MIDWEST-SOUTHEASTERN EQUIPMENT DEALERS ASSOCIATION Serving farm, outdoor power, farmstead mechanization and industrial dealers FEB THE INSIDER 2020 TAKE NOTE

CONSIDER HOW YOU WRITE THIS YEAR’S DATE

We recently saw a caution against writing the date as, for example, “2/5/20,” but rather write the year out in full as “2/5/2020.” The reason? If you just write 2/5/20, it could potentially be changed to “2/5/2021” or FARMERS FEEL BETTER ABOUT THE FUTURE “2/5/2019.”

If you agreed to begin The Ag Economy Barometer rose to of farmers said they expected to making payments on 2/5/20, a reading of 167 in January, a 17-point see U.S. ag exports increase over for example, someone could jump from December. Virtually all of the next five years. That began to claim that obligation began the rise in this month’s reading was shift in November, and last month, on 2/5/2019 and try to collect attributable to optimism about the 71 percent of respondents said they additional money. future. expect to see exports rise. A never-cashed check dated The Index of Future Expectations The Farm Capital Investment 2/5/20 could be changed to climbed 24 points to 179, while the Index, which captures farmers’ 2/5/2021, possibly making Index of Current Conditions—at willingness to make big purchases, the uncashed check active 142—was essentially unchanged does not yet reflect that longer-term again. from the December reading of optimism. The index fell 4 points 141. The survey coincided with below December’s reading to 68. MSEDA: Committed President Trump’s signing of the The index has ranged from the high to building the best phase-one trade agreement with 60s to low 70s since November business environment China. Producers have become and, despite the decline in January, for equipment dealers. more optimistic about the future of remains much stronger than it was agricultural trade in past months. As in early fall, when it ranged from the recently as October, just 55 percent high 40s to the high 50s. West Equipment Dealers Association and founding coalition member.

“Whether you are in the business of selling boats, batteries, power tools or portable generators or you are operating a landscape business, you don’t want your customers exposed to the safety risks that come with illegal tampering,” added Mark Hennessey, CEO of the Iowa-Nebraska Equipment Dealers Association. The coalition will share intelligence and resources to EDA HEADS NEW COALITION maximize results. “The benefit of this coalition is that we are harnessing the individual efforts of each member OPPOSING ILLEGAL TAMPERING to the benefit of all. While each industry’s concerns he Equipment Dealers Association (EDA) has may vary, our common interests are in protecting the Tbeen coordinating industry right to repair efforts safety of product users and the environment,” added since 2016. “Together, we have worked in lockstep Higgins. with our industry partners at the Association of Equipment Manufacturers (AEM), Associated The Coalition has already begun to weigh in with Equipment Distributors (AED), the Truck and state legislators and will continue to do so as the state Engine Manufacturers Association (EMA) and our legislative session period ramps up. “We are pleased regional dealer association partners including the to lead this next step in advocacy for our industry,” Far West Equipment Dealers Association (FWEDA), said Kim Rominger, President and CEO of EDA. “This the Midwest-Southeastern Equipment Dealers is the largest coalition that we are aware of on this Association (MSEDA) and the Iowa-Nebraska issue and it will require the attention of legislators Equipment Dealers Association(INEDA).” explained moving forward.” Natalie Higgins, EDA’s Vice President of Government Relations. FARMERS RECEIVE FINAL ROUND

In 2019, the industry saw an onslaught of so called OF 2019 TRADE SUPPORT “right to repair” bills filed in some twenty-three states. Higgins added, “We have coordinated closely with USDA earlier this month rolled out the final tranche our off-road and outdoor power industry partners and of payments to farmers hurt by global trade disputes. fought these bills each step of the way.” “We are very The influx of funds could bring total payments for 2019 proud to say that no “right to repair” bills have passed closer to $14.5 billion. in any state legislature,” stated Gary Manke, CEO of MSEDA, “but it has required a lot of hard work on the Prior to this distribution of aid, the Trump Administration part of our associations and other industry partners.” had paid around $11 This year, though, EDA has a new tool in its arsenal, billion to farmers and a coalition of over thirty organizations, in various ranchers for their industries, working together to thwart efforts 2019 losses, as well to undermine federal law and proliferate illegal as $8.6 billion for tampering. 2018. USDA approved the funds after the The “Coalition Opposed to Illegal Tampering” will be January thaw in trade weighing in on the widespread risks that vague and tension with China. overly broad “right to repair” bills across the United States and Canada. “Our coalition encompasses many In related news, different industries – but we all recognize the safety payments from federal crop insurance total more than and environmental risks that this type of legislation $6.4 billion for the 2019 growing season. That amount would create,” explained Joani Woelfel, CEO of the Far Page 2 makes this the costliest year on record, resulting primarily from losses covered from the spring and summer floods across North and South Dakota, Minnesota, and Illinois, according to data from the USDA.

Steve Bowen, a meteorologist and head of catastrophe insight for an insurer, said that in terms of overall economic costs— including damage to agriculture, infrastructure and other property—the 1993 floods along the Mississippi and Missouri rivers remain the costliest in modern history at $38 billion in today’s dollars. Last year’s disaster cost about $20 billion. Source: Politico

2020 MIDWEST-SOUTHEASTERN OFFICERS & BOARD OF DIRECTORS ELECTED

he Midwest-SouthEastern Equipment Dealers Association would like to express our sincere appreciation to Tall of the 2020 Board of Directors who give generously of their time and talents to provide leadership while looking after the best interests of the equipment dealer members in Arkansas, Delaware, Illinois, Maryland, Mississippi, Missouri, North Carolina, South Carolina, Tennessee, Virginia, West Virginia and Wisconsin.

Front row Left to Right: Immediate Past Chairman John Maus, Greenway Equipment; Morrilton, AR; Chairman Jim McCartney, A.C. McCartney Farm Equipment, Durand, IL; Vice Chairman Bubba Cooper, Delta Group, Greenville, MS

Back row Left to Right: Kevin Sommer, Service Motors Company, Dale WI; Mike Carley, Birkey’s Farm Store, Champaign, IL; Jeremy Brooks, Brooks Sales Inc, Monroe, NC; Jared Nobbe, Sydenstricker Nobbe Partners, Waterloo, IL

Missing from picture: Ken Snow, Snow & Equipment, Ayden, NC & Chris Turnage, Tennessee Tractor, Alamo, TN

The Insider - February 2020 Thank You for Your Support! n addition to our immense appreciation to all our Midwest-SouthEastern Equipment Dealer IMembers and Industry Friends who attended the 2020 Joint Annual Meeting, our sincere gratitude is extended to the many corporate Sponsors whose continued commitment and support helped the Deep Southern & Midwest-SouthEastern Associations’ Joint Annual Meeting be a grand success! It is through their gracious generosity and sponsorship that we are able to provide our Dealer Members attending the convention with an exceptional educational, networking and social experience. Please be sure to thank the foSponsors on the following page for their continued support and efforts to make the Dealers in attendance at our 2020 Joint Annual Meeting an entertaining and informative event.

ANNUAL MEETING SPONSORS DIAMOND SPONSORS SILVER SPONSORS AGCO Bush Hog Case IH DLL Finance, LLC Federated Insurance Fastline Publications HUB International Kubota Investar Bank Mahindra Agriculture North America K.COE ISOM Southern Marketing Affiliates Siegfried Bingham P.C. Specialty Equipment Insurance Services PLATINUM SPONSORS Unverferth Manufacturing Co., Inc. AgDirect Basic Software Systems BRONZE SPONSORS Faubourg Private Wealth Apache Palco Henke Buffalo Nationwide Financial BigIron Auctions Tractor House/Auction Time.com Chaffe McCall, LLP Charter Software, Inc. GOLD SPONSORS Diversified Financial Gilsbar Equipment Insurance International Jones Walker, LLP Farm Credit Express OPOC.us HBS Systems Iron Solutions LaPorte CPAs & Business Advisors Machinery Scope / Finance Scope Sunbelt Ag Expo Warranty Processing Services, LLC

Page 4 The Insider - February 2020 EQUIPMENT DEALERS ASSOCIATION (EDA) DEALER- MANUFACTURER MANUFACTURER RELATIONS NEWS SURVEY New Bobcat Dealer Agreement Review Available Clark Equipment Company d/b/a Bobcat Company has requested its dealers to sign a new dealer agreement for 2020. Although this is consistent with Bobcat’s past practices, the new version of the dealer agreement is substantially re-formatted. To assist you in making your decision about signing the new dealer agreement and understanding its terms, we had Lance Formwalt, MSEDA legal counsel review the new agreement, The Equipment Dealers Association (EDA) is once If you are a Bobcat dealer and would like a copy of again conducting their annual Dealer-Manufacturer the Mr. Formwalt review of the agreement, please Relations Survey. call the MSEDA office at 800-236-6332 or email [email protected] to request a copy. This survey provides dealers the opportunity to rate the manufacturers they do business with in important categories regarding Products (quality, AGCO DOUBLES FENDT availability, and technical support), Parts (availability, DEALERSHIPS quality, and return policy), Communication, Warranty and Marketing/Advertising support. If it feels like you’ve been hearing the Fendt name more than usual lately, you’re probably right. Of Responses are compiled anonymously and the four major brands acquired by AGCO since it distributed to manufacturers and dealers for was formed, Deutz-Allis (which was discontinued), comparison, analysis and review. The survey results , Challenger, and Fendt, AGCO is are helpful in the association’s discussion with beginning to put more of its marketing eggs in the manufacturers to help identify and address issues of Fendt basket here in North America. concern. Fendt has long been known as a premium brand in As a dealer, you should have received an E-Mail from its native Germany, and it has owned a dominant Equipment Dealers Association with the survey link share of the ag tractor market there for a long time. either on Wednesday February 12th or Thursday As of late, AGCO is February 13th. giving that brand more than a fighting If you have not received a survey request after chance to dominate the premium tractor market February 13th, you can also complete the survey by on this side of the Atlantic too. AGCO brought the contacting Equipment Dealers Association by E-Mail brand to these shores in 1998, shortly after buying it. at [email protected] and they will But it was initially a slow climb for the marquee to individually send you a link to the survey. Individual rise from niche-market to the broad market appeal. dealer contacts are only able to take the survey The machines offered in the Fendt brand were once. originally just a select group of with a high spec and limited horsepower range, even though

Page 6 Fendt offers a much wider range in Europe. Today, that has changed. The brand has started a breakout in Canada and the U.S. offering additional Fendt- branded equipment that will appeal to a broader range of producers.

The debut of the unique high-horsepower 1000 Series tractors, which have also been sold wearing Challenger colors, was a big step in appealing to broad-acre grain growers. Last year the introduction of the all-new IDEAL combine wearing Fendt badges pushed that further, and now the new 900 Series tractors aimed at mid-western U.S. row crop farmers As part of that, in February 2020, the “revolutionary” as well as other grain growers are coming online. Fendt MOMENTUM planter is expected to join the There has, however, been one more hurdle for AGCO product line. It’s a global planter platform, which the to overcome to really set the Fendt brand on fire company claims is “designed from the ground up for in North America: it needs more Fendt-authorized producers across the globe.” It has already debuted dealers. Management knows that, and there’s been a in Brazil, and it’s currently undergoing field trials in lot of progress on changing that this year. There are North America. now 189 Fendt dealers in North America. CNH INDUSTRIAL REPORTS 4Q AND That has meant nearly doubling the number of Fendt dealers in the last 12 months, which saw the FY19 RESULTS network grow by a surprising 98 locations. There are now dealerships in 37 of the 54 U.S. states and CNH Industrial N.V. has reported fourth quarter and Canadian provinces that are considered large ag full year 2019 results for the period ended Dec. 31, markets. 2019, stating that consolidated revenues were $28.1 billion for the full year 2019, down 6% compared to “The Fendt dealership expansion is a clear sign 2018 (down 2% on a constant currency basis). Net of our continued commitment not only to growth sales of Industrial Activities were $26.1 billion for the in North America, but to an expanded group of year, down 6% compared to the prior year (down 2% customers who, when they learn why Fendt has on a constant currency basis). In the fourth quarter such a dedicated fan base, will also want to be Fendt of 2019, consolidated revenues were $7.7 billion, owners,” says Bob Crain, senior vice president and down 6% compared to the fourth quarter of 2018 general manager, Americas, AGCO. “Our existing (down 4% on a constant currency basis). Net sales Fendt dealers are excited about the new products of Industrial Activities were $7.2 billion in the fourth that meet the needs of North American farmers and quarter of 2019, down 7% compared to the fourth our new Fendt dealers look forward to bringing their quarter of 2018 (down 4% on a constant currency customers into the Fendt family.” basis).

Outside of North America, AGCO has all but Net income was $1,454 million for the full year abandoned the Challenger brand name, but not 2019. In the fourth quarter of 2019, net income was its equipment. Instead, the Challenger MT700 and $120 million compared to $258 million in the fourth MT800 line of tracked tractors are being marketed quarter of 2018. as Fendt-brand machines. That may not happen here anytime soon, but the Fendt line is set to expand, AGRICULTURE nevertheless. The company says it is working toward giving Fendt a full line of branded equipment. Agriculture’s net sales totaled $11 billion in the full year 2019, down 6% compared to 2018 (down 3%

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Page 8 on a constant currency basis). The decrease was (down 28.8% year-over-year). Operating margin for primarily driven by lower industry volumes in North the fourth quarter of 2019 was (2)% (down 810 basis America and Rest of World markets, coupled with points compared to the fourth quarter of 2018) and actions to reduce dealer inventories in the second 3.9% for the full year of 2019 (down 140 basis points half of the year, partially offset by price realization year-over-year). performance across all geographies and sustained aftermarket activity. In the fourth quarter of 2019, Retail unit sales for full year 2019 were down year- Agriculture’s net sales totaled $2.9 billion, down 7% over-year for both tractors and combines in North compared to the fourth quarter of 2018 (down 5% America (tractors down 1%, combines down 6%), on a constant currency basis), as result of lower South America (tractors down 16%, combines industry volumes partially offset by positive price down 5%) and Western Europe (tractors down 2%, realization performance. The company cited positive combines down 18%). pricing, disciplined cost management, industrial efficiencies and a reduction in short-term incentive AEM EXPECTS SLIGHT DOWNTURN compensation expense as being more than offset by lower wholesale volume and market and product IN 2020; REBOUND IN 2021 mix, including negative industrial absorption primarily from the lower production level mainly in New data from the Assn. of Equipment the second half of the year, as well as higher product Manufacturers (AEM) and Oxford Economics shows costs as result of increased raw material costs and a positive trend in agricultural tractor and self- tariffs. propelled combine sales for the next several years despite a brief tick down for 2020.

AGCO REPORTS FY19 RESULTS For 2019, the Agricultural Machinery Industry grew a better-than-expected 3.2% to $15.6 billion in 2019 AGCO has reported net sales of approximately $2.5 according to AEM Market Intelligence Director billion for the fourth quarter of 2019, a decrease of Benjamin Duyck, citing data from Oxford Economics. approximately 3% compared to the fourth quarter of “Bad weather, trade protectionism and slower growth 2018. around the globe were the main impediments to further growth in 2019. Future global slowdowns Excluding unfavorable currency translation impacts could reduce food production, putting downward of approximately 2.4%, net sales in the fourth quarter pressure on farmers’ incomes,” said Duyck. of 2019 decreased approximately 0.6% compared to “Escalation the fourth quarter of 2018. in the U.S.- China trade Net sales for the full year of 2019 were approximately dispute could $9 billion, which is a decrease of approximately 3.3% also cause compared to 2018. Excluding unfavorable currency concerns for translation impacts of approximately 4.2%, net sales ag equipment for the full year of 2019 increased approximately 0.8% manufacturers. compared to 2018. However, despite Gross margin was 20.4% for the fourth quarter of its limited 2019 (down 35 basis points compared to the fourth scope, the recently-passed Phase One deal should quarter of 2018) and 21.9% for the full year of 2019 provide relief, both for the soybean market as well (up 60 basis points year-over-year). Operating (loss) as overall capital expenditures.” Researchers at income for the fourth quarter of 2019 was $(49.8) Oxford Economics believe ag machinery is looking million (down 131.3% compared to the fourth quarter at a down year for 2020. However, they forecast that of 2018) and $348.1 million for the full year of 2019 slip will turn back around for 2021. Overall, their

The Insider - February 2020 Page 10 most likely scenario of a 2.5% drop looks to be just chances are better than not that the medium-term a 1 year event and not the start of a trend. Projected trend will be positive. 1-2% annual growth over the following years would put manufacturers more than 2% above their 2019 “With the USMCA having passed in Washington performance by 2023. and the Phase One agreement struck by President Trump and Chinese President Xi, we believe one of The worst-case scenario, according to Oxford, is the more positive scenarios to be increasingly likely,” an escalation in global protectionism, which their said Duyck. “While some of the environmental and researchers believe has a 20% probability. In that global economic concerns remain question marks, scenario, ag equipment sales would slide for each of the trade concerns that were modeled into some the next four years, with 2023 sales being more than versions of the forecast seem to be relaxing.” 6% lower than 2019. JANUARY TRACTOR & COMBINE However, they also assign a 15% probability of expanded growth occurring if global governments SALES: U.S. MIXED, CANADA STILL ramp down trade tensions, cutting 2020’s forecast DOWN loss in half and putting 2023’s performance more than 5% above 2019. In another report from AEM, January 2020 saw mixed results in overall U.S. sales of tractors and self- All forecast models show a drop in 2020 of varying propelled combines. Total farm tractor sales grew sizes, but both Oxford Economics and Duyck agree compared to January of last year while combines fell

The Insider - February 2020 by a quarter, according to the latest data from the Assn. of Equipment Manufacturers (AEM).

U.S. total farm tractor sales Increased 4.7% in January compared to last year while U.S. January self- propelled combine sales fell 24.4%.

Total U.S. sales of 2WD tractors grew in all segments in January, a total of 4.9% compared to January 2019. Under 40 horsepower 2WD tractors were up 2.6%, and sales of 40-100 horsepower tractors went up 4.6%, while sales of 100-plus horsepower tractors led the way with 19.6% growth to 1,361 units. Total November U.S. 4WD tractor sales fell 6.6% to 169 units sold.

For Canada, November 4WD tractor sales fell 84.1% (from 69 to 11 units sold year-over-year) and self- propelled combine sales notched down 22%. November 2WD Canadian sales were down over all 2.8%, with the sub-40 horsepower segment growing 11.9% while the 40-100 horsepower segment fell 18.2%, and the 100+ horsepower segment fell 28.6%.

“The sales numbers we are seeing for January 2020 are in line with our expectations,” said Curt Blades, senior vice president of Ag Services at the Assn. of Equipment Manufacturers. “With the approval of the USMCA and the announcement of the Phase One trade agreement between the U.S. and China, we believe we are seeing some positive trends on the horizon for ag equipment sales.”

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Page 12 OFFICERS & DIRECTORS OF THE ASSOCIATION

OFFICERS DIRECTORS

CHAIRMAN Jeremy Brooks Jim McCartney Brooks Sales, Inc., Monroe, NC AC McCartney Farm Equipment, Durand, IL Mike Carley VICE CHAIRMAN Birkey’s Farm Store, Champaign, IL Bubba Cooper Delta Group, Greenville, MS Kevin Sommer Service Motors Company, Dale, WI IMMEDIATE PAST CHAIRMAN John Maus Jared Nobbe Greenway Equipment, Morrilton, AR Sydenstricker Nobbe Partners, Waterloo, IL

PRESIDENT-CEO Ken Snow, Jr. Gary Manke, CAE Snow Tractor & Equipment Co., Ayden, NC Madison, WI Chris Turnage Tennesse Tractor, Alamo, TN

5330 Wall Street, Suite 100 Madison, WI 53718 Ph: (608) 240-4700 Toll Free: 800-236-6332 Fax: (608) 240-2069 www.mseda.com

The Insider - February 2020