By Bianca Flowers

CHICAGO (Reuters) – More farm equipment dealers are closing, leaving a handful of companies with control of much of the market and greater ability to set prices for selling and repairing equipment , according to interviews with farmers, equipment dealers and analysts.

Takeovers by local family dealers have reduced farmers’ options for buying machinery and repairing aging equipment.

In Montana, a state the size of Germany, only three Deere & Co. dealers remain from about 30 two decades ago, according to the state Farmers Union. Local barley farmer Erik Somerfeld said a dealer network dominates all sales and repairs for rival equipment maker CNH Industrial.

Somerfeld had to travel out of state to get parts for his gear when they weren’t in stock at his local dealership 25 miles from his home.

“The dealer that’s 110 miles away normally has everything I want at a lower price,” Somerfeld said.

Only two dealer groups, Ag-Pro and Titan Machinery, own the bulk of stores in North America selling farm equipment made by Deere — America’s largest farm equipment maker — and CNH Industrial, according to the Ag- Pro and Titan Machinery.

The pursuit of regional dominance by large dealerships began in the 1980s. The merger momentum accelerated during the COVID-19 pandemic, when the supply chain constrained parts and labor available and that smaller dealers have not been able to compete with larger rivals, said John Schmeiser, chief operating officer of the North American Equipment Dealers Association, a trade group.

Fewer dealers to service millions of acres of farmland means American farmers are paying more for equipment and gas at a time when they also face higher costs for seed, fertilizer and other chemicals for crop maintenance. Rising costs are threatening their profits and their ability to expand plantings next season at a time of growing global food security concerns.

About 65% of farmers in the United States have access to fewer equipment dealers than five years ago, according to a late 2021 survey by the US Public Interest Research Group (PIRG) and the National Farmers Union, based on interviews with 74 farmers.

For Deere, more than 80% of authorized dealers are now part of large chains, defined as having seven or more stores, according to the survey and dealer location data analyzed by Reuters. CNH and AGCO Corp have a smaller percentage of their dealerships owned by larger chains – at 37% for CNH’s Case IH brand and 22% for AGCO as of December 2021.

Deere, best known for its green tractors that have been the workhorse of agriculture for decades, CNH and AGCO declined to comment on dealer consolidation.

Ag-Pro, Deere’s largest private dealership chain, has added 59 dealerships to its portfolio through 20 acquisitions since 2017, according to data from the company’s website.

Ag-Pro and Titan Machinery also declined to comment.

Farmers say the scarcity of local dealers, on the other hand, has cost them time and money to transport machinery.

An oil pressure problem with Tony Lourey’s 20-year-old tractor put it out of action at the start of the hay season last July.

While the only independent repair shop near him estimated a three-week wait for the tractor to be operational, the Duluth, Minnesota farmer ended up driving more than 150 miles to a Wisconsin-based AGCO dealer to buy a brand new $75,000 tractor. Delivery charges added another $1,200 to the bill.

After setting up the new machine on his field, the high-powered tractor malfunctioned minutes after he turned it on.

“At this point, I’m tearing my hair out,” Lourey said.

RIGHT TO REPAIR

At the same time, farmers lack bargaining power to get better purchase prices on equipment due to fewer dealers, they also face higher prices to repair equipment. As the industry accelerates its adoption of technology, high-tech machinery has made it nearly impossible for them to repair their own equipment or hire independent technicians.

The administration of US President Joe Biden has attempted to address the so-called right to repair with machinery manufacturers through a sweeping executive order signed last summer aimed at promoting greater competition in the economy against a backdrop of rising inflation, and manufacturers have made some concessions in response to consumer lawsuits.

Until recently, Deere only offered authorized dealers the gateway to access the complex computer systems of their tractors and other machines. This translated into a strong bottom line for its parts and service business. Financial records from the Moline-based company showed annual coin sales grew from $4.5 billion in 2011 to $6.8 billion in 2020.

In March, the company announced that it would make available to farmers and independent repairers a diagnostic software tool that could be purchased online.

Other machine makers are also raising repair prices after consolidating dealer ownership in a bid to boost sales, mechanics and farmers said.

A freelance technician, who declined to be named and worked at a dealership bought by Titan Machinery, CNH Industrial’s largest dealership chain, said he often receives calls from customers he says are overcharged.

For example, he said changing gear fluids on a quadtrac tractor, a machine used to plant and harvest in muddy conditions, should cost around $2,000.

“I was getting calls from farmers telling me that Titan had charged them $12,000,” he said.

Titan Machinery did not respond to request for comment.

Pressure from machine makers for dealers to increase market share has increased, meaning further industry consolidation is likely, said Ken Wagner, president of Kansas-based Heritage Tractor Inc. which sells Deere equipment.

“Deere demands performance from its dealers – it’s all about size and reach now,” he said.

(Reporting by Bianca Flowers; Editing by Caroline Stauffer)

Previous

Opioid epidemic crisis: what is fent? Justice Department warns of 'rainbow fentanyl' spike as dealers target young teens

Next

Buy Now Pay Later Platform Market Size to Reach $46.9 Billion with a CAGR of 22.4% by 2031 | Future market prospects

Check Also