EIMA 2021: Good times keep rolling, but possibly trouble ahead
By Julian Buckley20 October 2021
While there are fewer companies taking up the same hall space and not the same crowds you would normally expect to see milling around the stands, the latest edition of the EIMA International Agricultural and Gardening Machinery show should be considered a success simply for happening at all.
With all ticket holders subject to vaccination checks at the door, virtually all visitors masked up and hand sanitizer gel dispensers everywhere you turn, COVID-19 is still having an impact on otherwise normal activities.
Despite the unavoidable situation, the companies speaking with Diesel Progress International are happy to be here to present their latest and greatest products. Without exception, they report that the agriculture machine market is booming and the only real trouble is fulfilling customer orders.
The overarching plan is to enjoy the good times, but some express a nagging doubt that there could be trouble on the horizon.
After all, it’s a picture they’ve seen before, when the market was red hot directly in advance of the global financial crash in 2008-’09.
The view is that the agricultural machine industry, and even the wider on- and off-road machine sector, is operating in a bubble. A bubble which could burst at any moment.
According to the national director of a major engine distributor, the company is having trouble keeping up with demand. That is in part due to the shortage of some critical components putting a damper on production. But at the same time, customers are cash rich and buying equipment like there’s no tomorrow.
He reports that where customers would normally baulk at even minimal price increases, they are now less concerned about the cost and are simply happy to be able to source their new machinery in a market where demand is outstripping supply.
Such is the state of play that dealers are unable to fulfil new orders and are in the unenviable position of having to turn away customers.
The situation is creating problems for the OEM engine manufacturers as well. With the market surge that started in June 2020 continuing at pace, these companies are having real difficulties making accurate forecasts, figures which are required by suppliers and dealers alike.
Some companies are considering adding capacity to service this demand. But others say ‘what’s the point?’ if there are key components which cannot be supplied. And, back to the original point, why invest in new production capacity if the market bubble is going to pop.
The post-COVID bounce across all industries has pushed energy prices up across the board. Crude oil continues to trade at recent highs, while as with other European countries, retail energy prices in Italy have continued to increase. The retail price of natural gas has increased 40%, while electricity has gone up 25%.
The cost of doing business is now so high that it will inevitably create inflation, at which point central banks could decide to increase base interest rates – rates which have been at historic lows across Europe for more than a decade.
Any increase in interest rates would create drag on the wider economy. It would also likely start to evaporate those cash piles which customers have been using to fund machine purchases.
Well, at least that’s the thought of one engine manufacturer. But it’s not all doom and gloom. The company director adds that he’s determined to enjoy this bubble while it lasts. As he says in closing, if you cannot enjoy the good times – even if you are slightly nervous about the future – then when are you supposed to enjoy yourself?