Will Steel Price Hike Impact Ag Equipment Sales in 2021?
May 10, 2021 As the world slowly emerges from the COVID-19 pandemic, consumers are once again beginning to venture out of their homes and back into the general marketplace. Naturally, this has grown demand for certain items that has languished through most of 2020, such as lumber for home and building construction projects. In turn, this has pushed prices for wood to fulfill demand to some record levels in recent months.
For the agricultural industry, lumber prices might be a concern. However, steel could present a much more urgent challenge, especially for equipment makers. According to most analysts, unprecedented steel demand during the first quarter of 2021 has pushed up prices. After bottoming out around $460 per ton last year, U.S. benchmark hot-rolled coil steel prices are now sitting at around $1,500 a ton, a record high that is nearly triple the 20-year average. During the month of March alone, steel prices increased 7.8%.
Some ag equipment manufacturers are already rising concerns over the steel situation. In fact, back in February, John Deere noted steel prices in its corporate outlook for the year. The Moline, IL-based company said higher farm commodity prices and rising exports, coupled with lower equipment inventories, have boosted the demand for farm machines, with early orders for sprayers, planters, and combines all experiencing double-digit growth. However, John Deere also noted that surging steel prices and elevated freight rates could cost the company $500 million during fiscal 2021.
Loading ...Given how most of the agricultural world went into a “big ticket item” buying slowdown during 2020, many market watchers were expecting a stronger-than-average comeback for ag equipment during the 2021 growing season. Indeed, John Deere and other manufacturers have noted this in their financial outlooks for the year. But if steel prices keep going up and remain high throughout the summer months, rising ag equipment prices might curtail this expected boom significantly. As always, time will tell . . .
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