Are machinery price hikes purely a result of production problems?
New machinery price hikes may not be solely the result of rising material costs and component shortages, according to the president of the French major machinery trade organisation. A report from a press conference in the magazine La France Agricole, quotes Loic Morel, president of the French machinery dealers association, Sedima, as stating that one manufacturer has just imposed a brutal 18% increase. Despite this rather strong language, he does concede that price increases are inevitable given the major increases in raw materials, especially steel, over the last year. It would appear to be the rate of increase which irks the organisation, which claims to have 2,700 members who account for 70% of the revenue generated within the industry. Sudden jump in prices causes alarm  Smaller increases of a few percent are not the object of Sedimas concern. It seems that they do not cause a major problem in the purchasing process. Any machine using a lot of steel is going to be adversely affected  The difficulties would appear to arise when large increases are combined with the long lead times presently being experienced. A machine priced now, but not available for delivery for several months, may cost a great deal more to make when it is finally manufactured. This is not in dispute, but there is obviously some frustration within the organisation, with manufacturers who tend to anticipate the increase a little too strongly. Another issue is that delays in the customer obtaining finance agreements with banks may result in the price being asked at the time of order, being significantly higher than that quoted when the deal was first struck. Dealers demands not being met  Naturally, an organisation representing dealers will be keen to see price stability within the market, a stability that manufacturers are unable to provide at present. Despite this desire to promote the interests of his members, Morels words should not be dismissed too lightly, for he has stood on both sides of the fence. Advertisement  For 15 years he worked directly for New Holland, reaching the position of director for France. He then joined the board of the SICOIT group which are New Holland distributors in south east France. Ireland will not escape machinery price hikes  Here in Ireland there is also much concern over the rising cost of raw materials and its effects on the machinery trade. Speaking to Agriland, Diarmuid Claridge, president of the Farm Tractor and Machinery Trade Association (FTMTA), pointed to the rocketing cost of steel and noted that price rises are inevitable and are going to have to be managed carefully. He went on to explain that all those concerned in the supply train need to remain profitable, and that includes farmers, as well as the producers of machinery. They cannot afford to not recover their costs, but there is no room for manufacturers to increase prices unnecessarily, it is not in their long-term interests.  Digital technology is driving up productivity, and costs! The fear has also been expressed that rising prices will impact significantly on investment in new machinery. Technology is playing an ever more important role in farm machinery and an increasing part of the manufacturing cost is due to the inclusion of sophisticated electronics. On this issue, Diarmuid Claridge warns against putting off machine purchases, as it is technology which is leading to ever greater productivity and reduced costs overall. Farmers caught in the middle  There is no doubt that unless the increase in the price of raw materials and components eases in the near future, then many farmers are going to reappraise their investment plans. Generally speaking, farmers are not in a position to pass on their increased production costs to the consumer. Trying to explain that spending 150,000 on a new tractor is entirely justified was always difficult to those in the checkout queue; having that same tractor cost 180,000 is not going to make it any easier.