Bin, machinery makers hit by steel tariff hikes
KINDRED, N.D. — The steel tariff threats and realities have been roiling for four or five months and are starting to come to a head in farm country, where farmers already are watching purchases carefully.
Josh Rauser is operations manager at Superior Grain Equipment Inc., based in Kindred, maker and marketer of steel grain storage bins and grain drying equipment. The company has manufacturing plants in both Kindred and Beresford, S.D.
Superior Grain Equipment, through an entity called Superior Inc., makes grain handling systems, does site design and makes sales. They operate in North Dakota, South Dakota and Montana.
Rauser says steel usage varies significantly year-to-year, with needs varying between commercial and grain demand, but he acknowledges the company is one of the significant players for steel use in the region.
"As soon as the word 'tariff' was muttered, basically steel mills took full advantage of that and created a fairly false sense of demand. At least the prices showed that," Rauser says. "It's come to a head more and more as the months are progressing. ... As of right now, the steel prices are the highest they've ever been, with no return in sight."
Bin companies often use U.S. steel suppliers, in part because of the quality assurances for tempering, galvanizing and gauge standards. Auto makers and others that have increasingly used foreign steel are becoming more competitive users of U.S. steel.
Things could change if the tariffs and tariff threat goes away, or if someone comes up with a better way to produce and price steel.
Rauser and his Superior colleagues calculate they'll deal with steel price increases of 20 to 27 percent. His company had been proactive and bought greater-than-normal steel inventories when price increases were rumored nearly a year ago.
But those inventories will run out, he says, and the company will be back on an even playing field. If crops look good, demand for grain bins could strengthen and the lower-priced inventories would last only two or three months. If the ag market is down, the inventories could last eight or nine months.
A cost-price crunch affects the whole ag market, especially as it relates to steel.
"Never before have I had to compete with a guy selling a tractor, a truck, a building," Rauser says. In times of higher-priced ag commodities, a farmer might be buying two combines, a bin and a shop, all in one season.
"The market isn't there to support that anymore," he says.
In volatile market conditions, with good crops, the bin seller must focus on the value of the bin as a vital marketing tool, as farmers lock in futures markets for profitable market certainties.
Rauser says North Dakota political figures know the struggles in agriculture, so he hasn't yet attempted to be more politically active to affect the tariff issue.
"For us to be political, it's almost a no-win situation," he says. "This stuff always goes in a cycle and it will sort itself out over time. We need to be better stewards of our own business and making sure we can make it work for us, our employees and our customers, versus wasting our time blowing up the political field."
SD, MN, IA markets
Doug Edney, president of Edney Distributing Co. Inc., is based in corporate offices in Huron, S.D. The company has warehouses in Fargo, N.D., Portage, Wis., and Lakeville, Minn. The Edney firm is a wholesale distributor of equipment from 35 manufacturers, providing service to shortline and major full-line equipment dealers, often in geographic zones specific to each manufacturer.
Among others, they develop and service the market for Grasshopper, a zero-turn lawn mower made in Kansas. Those are sold in a territory in Iowa, Minnesota, South Dakota, North Dakota and Wisconsin. On the larger scale, they market Canadian-made Nitro brand manure spreaders, made by Tubeline Manufacturing Ltd. of Ontario, Canada.
Edney says the steel tariff tit-for-tat hasn't affected his business significantly — yet.
Only five of his 35 manufacturers have so far changed prices blaming the steel tariffs or threats of tariffs. (Grasshopper isn't one of them.) Despite reports of 20 percent or greater steel price increases, Edney's only seen price increases of 3 percent to 5 percent on the price of the products.
"I had expected to see more," he says. But he acknowledged he's mystified by price changes that can come into effect because of tariff threats even before they go into effect.
Order of things
Edney noted that the pricing of "equipment in general" has been "flat for three years or more," and that some of the price increases may or may not be steel related.
Several players in the ag equipment manufacturing business declined to be interviewed on the topic of steel prices out of fear.