A Prole of the Farm Machinery Industry

A Prole of the Farm Machinery Industry

Helping Farmers Feed the World
Dawn M. Drake

A Prole of the Farm Machinery Industry: H  elping Farmers Feed the World Copyright Business Expert Press, LLC, 2014. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any meanselectronic, mechanical, photocopy, recording, or any other except for brief quotations, not to exceed 400 words, without the prior permission of the publisher. First published in 2014 by Business Expert Press, LLC 222 East 46th Street, New York, NY 10017 www.businessexpertpress.com ISBN-13: 9  78-1-60649-442-4 (paperback) ISBN-13: 9  78-1-60649-443-1 (e-book) Business Expert Press Industry Proles Collection Collection ISSN:  Forthcoming (print) Collection ISSN:  Forthcoming (electronic) Cover and interior design by Exeter Premedia Services Private Ltd., Chennai, India First edition:  2014 10 9 8 7 6 5 4 3 2 1 Printed in the United States of America.

To my parents, who have always supported my dreams

Abstract
The farm machinery industry is a complex sector of the global manufacturing economy that encompasses many companies, including those who produce tractors, combines, sprayers, planting equipment, harvesters, tillage equipment, and irrigation systems. While the industry is dominated by three full-line manufacturers (Deere and Company, Case New Holland, and the Allis-Gleaner Corporation), there are thousands of other companies, including many short-line manufacturers, that also dictate the nature of the industry. The farm machinery industry, while contri buting a small percentage to gross world product, is vitally important to another key sector of the economyagriculture. In advanced economies, where the percentage of the labor force engaged in agriculture has been on the decline since World War II, high horsepower tractors and efficient harvesting systems are necessary to cultivate more acres with fewer workers to feed an ever-growing world population.

Keywords
farm machinery, agriculture, tractor, combine, implement

Contents
List of Figures........................................................................................ xi List of Tables....................................................................................... xvii Acknowledgments................................................................................. xix Chapter 1 Introduction.......................................................................1 Chapter 2 How the Farm Machinery Industry Operates......................7 Chapter 3 Industry Organization and Competition..........................39 Chapter 4 Outside Market Forces....................................................107 Chapter 5 Regulation in the Farm Machinery Industry...................121 Chapter 6 Challenges and Opportunities for the Farm Machinery Industry....................................135 Notes.................................................................................................167 References...........................................................................................171 Resources for Further Study..................................................................175 Index.................................................................................................177

List of Figures
Figure 1.1. Types of self-propelled farm machinery..............................2 Figure 1.2. Implements manufactured by the farm machinery industry.............................................................................2 Figure 1.3. Other types of farm machinery .........................................3 Figure 1.4. A high-horsepower articulated tractor completes preparation of a new seedbed.............................................5 Figure 1.5. Signage used in Case New Hollands display area...............6 Figure 2.1. A steam traction engine.....................................................8 Figure 2.2. Two gasoline traction engines............................................9 Figure 2.3. A Moline Universal..........................................................11 Figure 2.4. A Farmall row-crop tractor...............................................12 Figure 2.5. Two tractors with tricycle front ends................................13 Figure 2.6. The Allis-Chalmers B.......................................................15 Figure 2.7. A Ford 8N tractor equipped with the Ferguson System...16 Figure 2.8. The modern three-point hitch system..............................17 Figure 2.9. An early self-propelled Gleaner combine..........................18 Figure 2.10. Straw is ejected from the back of this combine as it harvests wheat in eastern Pennsylvania......................19 Figure 2.11. The stock of draft animals compared to tractors on U.S. farms from 1920 to 1960.........................................20 Figure 2.12. A Fordson tractor21 Figure 2.13. A tractor being tested on the track at the Nebraska Tractor Test Lab...............................................................24

xii

LIST OF FIGURES

Figure 2.14. The volatile farm machinery industry..............................25 Figure 2.15. A high-horsepower Case International tractor..................31 Figure 2.16. A Case International wing disc........................................32 Figure 2.17. A Case International combine.........................................32 Figure 2.18. Other Case International farm machinery.......................33 Figure 2.19. A fixed-frame four-wheel drive articulated Versatile tractor................................................................35 Figure 3.1. A Waterloo Boy tractor....................................................41 Figure 3.2. A John Deere model D....................................................41 Figure 3.3. Products from the Agricultural and Turf Division of John Deere....................................................43 Figure 3.4. A tractor using its power-takeoff shaft..............................48 Figure 3.5. A scale model of an axial flow grain rotor from a Massey-Ferguson combine and the transverse grain rotor from a Gleaner combine side-by-side......................49 Figure 3.6. Case Agriculture Steiger and Quadtrac tractors................50 Figure 3.7. A New Holland mower-conditioner................................52 Figure 3.8. The prototype Module Builder Express............................53 Figure 3.9. A banner in New Hollands display area...........................54 Figure 3.10. Several different CNH products......................................56 Figure 3.11. On the left, advertising for Case Internationals real-time kinematic base stations for its Advanced Farming Systems. On the right, virtually the same sign with New Hollands Precision Land Management logo...................................................58 Figure 3.12. Signage in both Case International and Ram Trucks display areas........................................................59

LIST OF FIGURES

xiii

Figure 3.13. Numerous brands make up the AGCO family.................60 Figure 3.14. An early Allis-Chalmers tractor........................................62 Figure 3.15. The first Allis-Chalmers model U to be outfitted with pneumatic rubber tires.....................................................63 Figure 3.16. AGCO Ro-Gator self-propelled sprayer...........................68 Figure 3.17. An AGCO Challenger track tractor.................................69 Figure 3.18. A GSI grain dryer............................................................70 Figure 3.19. Construction at AGCOs Jackson, Minnesota facility......73 Figure 3.20. Large capacity Apache sprayer on display.........................76 Figure 3.21. A Kinze corn planter folded in the transport position......77 Figure 3.22. A Great Plains compact grain drill...................................79 Figure 3.23. Great Plains Discovator cultivator................................79 Figure 3.24. A Reinke tower for a center-pivot irrigation system.........81 Figure 3.25. Vermeers round balers.....................................................84 Figure 3.26. The Hagie STS 16 sprayer...............................................85 Figure 3.27. A Mahindra tractor..........................................................86 Figure 3.28. A variety Deutz-Fahr models...........................................91 Figure 3.29. Versatile products............................................................92 Figure 3.30. A Farm King pull-type sprayer.........................................93 Figure 3.31. A CLAAS Jaguar self-propelled forage harvester...............96 Figure 3.32. A CLAAS Lexion combine..............................................96 Figure 3.33. Kubota tractors with front end loaders.............................98 Figure 3.34. A TYM tractor with front end loader.............................101 Figure 3.35. A Kuhn-Knight mixer feeder wagon..............................102 Figure 3.36. A Kuhn wing disc..........................................................103

xiv

LIST OF FIGURES

Figure 3.37. A MacDon self-propelled windrower.............................103 Figure 3.38. The two major brands of Argo.......................................105 Figure 4.1. The trend in U.S. crop prices among corn, soybean, and wheat from 1960 to 2010.......................................108 Figure 4.2. The production of animal protein..................................109 Figure 4.3. The increasing production of corn in the United States.......................................................110 Figure 4.4. Acres enrolled in the Conservation Reserve Program in the period 19882012.................................113 Figure 5.1. A SAME Deutz-Fahr tractor outfitted with ROPS.........124 Figure 6.1. The exhaust system on a high-horsepower John Deere tractor with cEGR engine technology.137 Figure 6.2. The exhaust system for a CNH SCR engine..................138 Figure 6.3. The diesel fuel and DEF tanks on a Massey-Ferguson tractor................................................139 Figure 6.4. The prototype ElectRoGator..........................................146 Figure 6.5. The NH2 at its North American debut...........................147 Figure 6.6. A poster advertising AGCOs one-pass biomass collection system..............................................148 Figure 6.7. Hillco Technologies cob cart.........................................149 Figure 6.8. Two different slogans that AGCO has employed in recent years..........................................153 Figure 6.9. Identical Case International and New Holland compact-diesel tractors..................................................154 Figure 6.10. A Kinze grain cart..........................................................160 Figure 6.11. Population on Earth......................................................161 Figure 6.12. The decline in hectares of agricultural land per person across Earth...................................................................162

LIST OF FIGURES

xv

Figure 6.13. Distribution of population by world regions..................163 Figure 6.14. Increases in average yield, worldwide, of the three most important grain crops....................................................164 Figure 6.15. The percentage of the worlds employed population that works in agriculture.......................................................164

List of Tables
Table 2.1.  The percentage of farms in the United States reporting using only draft animals, a combination of draft animals and tractors or using only tractors22 Table 2.2.  The declining number of full-line North American farm machinery manufacturers26

Acknowledgments
There are so many people that I need to thank for their contribution to the completion of this book. Throughout various steps in the research process, from graduate school and beyond, funding was provided by the McCroskey Memorial Fund at the University of Tennessee and the Government of Canada. Numerous people were instrumental in the collection of data, including archival librarians, manufacturing plant managers, and trade show workers. Specifically, I would like to thank Linda Skolarus at the Benson Ford Research Center, Simone Munson and Lee Grady with the McCormick-International Harvester Archives at the Wisconsin Historical Society, and the staff of the Wellington Reading Room at the University of Guelph Libraries. Among the tour guides that assisted in my research were Ron Kleinsasser at CNHs facility in Saskatoon, Saskatchewan and John Daniels at CNHs plant in Dublin, Georgia. Additionally, I would like to thank people like Gary Hamilton at AGCO and Leo Bose at CNH for the time they took to talk to me and answer by questions. Ialso owe a debt of gratitude to Dani Johnson in the Departments of History & Geography and Philosophy & Religion at Missouri Western State University for completing final checks of the table of contents and index of this volume. My academic mentors were also crucial to all of my successes. The faculty in the Department of Geography and Regional Planning at Indiana University of Pennsylvania were the ones that first convinced me that geography was the academic path for me. Especially, among that group, I would like to thank John Benhart, who not only provided thoughtful feedback for this volume, but also made me believe that I could survive and thrive, in graduate school. Also important were my dissertation committee members at the University of Tennessee. In addition to Bruce Ralston and Anne Smith, I would also like to thank my major professor, Ron Kalafsky. His guidance and support were crucial to the completion of both my Masters degree and my PhD. Perhaps even more important was the fact that Ron did not think I was crazy when I pitched a half-

xx ACKNOWLEDGMENTS

baked idea to research the farm machinery industry at my first advising meeting. Finally, I need to thank one other committee member, Tom Bell, for all his support and help in this and many other projects. Toms edits and comments on numerous manuscript drafts have always been welcome and helpful. I also need to thank my friends for all the support they have provided to me over the years. I would especially like to thank my closest friends, Gary and Melissa Fehnel, and their children. They all have always been a huge support financially and morally. The time I have spent on the farm has been educational and stimulated some of my greatest research projects. Without them, I do not know where I would be. Finally, and most importantly, I must thank my parents for all their love and support through the years. If my mother had never told my father to get a hobby and he had not decided that collecting antique tractors would be that hobby, my life would be very different today.

CHAPTER 1

Introduction
1.1 What is the Farm Machinery Industry?
There are many ways to define the farm machinery industry. The North American Industrial Classification System (NAICS) defines it broadly as any firm that primarily produces equipment for use in commercial agriculture. This equipment includes everything from self- propelled machines such as tractors, combines, sprayers, and windrowers (Figure1.1) to implements such as mowers (but not the lawn-and- garden type), balers, and tillage equipment (Figure 1.2). It also includes agriculturally related items such as milking machines, feed grinders, and grain delivery systems (Figure 1.3).1 Over 2,000 firms worldwide and more than 1,000 in the United States fit this definition. They range from multimillion dollar full-line manufacturers to small operations that produce a few custom pieces per year. While some companies build a wide variety of products, which would allow consumers to purchase all their farm machinery from the same manufacturer, others choose to focus on a few core competencies and offer a more limited product line. The differences between general manufacturers, also known as full-line manufacturers, and those that are more specialized (short-line manufacturers) are explained in Chapter 2. To understand the farm machinery industry in the United States and internationally, it is critical to understand the firms involved and their major products, which is the focus of Chapter 3. In 2012, U.S. farm machinery manufacturers generated $35.4 billion of revenues, an increase of a little over 1% from the previous year.2 Increases in revenues and profits were driven by increased demand for crops exceeding current supply, including those grown for ethanol and biodiesel production. Record high crop prices leading to increased profits for the industrys key marketU.S. farmersalso drove the industry. Almost 70% of sales of U.S.-produced farm machinery stayed within the

A PROFILE OF THE FARM MACHINERY INDUSTRY

Figure 1.1. Types of self-propelled farm machinery on display at a trade show. Clockwise from the top left, New Holland tractor, Versatile combine, MacDon rotary disc mower, and Apache sprayer.

Figure 1.2. Implements manufactured by the farm machinery industry on display at trade shows. Clockwise from the top left, Great Plains planter, Vermeer round baler, John Deere air seeder, and Sunower disc.

 Introduction 3

Figure 1.3. Other types of farm machinery on display at trade shows. Clockwise from the top left, Kinze grain cart, Reinke irrigation system, Willmar dry fertilizer spreader, and Kuhn feed mixer.

North American market as farmers spent a portion of their net income updating the technology level on their farms, in an effort to reduce workload and increase profits in the future. Farm machinery is part of the mature manufacturing economy of many developed nations around the world and is an increasing part of the manufacturing economy of developing nations as well. It is an industry that today experiences few major technological shifts. Patents are more likely to be filed for minor adjustments to existing designs than for radical new designs. In many cases, product differentiation between brands is minimal and companies compete with one another based on measures like efficiency and customer service. The majority of the largest firms in the sector are European and North American companies, which have long histories in the industry dating back to the days of horse-drawn

A PROFILE OF THE FARM MACHINERY INDUSTRY

implements. Successful new entrants have established themselves as competitors not only in the developed world markets of Europe and North America, but as affordable alternatives compared to the expensive products marketed by the largest firms. These more affordable options are mainly targeted to small farmers in Asia and Africa. This trend has led to a decrease in market share for European and North American firms while companies from Asia continue to gain new customers. Among the farm machinery companies based in the United States, there is a great diversity in size and focus. The U.S. farm machinery industry includes the largest firms in the world in this category: three full-line manufacturers, such as John Deere, which build the iconic machines that people are most likely to identify as a part of the industry. It also includes small firms, such as Kinze, which maintain operations for goods exported all around the world from a single factory. Kinze, and companies like it, can remain small but successful by focusing on a few core competencies that make it the leader in a single division of the farm machinery industry. All of these companies, large or small, coexist in an industry that is designed to help farmers feed a growing world population.

1.2 Why Does the Farm Machinery Industry Matter?

The simple answer to why the farm machinery industry matters is that most humans like to eat. As the world population continues to grow and the proportion of the workforce engaged in agriculture continues to decline, there is going to be an increasing need to use mechanized agricultural practices, specifically using the equipment built by the firms in this sector, to produce and manage higher yields on the same, or even less, farmland. Not only is the population increasing, but so is the demand for crops. Changes in income levels in parts of the world, such as China and India, led to more demand for agricultural commodities to feed both people and livestock. As the worldwide demand for animal protein increases, so does the need to grow crops used as feedstock. Currently the world agricultural community is able to meet that demand, but the demand is still growing. The 2012 Global Agricultural Productivity Report, published by the Global Harvest Initiative, clearly states that in order to meet

 Introduction 5

the food demand of Earth in the near future, all regions must increase agricultural productivity through science- and information-based technologies.3 The use of these new technologies will have impacts on the farm machinery industry. In fact, many new technologies cannot be implemented without the use of mechanized agriculture. Among science-based technologies are new hybrid seeds that generate thicker stalks and stems. This increased biomass has to be cut and plowed under, which requires more engine torque and horsepower from harvesting and tillage equipment. Increases in vertical tillage of tough crop residues demands tractors that can maintain high speeds even under heavy loads. The trend for farms in the developed world to increase in acreage, but decrease in labor inputs means that farmers must streamline field preparations pulling multiple implements in tandem across the field in order to limit individual trips (Figure 1.4). Pulling more and larger implements demands high-horsepower farm machinery. New information-based technologies in the form of computers and global positioning systems (GPS) installed on mechanized farm machinery, help farmers better apply inputs to reduce wastes and increase yields. Additionally, specialized tools built by the farm machinery industry help farmers around the world manage crops such as grapes, groundnuts, and fruits and vegetables more quickly and efficiently. All of these technological

Figure 1.4. A high-horsepower articulated tractor completes preparation of a new seedbed by moving both a disc and a cultipacker across the eld at the same time, limiting the number of trips and allowing a smaller agricultural workforce to manage more land and higher yields.

A PROFILE OF THE FARM MACHINERY INDUSTRY

advances allow fewer farmers to manage more acres and feed a growing world population. The trend to increase productivity in agriculture through the use of new farm machinery is apparent to the industry. Farm machinery manufacturers, such as Case New Holland, have made it a key part of their marketing strategies with slogans like, Be Ready. In their advertising, companies target farmers facing workforce shortages, desiring to carve out a larger place in the global economy through commodity sales, or both (Figure 1.5). Without new technology and products, produced by the farm machinery industry, used in combination with new strains of hybrid seeds, a variety of synthetic fertilizers, herbicides, and pesticides, and the most up-to-date information technology, Earth would be at serious risk of not being able to feed itself given the current land area and climate restrictions.4

Figure 1.5. Signage used in Case New Hollands display area, at a trade show, marketing equipment to help feed the worlds growing population using a variation on its slogan Be Ready.