Some Saskatchewan producers’ buying intentions have shifted in light of recent trade tariffs imposed by the U.S.
“You don’t want to buy high and sell low,” Chad Doerksen said with a chuckle on Thursday. The fourth-generation farmer works in the Hanley, Sask., area.
Doerksen said he was considering upgrading and adding to his fleet of equipment in the near future with plans to buy a new sprayer, combine and tractor. But recent tariffs of 25 per cent on steel and 10 per cent on aluminum have left him uncertain.
“I’m looking to do some more purchasing but right now, I’m just holding off to see how things evolve.”
At Moody’s Equipment in Saskatoon, current inventory is unaffected by tariffs but when it’s gone, all equipment will be priced much higher and the dealer isn’t planning to bear the brunt of any of the increased cost.
“The price has gotten so high that the margin has eroded, eroded, eroded,” said Moody’s general manager, Kim Leland. “So there is no margin. So if we got charged, as a dealer, $50,000 more for the combine, we have to pass that on because there is no buffer anymore.”
But according to Steve McLellan with the Saskatchewan Chamber of Commerce, there are potentially farmers who won’t be able to carry those cost increases.
“Everybody feels it — the business and their customer,” McLellan said.
“If you take the price of a combine at $550,000, and you may add 10 per cent to that, that’s significant. That’s $55,000 more,” said Leland, who estimates retail prices will need to increase more than that to curb the impact.
Federal Agriculture Minister Lawrence MacAulay said the situation is unfortunate.
“Farmers right across North America are fully aware of how valuable free trade is and how valuable it has been,” he said. “What we want to see happen is the free flow of trade.”
Trade negotiations continue between Canada and the U.S. but the damage may already be done.
“Once you’ve increased your price by 10 or 15 or 20 per cent, it makes your market very confused,” McLellan explained. “Next year… [you might say] ‘Oh, well, we’re dropping our prices by 20 per cent because steel has gone back to normal.’ Nobody knows what normal is going to look like in a year, so it’s a very volatile market.
“A lot of our customers are having to re-look at that plan and go, ‘OK, are we going to push our buying forward now into 2018 and buy non-tariffed equipment now? Or are we going to wait it out? And if we wait it out, how long are we going to have to wait?’”
Steel and aluminum tariffs are also affecting the cost of replacement parts for equipment repairs.
In addition, tariffs are expected to have an effect on the used-equipment market with sellers likely to expect the gap between new and old to widen as new equipment becomes more expensive.