Read in
Your friend, Machinery Pete, here with a public service announcement: Relying on our past experiences through the ups and downs of the ag cycles is incredibly valuable. However, using those experiences to predict how used farm equipment values will behave coming out of a strong up cycle into a slower, tighter time in the ag economy is dangerous, in my opinion.
That’s because the farm equipment industry is fundamentally changing. Here’s how:
1. There are far fewer equipment dealers now.
The old days of small dealerships are gone. The new mega dealers with 20, 30, 50+ locations are capitalized wholly different. When the ag cycle went south in the past, the mass of smaller dealers were forced to sit, hold, hope and wait for better days to sell out from under their excess of large, late-model, used inventory. They couldn’t be proactive and push out the excess used. They’d have been out of business.
Today’s larger mega dealers can be proactive when the market changes, and they were from late summer 2023 through year end. As used inventory finally began to rise in 2023, these larger dealers went into action mode.
There was a staggering 90.8% increase in the number sold at auction in 2023 versus 2022 and a 91.4% increase compared to 2014.
2. There’s been an explosive growth in online auctions since the start of the pandemic.
When you have an auction these days, your pool of potential buyers comes from everywhere.
My jaw hit the floor in late March 2020 when our Machinery Pete auction price data showed something seemingly impossible. Within 10 days of the shutdown, auction prices were rising. There was no reason for the jump, but prices haven’t looked back yet.
| 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 |
|---|---|---|---|---|---|---|---|---|---|
| 645 | 338 | 193 | 317 | 304 | 299 | 442 | 450 | 369 | 337 |
3. Manufacturers have more pricing power.
They’re more capable of holding production to better match demand, and the past couple of years have trained farmer buyers to the “you buy it, then we’ll build it” model. We don’t have to like it, but that’s just the way it is. And likely the way manufacturers will want to keep it. Now, their dealers are more efficiently moving out excess 1-to-3-year-old, late-model, used inventory and pushing forward, helped greatly by the growth and acceptance of online auction buying and selling.
Despite the huge spike in the number of 1-to-3-year-old tractors sold at auction in 2023, record prices still happened. We saw a 2022 John Deere 9RX 640 with 520 hours sell for $661,000 at a late-August auction in Williston, N.D. This has been the highest auction price ever on a modern tractor, so far. Just in 2023, there were 13, 1-to-3-year-old tractors sold for over $500,000 at auction.