pay interest on their unsold inventory to manufacturers.

With fewer sales forecast, equipment dealers are feeling pressure to auction off equipment “right away” to preserve margins, said Casey Seymour, a sales consultant for dealers.

“Some of the stuff that is being put to auction is because dealers can’t afford to keep the floor plan,” Seymour said. “They can’t have millions of dollars worth of inventory sitting around at a floor plan [with a] 7.5 per cent interest rate.”

Particularly, inventory levels have been a big concern in the Midwest grain belt, said Ryan Dolezal, the manager of TractorHouse, a site for selling new and used farm equipment.

“We do not see the inventory levels issues like we do in Midwest markets,” he said of specialty crop equipment compared to row crop machinery.

Used agriculture machinery inventory, the bulk of machinery sold in the United States, is on a steady increase that is forcing dealers to auction equipment at a lower price point, said Mitch Helman, a sales manager at Sandhills Global.

“For planters there’s a 70 per cent gap between auction and retail and that’s insane. A spread this high has not been observed since May 2015,” he said, referring to a time when grain oversupply was pummeling farmer income.

Deere reports earnings on May 16. In February, the company announced plans to cut production and warned shareholders inflation would make farmers reticent to finance equipment purchases.

Texas-based farmer, Scott Born said given his tighter budget, he’s forgoing buying new or used equipment for the remainder of the year.

“We have to try to limp by without major repairs—it’s tough especially since (equipment and fertilizer) has gone so much higher in just a few years.”

—Additional reporting for Reuters by Heather Schlitz in Chicago

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Global crop prices have moderated while farm incomes have dwindled, setting up for a murky demand backdrop for the agriculture equipment sector as farmers pull back on big purchases such as tractors and combines.

A surge in demand for agriculture equipment early last year had also seen machinery dealers bulk up on inventories, but that trend is now set to reverse as dealers look to tighten their stocks, which translates to lower margins for equipment makers like CNH.

While strong infrastructure spending in the United States was expected to prop up construction equipment demand, softer trends in other global markets like China have hurt machinery makers.

CNH’s larger rival Caterpillar last week forecast glum current-quarter sales, hurt by weak construction equipment sales in all regions but North America.

At CNH, sales of agriculture equipment, which make up close to 75 per cent of overall revenues, fell 14 per cent to $3.37 billion in the first quarter ended March 31, while construction equipment, which typically accounts for around 16 per cent of sales, reported a drop of 11 per cent to $758 million.

CNH now expects full-year adjusted profit between $1.45 and $1.55 per share, compared with the previously estimated range of $1.50 to $1.60 per share.

It also projected an 11 per cent to 15 per cent drop in agriculture segment sales for the year, steeper than the previously expected eight per cent to 12 per cent drop.

Still, higher prices helped CNH top market expectations for quarterly sales and profit, sending its shares up about two per cent in premarket trading. Its adjusted per-share profit of 33 cents beat expectations of 26 cents, according to LSEG data.

—Reporting for Reuters by Deborah Sophia in Bengaluru

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Shares of the world’s largest farm equipment maker were down 2.6 per cent in premarket trading.

With farmers reassessing expenses, particularly for compact tractors, Deere said it now expects net income for fiscal 2024 of $7.50 billion to $7.75 billion. This is below its prior forecast of $7.75 billion to $8.25 billion and below analysts predictions of $7.93 billion, which already marked a decline from the prior quarter.

“That’s not particularly unusual for the first year of a market correction,” said Stephen Volkmann, senior machinery analyst at Jefferies. “The lower guidance that they put out is just a factor of that lower large agriculture outlook.”

Deere, a barometer of the global economy, said operating margins contracted due to lower sales for large agriculture equipment which the company is expecting to decline 20 per cent this year. Operating profit across its equipment divisions fell 13 per cent in aggregate.

Executives have expressed caution about margin performance amid a weakening farm economy, and said Deere intends to cut equipment production in 2024. Rival CNH Industrial has also tempered investor expectations even after posting better than expected profit for the fourth-quarter, saying softening commodity prices will lead to a downturn in farm equipment demand.

Net farm income in the U.S. is set to fall 27 per cent this year to $116 billion, from its inflation-adjusted total in 2023, according to the U.S. Department of Agriculture. U.S. grains and soybeans are at three-year lows and face stiff competition for export business from South America and the Black Sea region, translating to tighter balance sheets for growers and causing them to pull back on new equipment purchases.

Deere’s sales for production and precision agriculture equipment, it’s largest division, declined seven per cent year-over-year in the fiscal first quarter. Revenue for equipment operations fell eight per cent to $10.5 billion year over year, but topped consensus forecasts of $10.3 billion.

Net income fell to $1.75 billion, or $6.23 per share, for the first quarter, beating analysts estimates of $5.21 per share, according to LSEG data.

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The completion of the transaction was subject to certain regulatory approvals which have all been met, Linamar said in a news release.

Linamar, best known as an auto parts manufacturer, announced it would acquire the Saskatchewan-based firm in late December.

“Linamar’s long term vision is to focus on six markets where we see significant market and technology evolution over the coming decades as a result of key global trends that are under way,” said Linda Hasenfratz, Linamar’s executive chair and CEO, during an online press conference in December. “Food and agriculture is a key market in this long-term vision, and we are rapidly enhancing our footprint in that market.

“We’re calling this our third down project,” added Jim Jarrell, Linamar president and COO. “This is the third short-line acquisition we’ve done to build our powerhouse company, to hit the strategy of feeding the world. If you go back to the day when we bought MacDon, this (Bourgault) was a clear target and discussion point we thought was complimentary. Also as part of the transaction we’re acquiring the business of Freeform plastics and the Highline manufacturing line”

Both Freeform Plastics, which builds plastic tanks for ag applications, and Highline, an implement brand, are divisions of Bourgault.

Hasenfratz said the focus at Linamar is on acquiring shortline equipment manufacturers that produce specialized products which the major manufacturers don’t hold a dominant market share in.

The deal saw Linamar buy 100 per cent equity in Bourgault for CAD $640 million. Current president Gerry Bourgault will step away from the company, although the remainder of the management team will remain in place.

Linamar said it doubled MacDon’s business if five years and hopes to do the same with Bourgault.

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New 4WD unit sales in Canada grew 84.8 per cent year over year in November and 41.5 percent year to date, according to the Association of Equipment Managers.

In October, it reported Canadian sales of tractors above 100 horsepower were up 37.4 per cent compared to the same month in 2022. Sales of 4WD tractors were up 141 per cent in October, also compared to the same month in 2022.

However, the figures are a little deceptive, said John Schmeiser, CEO of the North American Equipment Dealers Association. That’s because farmers are finally receiving equipment ordered when the industry was still working through pandemic and strike-driven supply chain woes.

“The 4WD sales are definitely due to the delayed inventory of ordered equipment finally arriving, whereas the previous year’s sales were impacted by the pandemic and fewer unit numbers than what the market wanted were able to be delivered,” wrote Schmeiser in an email.

“So it looks good that there was an increase in sales, but in reality, the industry was getting caught up in delivering the units.”

Jim Wood, chief sales and operations officer with Calgary-based Rocky Mountain Equipment, agrees with Schmeiser that long-awaited deliveries make up the bulk of recent purchases.

“When you see big spikes like that, especially in this day and age and with production the way it was, it’s really just deliveries. They’re finally delivering stuff.”

However, producers still appear to have the confidence to buy, he added.

“We’ve sold all our four-wheel-drive production up until Q4 of next year, so I think that the farmers are confident. The pandemic brought on $24 canola, which brings on taxable income for farmers and cash receipts. So there is more demand because of commodity prices and things like that during COVID.”

Most farm equipment, new and used, is selling well at Rocky Mountain Equipment, said Wood.

“Combines are pretty consistent now and most other (equipment is) fairly consistent. Demand is still high. We sell as much used as we do new.”

Trading used for new has become a trend among customers thanks to the high value placed on pre-owned machinery, said Wood. Played right, it could mean paying a relatively small cash difference.

“As the new (equipment) goes up, your used value goes up. It’s the person that maybe had a 2022 combine and trades it on a new 2023 combine that are just paying that cash difference,” he said.

“Somebody buying a 2023 combine and trading in a 2014 combine, that’s where they’re going to see the huge price gap, because they’re 2014. They really didn’t see the same appreciation that a 2022 did.”

Kevin Kehler, vice-president of sales with Manitoba-based Greenvalley Equipment, said his business has had strong sales across all its product lines, including 4WD tractors.

While he concedes a lot of these sales stem from the lag between customers ordering equipment and receiving it, he said producers continue to place orders on 4WD tractors and other equipment.

“The long lead times to receive a new tractor are decreasing. It’s a good time to be in business and a good time to be in business as a farm producer as well.”

Overall, Kehler rates producers’ confidence as high when it comes to buying new equipment.

“We still have a number of new four-wheel-drive tractors on order that do not have delivery dates, so there’s still some new orders to fill.”

He attributes strong sales to strong cash receipts built on high commodity prices. However, commodity prices have weakened a bit over the past year.

“We see a spillover of income from some good crops and strong pricing over the last number of years. Do we anticipate that we could see a slight drop in demand? Yes. The reality is, we won’t be surprised if that happens,” he said.

“But at this moment, we have not seen demand drop for equipment. It’s extremely strong.”

Kehler would like to see more farmers trade in their used equipment and buy new at a cash difference. This would rebuild Greenvalley’s inventory of pre-owned equipment at a time when machines in that category are at a premium.

Strong sales aren’t due to lower equipment prices. Those have gone in the opposite direction, Scott Garvey reported in Grainews in early December.

According to the Manitoba government’s most recent cost of production guide, medium (160 to 224 horsepower) tractor prices have increased 35 per cent; large four-wheel drives (550+ hp) are up 28 per cent; Class 9 combines are up 27 per cent; high-clearance sprayers are up 31 per cent; and air drills are up 62 per cent, Garvey wrote.

Closer to home, calculations based on Alberta Agriculture and Irrigation’s latest report on farm input prices in the province reveal the average price of a new combine (Class 7, self-propelled, 323-374 hp) rose almost 20 per cent between November 2022 and November 2023. A 4WD tractor (325-375 hp) rose just over 20 per cent in the same time period.

Full equipment sales reports can be found in the Market Data section of the AEM website under Ag Tractor and Combine Reports.

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“One of the keys for us was making sure we found a partner that was committed to preserving the Versatile and Farm King brands,” said Adam Reid, VP of sales and marketing at Versatile.

“We wanted to make sure the viability of the plant here in Winnipeg and our staff was secure. And taking care of all of our stakeholders, the suppliers, shareholders.”

In July, management at Buhler Industries, parent company of the Versatile and Farm King brands, revealed it had begun a search for a “long-term investment partner”. In late December it announced that Turkish tractor manufacturer Başak Traktör, a wholly-owned subsidiary of ASKO Holding, was buying 96.7 per cent of its outstanding shares for a reported CAD $60.5 million.

Başak Traktör presented what was described as the most “well rounded” proposal, which met their concerns.

“Başak Traktör, has several manufacturing facilities in Turkey,” said Reid. “They’re big in ag and construction equipment. They’re very passionate about that sector.”

“Sami Konukoglu, (chairman of ASKO Holding) is extremely passionate about manufacturing, particularly agricultural manufacturing,” Reid added. “He started on the factory floor and worked his way up. He has a vision for global expansion and sees Versatile as a key to that. He understands the power of the Versatile and Farm King brands… he’s focused on the growth and expansion of the company.”

Talks with Başak Traktör had been underway since early fall, according to Reid, who expects the deal will be finalized by the first week of January. All of the roughly 24 million ownership shares to be acquired by Başak Traktör belonged to Russian ag equipment manufacturer Rostselmash, which had been the majority owner until now.

Brands will continue, expand

Some of the brand’s dealers have expressed apprehension at the thought of a change of ownership and what that might mean for the brand. Senior management, including COO Grant Adolph along with Reid, will remain in their current roles under the new ownership structure to help maintain consistency during the transition and moving forward.

Reid says dealers and customers needn’t worry about the brand disappearing. Instead, he expects it to grow and expand under the new ownership.

Due to the supply chain disruptions in the last two years, Versatile has struggled to fill orders for new tractors, due to persistent component shortages. The new ownership will give the brand increased purchasing power and should help it ramp up the number of tractors rolling off the assembly line to better meet customer demand.

It could conceivably also result in an expanded product line for Versatile, whose tractor offerings only go up from 175 horsepower. Başak’s models conveniently run from 50 to 120, and it could make a good fit for brand expansion. Versatile has so far avoided the temptation to design smaller models to play in the lucrative and very large utility tractor segment, because of the large number of players already there. But with a ready line of models from Başak, that could change. All that, though, remains speculation at the moment.

Başak’s 5120 model, which was released in 2019, won an iF Design award. So the Turkish brand now produces models with features that could potentially appeal to North American buyers.

“There could be some synergy in the long run,” acknowledges Reid. “But at this point the focus is on Versatile and on the manufacturing here, and pushing for growth here.”

As for the assembly of Kubota M8 tractors at the Winnipeg plant, Reid says that will continue.

“This (ownership) change does not affect our current relationships,” he said. “I think what we’re excited about is the passion that Başak Traktör and ASKO Holding brings to the manufacturing side of our business. They’re very forward-looking and we’re excited about where we can go together.”

“I think this opens up a lot of opportunities for us going forward. Internally, the team is very exciting about what this means for securing the future of the Versatile brand.”

Russians out

While the deal brings a new partner on board with a global vision willing to advance the Versatile brand, it solves one other problem for Buhler: it ends the involvement of a Russian company in its ownership. That had been causing some trouble for Versatile due to the invasion of Ukraine.

“The nature of who our major shareholder was did create some concern in some of our suppliers,” said Reid. “Even though Buhler Industries as an entity operated independently and autonomously, there were concerns about the ties back to Russian ownership. So we’re very excited about what this change in ownership can do for us when it comes to our global partnerships with our suppliers.”

Since Russia attacked Ukraine, management at Buhler has had to take steps to publicly distance itself from its primary shareholder. In March of 2022, the board of directors announced it had removed Konstantin Babkin, who had been on Buhler’s board since Rostselmash acquired majority ownership of Buhler in 2007. He had been a vocal supporter of Vladimir Putin and Russia’s aggressive action in Ukraine. The Buhler board quickly and publicly denounced Babkin’s outspoken views, noting they didn’t reflect the values of the board overall or those of Buhler Industries.

However, the company remained under majority ownership by Rostselmash. And some Russian representatives remained on the board. With the Başak acquisition, all board members will have to resign and be replaced with those selected by the new owner.

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“Linamar’s long term vision is to focus on six markets where we see significant market and technology evolution over the coming decades as a result of key global trends that are under way,” said Linda Hasenfratz, Linamar’s executive chair and CEO, during an online press conference. “Food and agriculture is a key market in this long-term vision, and we are rapidly enhancing our footprint in that market.

“I feel like our team has really hit it out of the park this year, finalizing three acquisitions. All three business bringing excellent technology to the table and strategic value.”

“We’re calling this our third down project,” added Jim Jarrell, Linamar president and COO. “This is the third short-line acquisition we’ve done to build our powerhouse company, to hit the strategy of feeding the world. If you go back to the day when we bought MacDon, this (Bourgault) was a clear target and discussion point we thought was complimentary. Also as part of the transaction we’re acquiring the business of Freeform plastics and the Highline manufacturing line”

Both Freeform Plastics, which builds plastic tanks for ag applications, and Highline, an implement brand, are divisions of Bourgault.

Hasenfratz said the focus at Linamar is on acquiring shortline equipment manufacturers that produce specialized products which the major manufacturers don’t hold a dominant market share in.

In the press release announcing the takeover, current Bourgault president Gerry Bourgault commented, “We are excited to have our team of over nine hundred people in Saskatchewan, and over one thousand worldwide, join the Linamar family. Linamar has a proven track record for not only successfully integrating acquired companies, but also for their manufacturing expertise and business execution overall.”

The deal will see Linamar take 100 per cent equity in Bourgault for CAD $640 million as current president Gerry Bourgault steps away from the company, although the remainder of the management team will remain in place.

“Bourgault is a company we’ve long had our eye on,” said Hasenfratz. “We like the technology. We like how the business is run and how it complimented our existing lineup of products. So we’ve been talking to them on and off. The timing was right. The family was ready to make an exit. It comes at a time when all of our business can complement and create growth.”

When it acquired MacDon, that company had sales of roughly $500 million, about the same as Bourgault does now. Linamar has managed to push MacDon’s current sales into the range of $1 billion. Hasenfratz expects to be able to achieve the same level of growth with Bourgault. She thinks the company can do that by increasing Bourgault’s global reach and cutting manufacturing costs by including it in Linemar’s current procurement processes.

“We have the ability to link and leverage our purchasing efforts,” confirmed Jarrell.

“We see excellent growth potential with the business,” Hasenfratz added. “It’s not dissimilar in size to what MacDon was when we acquired it five years ago. We are selling now in more than 30 countries with nearly 2,500 dealers and distributors around the world. We’ve really created quite a broad strategy around our agricultural products.”

The deal is expected to be finalized in the first quarter of 2024.

Said Hasenfratz: “We doubled MacDon’s business in five years. We hope to do the same with Bourgault.”

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