Selected US farm machinery market characteristics and their implications for the future

Trends in farm machinery use suggest the US farm machinery market is a replacement market. Moreover, since 1960, the price of machinery has risen relative to prices for other production inputs. Econometric analysis suggests that higher relative machinery prices encourage input substitution. Thus, relative price trends should be a major concern to the machinery industry. The analysis also suggests that demand for machinery is elastic, meaning that lower prices could produce higher gross sales. Last, annual machinery purchases by farmers will likely remain variable because factors influencing purchases are variable. Therefore, reducing factory and dealer inventories could produce lost sales.