Rising prices for both agricultural products and new home construction have created a surge in off-road machinery equipment manufacturing activity. Farm prices received for soybeans (+56%) and corn (+33%), among other major farm staples, have seen prices rise by double and even triple digits in the last 12-months, according to the U.S. Department of Agriculture. The downstream effects have been significant: feed prices are up 15% or more in the year period ending April 2021 per the Bureau of Labor Statistics. Helping to offset these higher feed prices has been the significant rise in the price of livestock with farm prices received for hogs up 33% over the last year and cattle prices up 18% since last July.

Home construction has seen similarly eye-watering gains. Publicly-traded firms such as D.R. Horton and Pulte have seen revenues soar and profits expand by 50% over the last year. D.R. Horton’s profits of $3.2B in the trailing 12 months (TTM) ending 1Q2021 is double its profits earned at the peak of the housing market just prior to the great recession.

The elevated profitability experienced among farmers and home construction firms alike has been evident in the Gardner Business Index (GBI) data. Among manufacturers supplying the agricultural and off-road construction equipment makers, new orders and production activity have both expanded greatly since reaching the pandemic lows set in the June/July 2020 period.  Conversely, the third quarter through the present has reported two new orders activity surges, with a brief-lived plateau during the fourth quarter. Production, on the other hand, has only been accelerating since July.

New Orders and production activities at manufacturing shops serving the agricultural and construction equipment industry have seen a near "V" shaped recovery since July 2020.

The resulting boom in activity has simultaneously changed the capital spending outlook for manufacturers serving this end-market. According to the April 2021 data collected by the GBI, among the smaller manufacturers in this cohort, capital spending over the next 12 months is expected to be anywhere from 25% to 100% greater than the amount anticipated just before the pandemic. The latest figures further indicate that larger manufacturers responding to our survey intend to increase their capital spending over the coming year by more than double their pre-pandemic amounts. In short, manufacturing opportunities to directly or indirectly serve the agricultural and construction market are ripe for the taking.

Anticipated capital spending by manufacturers over the next 12 months is projected to be significantly higher than in the months immediately before the pandemic. Larger shops account for much of the change in the outlook.