Dealer Consolidation Continues

North Dakota-based Titan Machinery announced in July it entered into a purchase agreement with Heartland Ag Systems of Minnesota. Titan has 15 stores in Nebraska located across the state while Heartland has 1 located in Grand Island. Both entities are affiliated with Case IH. The purchase is the latest merger in the ongoing consolidation of agricultural machinery dealers.

The annual Big Dealers Report produced by Ag Equipment Intelligence shows the percentage of agricultural machinery stores owned by big dealers rose to 37 percent this year compared with 35 percent a year ago. A big dealer is defined as any dealer which operates five or more stores. The report also says the number of big dealers this year dropped to 196 dealers from 197 (Figure 1). Big Kubota dealers increased 11 percent following a push by the company for company-branded stores. On the other hand, big dealers affiliated with John Deere dropped to 89 from 95 last year.

A Farm Equipment article outlines several reasons for the ongoing consolidation in the agricultural machinery sector. Some of the consolidation is being led by equipment manufacturers as noted above. Some consolidation is in response to farm consolidation. In 1982, 23 percent of farm revenue was generated by farms with over $1 million in revenue. In 2017, 69 percent of farm revenue was generated by the same economic class of farms. George Russell, a founder of the Machinery Advisors Consortium, says dealers need to consolidate to meet the needs of these farmers. Another reason for consolidation is the capital requirements needed by dealers due to high machinery prices. To assure products are available, dealers are consolidating to secure necessary capital. Finally, some of the consolidation is simply due to dealer owners exiting the industry.

The dealer sector is not alone in experiencing the consolidation trend. Several agricultural sectors, including production agriculture, are undergoing the same long-term consolidation trend. New technologies, economies of scale, global competition, labor shortages, and a multiple of other forces are contributing to the structural changes occurring in all agriculture sectors, with no signs of the trend abating soon.

Figure 1. “Big” Ag Equipment Dealers