Brazil is producing more crops than ever and yet farmers in the agricultural superpower are reining in their spending — bad news for tractor makers.

Revenue from Brazil’s agriculture machinery market is estimated to have shrank 20% in 2023 — the first annual decline since 2016 and the biggest drop in almost a decade, according to industry group Abimaq. And there’s no relief in sight, with the industry group expecting little change in sales this year.

The lack of machinery sales is a blow for the likes of manufacturers Deere & Co. and CNH Industrial NV and shows how farmers are struggling, even as Brazil expanded its market share to overtake the US as the world’s biggest corn exporter. The problem is that the growers produced so much corn and soybeans that prices there plunged, making it harder to pay for expensive tractors at high interest rates.

“That all together frightened farmers,” said Endrigo Dalcin, a Mato Grosso grower who gave up on plans last year to add a new tractor to his fleet. “I didn’t buy any new machines last year and I don’t think I’ll buy anything this year either.”

Brazil, an agricultural powerhouse that dominates in many of the world’s key food crops, was harder hit than other global producers from falling prices for much of 2023. Corn prices in the physical market fell more in top producing state Mato Grosso than they did in Iowa, the biggest producer in the US. Soybeans followed a similar trend.

Things aren’t looking up. Parched fields are hurting crops and prompting growers to hold off selling last season’s harvest until they’re confident of this year’s production.

“They’re just not selling,” said Scott Wine, chief executive officer of CNH. “They don’t want to sell into a market with softer commodity prices — they are just going to wait.”

Farmers who delay crop sales “don’t have as much ready cash to go buy equipment,” he said.

Deere, the world’s biggest seller of farm machinery, sees industry sales of tractors and crop-harvesting combines falling by 10% this year in South America. Industry demand in Brazil weakened much faster than expected in the second half of 2023, executives said in a Nov. 22 earnings call, while retail sales of combines declined about 25% and large tractors were down nearly 10%.

Expectations of lower financing costs on the horizon are also contributing to lackluster machinery sales in Brazil. The country’s interest rates are forecast to fall to around 9% by the end of this year, down from 11.75%. That gives farmers the prospect of financing equipment purchases at lower rates in the medium term.

Equipment inventories are much more burdensome in Brazil than the US, according to Bloomberg Intelligence analyst Chris Ciolino, adding that machinery makers will curb output in response. “It’s an inventory issue in Brazil — they will under-produce the market to bring it down.”