Agriculture and construction equipment demand cycle

“Looking ahead to 2025, we expect continued contraction of ag markets globally to result in ag and turf equipment demand at or below trough levels.”

“Additionally, construction and forestry market demand is expected to be down as healthy end markets are offset by continued uncertainty in equipment purchases.”

“We expect industry sales of large ag equipment in the US and Canada to decline approximately 30% as demand further moderates amid weak farm fundamentals, high interest rates, elevated used inventory levels, and short-term farmer concerns heading into next year's growing season.”

“Within South America, we anticipate industry sales of tractors and combines to be roughly flat as headwinds from 2024 stabilize.”

“Industry sales for earthmoving equipment in the US and Canada are expected to be down around 10%, while compact construction equipment in the US and Canada is expected to be down 5%.”

“Additional headwinds from historically low levels of earthmoving rental re-fleeting and somewhat elevated used inventories will further pressure equipment sales as market uncertainty persists into the start of fiscal 2025.”

“Global forestry markets are expected to be flat to down 5% as challenged global markets stabilize at low demand levels in 2025.”

“Given the inventory reductions we've achieved, we expect to produce in line with retail demand in North America in 2025.”

“We're encouraged by the progress we've made on this front, particularly as industry inventory-to-sales ratios for new equipment are more than double Deere's ratios for both 100 horsepower and above tractors and combines.”

“Despite our proactive inventory management, macro factors continue to be a headwind for equipment demand in 2025, resulting in subdued early order program results.”

“It's worth noting here that our order books for our newest tractor, the high horsepower 9RX, which we introduced last February at Commodity Classic, are currently full through the middle of the fourth quarter, underscoring the value that we're bringing to the market and the importance of continued investment in our core product lines.”

“We've seen significant competitive conversions in this market post our smart industrial redesign, which is focused on supporting the production steps that our customers take over the course of a year in their specific crop types and geography.”

“Many of the new product introductions over the past few years have been tailor-made for solving our Canadian small grains customers' toughest challenges, doing so at the system level.”

“Our dealers are in a structurally better position today versus previous cycles.”

“Given the additional softening in retail demand that we're anticipating in 2025, we've made the decision to continue to underproduce retail in the first half of next year to ensure inventory levels are appropriately sized to respond to demand changes in the back half of 2025.”

“Important to note that even with this underproduction, we're weathering the demand reduction in the competitive environment better than we have in the past.”

“Said more simply, we expect to deliver higher margins at trough than we did during the previous peak in 2013.”

“Broadly speaking, we're seeing used inventory-to-new sales ratios starting to plateau just above the long-term average.”

“We've seen, as we closed out harvest this year, we saw better-than-expected yields. Obviously, price has been a concern, but we've seen more profitability than was likely expected.”

“The bottom line is you take a late-model used row crop tractor, those products are needed as people expand high-speed planting in the market.”

“Compounded by elevated interest rates and a recently re-fleeted rental industry, there's less near-term appetite for new equipment purchases.”

“On the impact of used market, the used market obviously has had some impact, has seen some erosion of price. Actually, quite interestingly, where that impacts us more is around Cat Financial.”

“There will be a continued normalization, particularly in construction of the pricing environment as availability improves and across the industry as a whole.”

“In addition, we expect that improved availability across the industry will result in the normalization of the pricing environment.”

“In Asia Pacific outside of China, we expect soft economic conditions to continue into 2025. We anticipate China to remain at relatively low levels for the above-10 ton excavator industry.”

“In North America, we expect moderately lower sales to users in 2025 versus last year. Construction spend in North America remains healthy, primarily driven by large multi-year projects and government-related infrastructure investments supported by funding from the IIJA.”

“As we’ve said before, that’s also an attractive option for us because obviously we get some margin benefit from that within Cat Financial over the term of the financing deal. What that does mean, though, and as you saw from the Cat Financial numbers, new business volume is very high - actually, their share is up”

“In North America, overall construction spending remains at healthy levels and infrastructure projects funded by the IIJA continue to be awarded.”

“Customers continue to be responsive to the attractive rates we're offering through Cat Financial.”

“In North America, overall construction spending remains at healthy levels and infrastructure projects funded by the IIJA continue to be awarded.”

“Business activity at Cat Financial remains healthy. Retail credit applications and retail new business volume both grew by 5% versus the prior year.”

“This is the lowest second quarter in over 25 years.”

“used equipment inventory levels remain low and conversion rates remain above historical averages, as customers choose to buy equipment at the end of their lease term.”

“interest rates have stayed higher for longer than people were expecting. So low interest rate deals are very attractive, particularly for retail customers and helps them to make a decision about buying a machine.”

“In addition, used equipment levels remain low and conversion rates remain above historical averages as customers choose to buy equipment at the end of their lease term.”

“Prime Power is a great opportunity for us because it creates services opportunity as we move forward as well.”

“Our customers' financial health remains strong. Past dues were 1.47% in the quarter, down 27 basis points versus the prior year, the lowest third quarter in over 25 years.”

“In North America, overall construction spending remains at healthy levels and infrastructure projects funded by the IIJA continue to be awarded.”

“North America increased 11% over the prior year and was better than we anticipated due to growth in both residential and nonresidential construction.”