Niche marketing to large farms helps small operations as well Last September an unusual event occurred in the farm machinery industry. For the first time in at least two decades, at least by my reckoning, a new combine factory opened its doors. What I mean by "my reckoning" is that I haven't been invited to a combine plant dedication in the 18 years I've been covering the machinery industry.
This state-of-the-art Caterpillar facility lies in the western suburbs of Omaha, Nebraska. The factory is a departure from typical manufacturing facilities in that it is designed to be highly flexible -- there's no overhead conveyor system, for example. Instead, it relies on pneumatic carriers that float combines through the assembly process on air.
Oh, I've seen some neat machinery factories before.
John Deere has a skid steer loader facility in North Carolina that would knock your socks off. But what makes Cat's opening special is that it is symbolic of what is going on in the machinery industry today.
Targeting large farmsSomeone who would erect a combine plant in this day and age must be very (very) optimistic, or blind to the fact that half as many combines (at 5,663) sold last year than a decade agoed to over 10,000 a decade ago. Combines don't sell like they use to.
Caterpillar is not blind. Instead, the firm is focusing on the upper-end or large-farmer market and investing in a harvester plant (partnering with Germany's Claas) to help capture specific customers. For example, part of Caterpillar's new rotary combine line has a 67-inch threshing width and packs 400-horsepower engines!
The head of Cat's ag products division, Bob Strube, makes no bones about his firm's aim to cater to large farmers. "We're confident that agriculture is a good business," he says. "And we have positioned ourselves to service the fastest-growing segment of the agricultural market . . . found in large-scale farming operations."
Caterpillar is not unique in targeting large farms. The other major manufacturers all play that game. But Cat is unique in that it has armed itself only with large machinery. To meet the requests such producers put on suppliers, Cat has brought out such on-demand services as a satellite system that alerts a dealer when a tractor breaks down. This uplink allows the dealer to determine the problem and dispatch a technician with the necessary parts to repair the tractor in the field.
Providing custom services to preferred producers is going to be the norm of the future. Several manufacturers have tried and are still working at stocking farm shops with parts. This allows operators with fully equipped shops and mechanics to have the parts they need to complete their own repairs.
Dealers of all colors are also positioning themselves as consultants to farmers, helping their customers find information. Oh, sure, salespeople will still come calling, pitching you on a deal. But in between those deals, they will visit your farm and ask what they can do to to pitch in.
Special deals, financingIn the next several years, keep an eye peeled for special purchase and financing packages as manufacturers try to capture more market share. They have sold at very (very) favorable prices and rates in the past to get new business. They will likely do even more of this in the future since their existence depends on it.
Take, for example, the combine leasing packages being offered in recent years. Such packages basically allow a farmer to run a combine for a year without making much more than an interest payment. The purpose is to keep the factory business pumping out combines, dealers busy leasing combines, and farmers busy running a particular brand of combine.
Small, medium farms benefitUnfortunately for dealers, this resulted in a glut of used combines, which have been selling for unheard of low prices this past year. This is where preferred customer efforts and trying to gain market share help small and medium-size farmers. Such efforts put more good used machinery on the market and keep used prices reasonable.
An aside about Cat's plant opening: With New Holland's combine plant operating down the road from Omaha in Grand Island, Nebraska, this puts that state on the map as having as many harvester factories as Illinois. Both the Deere and Case IH plants are in Moline, Illinois, barely a stone's throw from each other. The only other combine facility in the nation is AGCO's operation in Hesston, Kansas, where it builds Gleaner, White, and Massey Ferguson harvesters.
Being tied for No. 1 in combine plants is no big deal, unless you're a Cornhusker like me. Seems appropriate -- the Cornhusker State and combines. Go Big Red.
