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Lenders fuel hopes that worst is over for US ag machinery market

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A university survey flashed another signal that the downturn in the US farm equipment market is at least slowing, even as it reported a 40th successive month of decline in the country's farmland prices.

A farm machinery sales index compiled by Creighton University, from a survey of lenders in major US agricultural states, came in at 22.0 for this month.

While a "still very weak" reading, and well below the 50.0 which indicates a neutral market, the figure was the highest in more than two years - and well above the figure of 6.7 reported for March last year, a low for the survey.

"This markets the fifth straight month that the reading has advanced," Creighton University said.

Sector recovery?

The figure follows comments from silos maker Ag Growth International on Wednesday that, after two years of decline in its sales to US farmers, "early signs of a recovery in demand appear to be forming".

"Management is cautiously optimistic that recent activity is an indicator of a modest improvement in the North American farm sector," the Canada-based group said, reporting an increase of more than 30% in new orders for the first two months of this year, and a "significantly higher" order backlog.

Meanwhile, latest figures from the Association of Equipment Manufacturers show the strongest February for US overall machinery sales, by vehicle, since at least 2013, and one well above the five-year average for the month.

'Now less negative'

Ernie Goss, the Creighton University economics professor in charge of the survey, flagged that while agricultural commodity price changes "remain negative" they "are now less negative than several months ago".

The impact of the ag downturn appeared evident in cropland rents too which, at an average of $212 per acre according to the survey, were down 16.1% year on year.

Values of farmland itself remained in decline too, with an index reading of a "frail" 33.0, extending a run of sub-50.0 readings which began in late 2013.

However, while down 0.7 points month on month, the figure was well above the reading of 20.2 in March last year.

Nebraska price falls

The survey covers states including Nebraska, which according to a University of Nebraska–Lincoln study published on Wednesday, saw its farmland prices fall by 10% in the year to February 1, to an average of $2,805 an acre.

"The current sustained period of lower commodity prices and the anticipation of these lower values [were] indicated by survey participants as major forces leading to the declines," the UN-L study said.

"The largest price declines by land classes in Nebraska occurred in the dryland cropland with irrigation potential at 13% followed by tillable grazing land at 12%."

By Mike Verdin

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