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Nov. 6, 2023
By Bob Tita, Photographs by Kaiti Sullivan for the Wall Street Journal Farmer Nick Welker's tractors steer themselves nearly as effectively as the latest Teslas. They were built in the 1970s. Welker has spent years outfitting the machines with satellite-guided steering systems, giving him cutting-edge technology without spending $700,000 for a new tractor. The last improvement two years ago on his 52-year-old tractor cost $20,000. "I'd love to upgrade some equipment, but our net profit per acre is so low we can't afford it," said Welker, who grows wheat, canola and lentils. "We're not going to be a buyer."
Equipment makers' emphasis on lower-cost retrofits comes as farmers' incomes are under pressure from sliding commodity markets. Prices for corn and wheat futures are down 29% since the start of the year, while soybean prices have fallen 14%. While rising crop prices in recent years put more money in farmers' wallets for new equipment models, just 7% of farmers globally replace their equipment in a given year. That leaves 93% of farmers using older models as potential customers for upgrades, according to Agco. The company estimates that current industrywide spending in its retrofit markets is $150 billion a year. "Most farm equipment has a useful life of about 17 years. Over that time, technology shifts so much. But the equipment is only used for a small part of the year," said Eric Hansotia, chief executive officer of Agco, the maker of Fendt and Massey Ferguson machinery. Agco in September agreed to pay $2 billion for an 85% stake in Colorado-based Trimble's agriculture technology business. That business provides software and components--for self-steering, precision spraying, data management and equipment monitoring--to Agco's bolt-on retrofit offerings. Agco plans to pair Trimble's technology products with those of Precision Planting--a software and components business for retrofitting seed planters--which Agco acquired in 2017. Agco expects Precision Planting sales to reach about $850 million this year, more than double the total in 2020, and is forecasting $1 billion in sales by 2025. Precision Planting's software and components can be added to most brands of planters, making them popular among farmers looking to improve older models. To read the entire article click here. Tweet |
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