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Abstract

I set out to write this paper with the intention of finding out how the 2008-2009 and ongoing

economic crisis has affect farm equipment manufacturers. My hypotheses to this question was

that no, the Ag manufactures had not been affected. This research was significant to me due to

the fact that it has been my family business for 3 generations. Farming is so very important to the

people who not only live here in the United States, but to many countries abroad that depend on

imported food products. I conducted literary research and found a great deal of evidence that

supported my hypothesis. I then conducted phone interviews with three members of the Ag

Industry, A manufacturer, a salesperson, and a distributer of equipment. All three outlined and

supported my idea that manufacturers were doing well and the industry as a whole was doing

well. In conclusion I found a great deal of evidence that supported my theory that manufacturers

of Ag equipment were doing well and that the current economic crisis did not affect them as

much compared to other industries and manufacturers.

Key words: Ag Industry, Economic crisis, The Great Depression, Fertilizer applicators, Auto

industry.

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Joe Anderson

English 202-013

Dr. Marlen Harrison

Fall 2009

Here to Stay:

The Affects of the 2008-2009 Economic Crisis on Agricultural Manufacturers

Number one, that is what the United States is in the exportation of agriculture products in

the world. “The United States, in 2004, accounted for 42.83 billion dollars in agricultural

exports” (Top Agricultural Exporting Countries). In 2008, according to the Nation Master.com,

“The United States exported 460 million Metric tons of Corn” (Agriculture Statistics). This is a

huge amount of corn which more than triples the amount of the second largest exporter,

Argentina. This information may make many here in America and around the world think that

the United State’s economy is booming, or at least the agricultural aspect of the economy.

The United States has gone through one of its worst economic hardships since the Great

Depression. In the news I have seen banks close, the auto industry begging for government

bailouts and the housing market hit rock bottom. According to a chart on wsj.com entitled “The

Nations Unemployment”, the state with the highest unemployment rate was Michigan with

15.3% in September of 2009(McGregor). What of the agricultural industry (from now on will be

called Ag industry)? Has the current economic crisis affected the Ag industry and its

manufacturers? This question is hard to answer due to the fact there has not been a great deal of

light shed on the subject. It is such an important subject that hits very close to home for all of us

who live here in the United States.

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I have worked directly and indirectly in the Ag Industry, on and off, for the past six to

seven years. My father owns GVM Inc. located in Biglerville, PA. The company manufactures

and sells Agricultural equipment, and I have worked in many aspects of the company. This

includes working in the assembly shop in the manufacturing sector. I have worked in the parts

warehouse where parts are stored and kept for resale. The most recent job that I have partaken in

was an in-house parts salesperson, there I have dealt with farmers and other manufactures

directly.

I have seen firsthand how an equipment manufacturer deals directly with a farmer. I have

also come to understand just how much both parties depend on each other. I’ve been told how -it

-is by farmers who didn’t received their part on time; when they have corn that needs side

dressed with Nitrogen I’ve seen farmers who have desperately needed a piece of equipment to

make it through growing season ,receive it and allow them to be more productive. This hand in

hand relationship that farmers and manufactures share allows this country to prosper. Working

within this industry has allowed me to get an understanding of how important this industry is.

Many don’t understand how important the Ag business is to them. It is an industry we

depend completely on for our food production in this country. Sure the government may import

some exotic fruits and vegetables that are incapable of being grown here in the United States. For

the most part though, food eaten in the US is produced domestically.  The nearly sole

dependence on the Ag Industry for the food in the US makes this not only a vital but necessary

industry.

How about the manufacturers of farm equipment? The great amount of farming that is

done on such large scales in this country could not have ever been accomplished without farm

equipment. Would it not be for the large combines, tractors and fertilizer sprayers and spreaders,

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we would not be able to produce the amount of food we do. The thought may be that the Industry

has suffered just as bad or even worse compared to the auto industry or other aspects of our

nation’s economy.

My hypothesis is that the Ag industry, primarily its manufacturers, has not been affected

by the current economic crisis. I feel that it appears to be a very stable industry and a market that

really just wouldn’t be affected by the economy. There are some aspects I would say that sure

have been affected I’m sure. From working in the business first hand I have a good feeling that

the Ag Industry is doing just fine. It may be even possible that it is even flourishing in current

economic crisis. People don’t always need cars but people have to eat.

A quote from the article Optimistic Outlook for Agricultural Machinery gives an idea of

the future of the Industry."In sharp contrast to most other sectors, agricultural machinery

manufacturers remain positive about 2009. Already, farm debt-to-asset ratios are at an all-time

low while farms continue to invest in equipment” (Fontelera,1). The continued investment into

the farm equipment sector helps to boost the sales for the equipment and keep the industry

above water. In the auto industry people were selling there cars, doing the “cash for clunkers “

really hurt the used car industry a great deal. As there was never such a program in the Ag

Industry the cost of used equimpent was able to remain cheaper and affordable to farmers who

need a later season addition to their equipment. While the auto industry has seen it lowest times

with the near closure of GM , Dodge and Ford Motor company , the Ag industry has been able to

keep consistant and positive sales in such times as these.

The Ag industry has been able to keep its sales of equipment up and used equipment to

stay relatively low in price. This would, in turn, allow many manufacturers to make more

innovative and technologically advanced machinery. The rise of more sophisticated GPS and

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computer sytems has allowed farm equipment to be more accurate and afficiant.( Ruiz-Garcia)

There are GPS systems out there that will not only tell the farmer how far outside of the fertilizer

spray or spread pattern he or she is , but it will atcually propell the machine within reason.

These changes in farming technology have allowed the prices of produce, dairy and meat

products to stay relativlty low and affordable. “ The average American spends 2% of their

weekly income on farm based products compaired to 11% half a century before”(Zulauf). People

are still buying just as much farm products as they were. The inovations in farm technology have

allowed the prices to stay relative to what they were fifty years ago. This has allowed people to

spend money in other sectors of our economy. The Ag industry has in effect allowed people to

spend money in other places, thus stimulating the economy in places it needs it most such as the

auto industry and the housing market. This shows that the Ag Industry is not only a vital part of

the economy but helps to stimulate it with relativly low prices in the machinery and products.

The Ag manufacturers have allowed this to happen because of their abliity to be innovative and

keep the sales of their equipment up in such hard economic times.

The information that I have observed and discussed have included how the farming

industry has been fairing in these current times of economic crisis. I have found substantial

evidence that has supported my theory that the Ag industry, primarily focused on the

manufactures, have and are doing well. This led me to ponder how farming has been affected by

past economic hardships.

The Great Depression was the worst economic time in this country’s history. The

unemployment rate was at the highest it’s ever been. The highest the unemployment rate reached

was twenty-five percent unemployment. That is staggering compared to today where the highest

average it has reached was around fifteen percent (McGregor). While I have not found evidence

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that the manufacturing aspect of farming was or was not affected in referee journal articles; I

have found evidence that many people turned to farming as a means of income after their jobs

were lost.

In an article by Robert L. Boyd, he discusses how many white and black Americans

turned to farming during the great depression. “…one of the most common of these pursuits was

farming. Thousands of jobless persons in rural and urban areas drifted to farms during the hard

times, searching for a means of livelihood” (Boyd). The article goes into the discussion of just

how many people decided to take up Farming. He calls it the “back-to-land” movement, “…in

point of fact, between 1930 and 1935, the population of farm operators in the U.S. increased by

over half a million” (Boyd). This just goes to show that even in such terrible times as the Great

Depression; farming was able to give people hope.

I found such a story about a man by the name of Carl C. Getz. Carl was just another man

who was laid off during the early part of the great depression. “…Carl C Getz, was one such

farmer who, with no personal resources other than his reputation as a responsible hard-working

hired farm hand, began farming at the very beginning of the depression and endured until better

times”(Getz). He was a man, as the article continues, who had no money, no equipment and no

horses that would help him when he initially started. He made arrangements with his wife’s great

uncle Bob to take over his farm. “Bob had sold all his equipment and horses when he retired

from farming, thus he contributed no equipment or horses for Carl to use” (Getz). This meant

that Carl had to buy everything that he need with all of his own money. “Carl spent $973.65 the

first year for the necessary equipment to begin farming; most of the equipment was new, only a

few items were used” (Getz). The equivalent to that in 2008 dollars was around 13,000 dollars. It

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hard to believe a man who had just started farming would have the money to start up a farm

basically from scratch. From then on there were prosperous times for him and his family.

This is just one story that illustrates a man who used farming during the great depression

to his advantage and provide for his family. What other industry could you say is capable of

doing that you may ask? And the answer would be none. Many industries failed during the great

depression. Banks closed, mills shut down, and many other manufactures were put to the

breaking point. Farming gave people the opportunity to provide for themselves and their

families. It gave them the option to be their own boss and make the land their own. This is what

helped many Americans to survive and even some prosper during the Great Depression.

Now that the Great Depression has been discussed, what of the evidence that farming

manufactures are surviving today. The first source that I felt really helped me came from an

article by Fontelera .The article starts out with a quote that basically says the Ag Industry has a

positive outlook for 2009. The writer outlines a very simple idea that is the basic backbone of my

argument, “Everyone has been cutting back on expenses and buying less, but there is one thing

people cannot live without: food” (Fontelera). She goes into the idea of how the global

population is growing larger and that those people need food. “For farm field equipment other

than tractors and combines, planters are supposed to have the highest sales increase at 9.3

percent while self-propelled sprayers are anticipated to gain 6.3 percent in the U.S”(Fontelera).

These ideas that farm equipment sales are expect to increase are evident that not only the US

economy is starting to recover, but the Ag industry is still going strong. This shows that the

manufacturing aspect of farming is still continuing to produce and sell products.

An article entitled “Farm equipment sales look strong” helps to continue the idea of the

Ag Industry continuing to sell products. “Net farm income is a driver of equipment sales, and

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producers' balance sheets overall are strong as a result of increases in net farm income, as well as

increased asset accumulation and debt management. “Farm debt-to-asset ratios are at an all-time

low” (Farm equipment Sakes Look Strong). The increase of net income will allow farmers to

purchase more and more advanced equipment. The purchase of more advanced equipment will

allow these farmers to be much more effective and efficient in planting and harvesting of their

crops. This article also addresses the issue on the importance of farming in respects to the need

of food. “It is predicted food production will need to increase by 50 percent by 2025 and double

by 2050” (Farm Equipment Sales Look Strong).

With all of these ideas in mind I actually wanted to find an article that outlined and talked

about how farming can affect the economy. I found an article entitled “The Economic Impact of

the Agriculture Sector in Clarke County, Virginia”. This article attracted me right off the back

because it is just an isolated but good example of the Ag industry affecting the economy. A quote

in the introduction part of the article outlines my point on the Ag industry’s continual

employment of people. Pease put it this way,“Though agriculture is not the dominant industry in

the county accounting for only approximately 5 percent of the total dollar value of output and 6

percent of value-added for the county, it represents approximately 31 percent in terms of

employment”(Pease). This is a great indication of the power that the Ag industry has in just this

small region alone. “…. agriculture is constantly changing in response to a host of factors

including changes in the market conditions for agricultural products...” (Pease). This quote

indicates that the Ag Industry is a market that is able to change and keep up with other markets.

“Clarke County economy for 2005… In terms of dollar value of output, the manufacturing sector

is the largest single sector representing approximately 31 percent of total output” (Pease).

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While Clark County, Virginia is just a very small example of the effects of agriculture,

never the less it shows just how important the Ag industry is to an economy. It accounted for

thirty one percent of the employment in the county. While that may not seem like a huge number

it still goes to show that almost one in every third person in the county would be unemployed if

it wasn’t for agriculture. Another interesting point to this article is that Ag manufacturing

accounts for thirty one percent of the total output for the county.

While looking at stock prices in The Wall Street Journal, I decided to compare stock

prices of two major Ag manufacturers to a major auto manufacturer. According to the November

18, 2009 issue, The New York stock exchange prices for stocks went as such. For AGCO

Corporation, stock prices were $29.35 a share. John Deere, another Ag manufacturer, had shares

at $49.15. Ford Motor Company, the major Auto manufacturer, had stock prices at $8.98 a share.

These prices on the New York Stock Exchange show just how different the two industries are

fairing during this current economic crisis.

These articles outline a basic idea. That is everyone in the global population needs food.

Not everyone needs cars; a house would be nice but not a total necessity, but everyone needs to

eat. With the global population continuing to rise, people will still need food. With that idea the

food needs to be produced by farmers. What do farmers need to be successful and efficient when

they are producing these crops you may ask? They will still need Agricultural equipment.

Without it, they won’t be able to produce nearly the amount of food that they can now. With the

United States being one of those huge produces and exporters of grains and other types of

produce, Agricultural manufactures are very vital to the survival of the countries Agricultural

Industry. This is why Ag manufactures are still able, even in economic times as these, to prosper

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and provide farmers with the vital equipment that they need. Without this farming equipment,

farmers are doomed to failure or to go back more primitive farming methods.

For my methodology I planned to conduct interviews with a manufacturer and distributor

of farm equipment. I also conducted an interview with just a distributor of farm equipment. Both

of these companies are based out of two different states. The manufacturer and distributor is

located in Pennsylvania. The distributor is located in Tennessee. I chose these two mediums

because they are different types of markets for farming. The Tennessee location caters to much

bigger farmers and fertilizer dealers. The Pennsylvania location deals with smaller farmers and

farmers in different states up and down the east coast.  I also chose to conduct an interview with

an equipment sales man of the Ohio branch of the Pennsylvania location.

Through my research I have had some questions arise.  I have found research that has

told me that manufacturers are supposed to be doing better and sales are expected to rise in 2009.

This is all well and good, but I have not found anyone who has asked the manufacturers directly.

"The AEM Ag equipment industry outlook asks farm equipment manufacturers to rate

anticipated changes in more than 15 factors that have emerged as significant influences on

machinery sales"(Farm Equipment Sales for 2009). This is an example of where an article speaks

about doing some type of survey. It does not however provide me with an example of the

questions they asked.

I wanted to get more in-depth analysis of why the manufacturers believe this is so. Also

now that we have progressed more than half way into 2009, I want to know if what they

predicted was true or has the potential of remaining true. These questions that I posed in my

interviews were based on what I have wondered in my research. I also chose to interview a

salesman on the company. I chose to do this because in no other articles or research that I have

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found, have they asked a salesman what his or her ideas are. In all it comes down to the

salesmen, who deal with the farmers and sell the equipment directly. They are the ones whose

jobs depend on how well the market is doing

1. Has the current economic crisis affected your business’s sales?

2. How have farmers expressed their feelings about your equipment during this period of

economic decline?

3. What aspect of the economic crisis has affected farmers in your regions of sale?

4. Has this helped or hurt you ability to close sales or get interest in your product?

5. What have you noticed other manufacturers or competitors doing during this time of

economic decline?

6. How do you project your sales for 2010?

7. Finally, how do you believe, in a whole, the farming community has responded to the

current economic crisis?

I conducted my interviews over the phone as I had no other way of contacting them. Also I

did this because instead email, I was able to get a sense of their personal attitudes toward the

subject. I decided to not only take notes as the person was speaking but also record the

conversations so that I could come back to them later. After reviewing all of my notes audio I

compiled my research results.

Mark Anderson, President of GVM Inc. Biglerville, PA.

Mr. Anderson responses to the interview questions went as such .The First question. The

following is the 2008 was actually a record setting year in sales and 2009 the sales have been

just as good. He expects sales to level out through the remainder of 2009. The Ag industry has

not been affected nearly as much as the rest of the economy. While other people were laying off

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in 2008-2009, we were still hiring. Answer to question two. Farmers are begging to realize how

important fertilizer applicators are for them to have a good crop production. New seed

technology has given way to an increase in the need to fertilizer crops more and with better

application. Answer to question three. The economic crisis has made it much harder for farmers

to receive financial backing for crop loans and equipment loans. Many farmers are relaying on

fertilizer dealers to hold their accounts receivable until they receive financial backing. Answer to

question four. This has all hurt the sales because farmers cannot get financial backing. Also this

year crop prices are down compared to last year. Many people aren’t willing to spend the money

this year that they spent last year. Question five. Many manufactures are coming out with zero

percent financing through spring of 2010. This is so they can move old inventory and get

production moving. Question six. The company is still growing in 2010. Still competing with the

big three who are, John Deere, Case, and Ag Co. Project a ten to twenty percent increase in

2010. “We are coming out with new and more technologically advanced equipment for 2010”.

Precision Ag and Ag Junction is the merging of GPS and Computer systems in the new

equipment and upgradeable for older equipment. Question 7. Farming economy is still good.

Weak dollar has helped in Ag exports and this allows our prices to beat many other countries.

The farming economy has almost shined during this time of economic depression. Many in the

Ag industry have had better years in this low point in the economy.

Gene Horn, Equipment Salesman for GVM West. Bellevue, OH.

Mr. Horn’s answers to the interview questions went as such. Question one. Sales in 2009

are not quite as high as they were in 2008. The late planting season has lead to a late harvesting

season here in Ohio. This has caused people to not want to spend as much. Question two. The

price of equipment is about the same or even cheaper than those of competitors. GVM offers the

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best dry fertilizer system on the market in many views. Question three. In Ohio prices on soy

beans and corn have gone up and the cost of fertilizer has gone down. There has really been no

economic effect on farmers in Ohio. Question four. Zero percent financing has helped farmers

out a great deal. With that though this is still a recession and people don’t really want to spend a

whole lot of money. Question five. Many competitors are doing the same as we are, just seeing

as many customers as you can and getting your name out there. “It is a race to zero”. Question 6.

2010 should still hold true to be a good year. Many of the guys who did not buy new or used

equipment this year will want to buy next year. Question 7. The response of the farming

community has been very fast. Farmers aren’t going to let this economic crisis affect them and

stop them from planting and harvesting crops. People will always need food. Farmers are a pretty

resilient group of people.

Gordon Bruff President of Alliance Application Equipment LLC. Troy, Tennessee.

Mr. Bruff’s answers to the interview questions went as such. Question one. No,

agriculture has not been that affected in Tennessee. The Ag business is a good business.

Question two. Customers say the prices are too high, but of course these are 200-300 thousand

dollar machines. Question three. Banking and the ability to get financial backing for crop loans,

equipment loans are not as much affected. Question four. For equipment dealers the ability not to

get crop loans has not had much of an affect. Now had there been a problem getting loans for

equipment that would have made it a problem. Question five. Many competitors have been

pulling back somewhat on production. They are trying to move older inventory first. Question

six. Sales forecasted for 2010 have sales being around the same, no increase, from 2009.

Question seven. Farmers are treating this economic crisis with caution. While no one has shut

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down, laid off anyone , or anything like that, they are still being cautious and hoping this crisis is

about over with.

From my results I have found a great deal of sufficient evidence that shows me that my

hypothesis is correct. My hypothesis that the Ag Industry has not been affected has more or less

been proven correct. For my first interview was with Mark Anderson, President of GVM Inc. He

really got the ball rolling by saying right off from the start that his business’s sales have not been

affected at all by the economic crisis. He goes on to say that he had a great year in 2008 and is

having just as good of a year this year. This is huge news. This goes to show right off that a

business in the Ag industry is thriving right now.

He continues to say that particularly the type of Ag machinery he builds and sells,

fertilizer applicators, are becoming very important to many farmers who want to yield a good

crop. The production of a good crop will then allow the farmer to have enough money so he can

go out and buy fertilizer application equipment. He also goes into saying that the rough economy

has caused a weak dollar. This weak dollar has actually helped farmers. This allows American

farmers to export at much cheaper costs compared to European nations and other nations. In turn

this allows for American Farmers to be very competitive in the global market. This whole idea

comes back to the manufacturers and distributors who build and sell the products to them. The

fact that also this industry has not only been thriving in a time like this, but hiring workers is

phenomenal. While the auto industry was shutting down plants and laying people off, companies

like GVM were still and are hiring workers.

The things that have only seemed to hurt the Ag Industry are outside problems. That

problem is the fact that many farmers are still finding it hard to get financing and backing to buy

seeds and equipment. The many Ag manufactures, as stated above, are doing zero percent

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financing through spring of 2010 on new machines. Also many fertilizer dealers, as also stated,

are helping farmers out by holding their accounts receivable so they have more time to come up

with money to pay. It is great that the Farming community is willing to help each other out

through these tough economic times.

Also through my research I have found that the farming community has almost shined in

these harsh economic times. The fact that a weak dollar has actually helped farmers in crop

exportation is amazing. The economic crisis may not have been good for other industries, but the

Agriculture industry looks to have remained strong. Famers aren’t going to let a little thing like

the economy get in the way of them planting and harvesting their crops. People have to eat and

who better to feed them than the American farmer? With the Ag Manufactures coming out with

zero percent financing and new technologically advanced equipment, the future looks bright for

the Ag industry.

The Ag Industry is one of single most important parts of this nation’s economy. It is an

industry that we, in this country and many around the world, depend on for food. The Ag

industry will always remain a very important part of the global market. With the Earth’s

population growing at the rate it is people will always need food. The Ag manufacturers are the

one who make this all possible.

In harsh economic times such as the ones we are experiencing here in the United States,

people look to a stable market place. As I have proven I don’t believe there is a more stable

market than the Ag Industry. The men and women who make this market so stable are those in

the manufacturing and distribution aspect of agriculture. While other manufactures such as car

manufactures are laying people off, the Ag manufacturers are still hiring and employing

America’s work force. Ag manufacturers make it possible for the US to do the large scale

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farming that it does. Had it not been for such products as fertilizer application equipment, large

scale farming would be nearly impossible to do? If we were not able to do this large scale

farming then many people all over the world would go hungry.

In conclusion I feel that I conducted a sufficient amount of research to prove my point

which is, have agricultural manufacturers been effected by the current economic crisis. The

answer to that is clearly no. From the literature research that I have done, I have found many

articles that have proven the point that the Ag industry is strong and is continuing to prosper.

Even in these hard economic times, manufacturers are still able to hire and employ people. The

sales of many of these companies have been affected in a positive way not negatively. Many

have seen even better years than what they have experienced while the economy is good. While

the weak dollar has affected other industries negatively, it has actually helped Ag manufacturers

and farmers.

All of these factors have allowed this industry to flourish. From the Great Depression to

this past recession, this industry has proven to be strong. I feel that this is an industry that has no

other direction to go in but up. Agriculture is a vital part of this great nation’s ability to survive

in the global market place. Agricultural manufacturers have made this all possible. This is an

industry that is truly here to stay and continue to provide for Americans and people of many

other nations.

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Works Cited

“Agricultural Statisics".2009. Web. 12 October 2009.

"Biggest 1,000 Stocks." The Wall Street Journal. 2009. C9.

Boyd, Robert L. "Black and White Farm Operations in the South During the Great Depression." 2004.1-22.

"Farm Equipment Sales Look Strong." Southeast Farm Press. 2009.1-3

Fontelera, Jorina. "Optimistic Outlook for Agricultural Machinery." Industry Market Trends. 2009.1-2

Getz, Lowell. "Hard times farming: Farming during the Great Depression of 1930-1940." 2008.1-22

McGregor, Susan. The Nations Unemployment. October 2009.Web. 10 October 2009

Monroe, Pat. "Farm Equipment Sales Forecast for 2009." Association of Equipment Manufacturers. 2009.

Pease, Jim. "The Economic Impact of the Agriculture Sector In Clarke County, Virginia." 2005.

1-22.

Ruiz-Garcia, Luis. "A Review of Wireless Sensor Technologies and Applications in Agriculture and the

Food Inustry." 2009. 1-24.

"Top Agricultural Exporting Countries". 2004. Web.12 October 2009

Zulauf, Carl. "Farming's Changing”. The Futurist. 2003.36-38