Used ag equipment values bounce back
MOORHEAD -- An auction is a snapshot of how people are feeling, said Greg Peterson, known as Machinery Pete, who has been tracking auction prices on farm and construction equipment since 1989.
MOORHEAD - An auction is a snapshot of how people are feeling, said Greg Peterson, known as Machinery Pete, who has been tracking auction prices on farm and construction equipment since 1989.
And the prices of some used ag equipment dropped significantly from mid-August through October, he said. In that timframe, prices on large, late-model used items such as tractors and combines for grain operations dropped 15 percent to 25 percent.
That’s a loss of $30,000 to $50,000 for people looking to sell, but it could be a bargain for buyers.
“What people are doing is pulling back a little bit and analyzing where these prices are coming in, where the opportunity is,” he said. “That price drop in late summer and the fall – that sealed the opportunity for a lot of people.”
Since then, he said, some of those prices have bounced back a bit, especially after the Senate passed the Tax Extenders Bill which, among other things, restores tax incentives for new and used equipment back to 2013 levels.
Prices were “through the roof” at an Ohio auction the day after the passage, he said.
There are sectors, Peterson said, where the used ag equipment market has remained high. Prices are rising for used livestock equipment.
“That used market is really vibrant right now,” he said.
Equipment in the 10-to-20-year-old range, Peterson said, is still doing well at auctions. Part of the reason is that the cost of new equipment has gone up 4 percent a year for the past decade. The older machines are also simpler, with fewer computerized features, he said, and some farmers will look for a used model that’s been their favorite over the years.
The takeaway message to farmers is to take care of your equipment, he said. “Shed it, keep meticulous records because our data shows that when you do that, at the end of the rainbow, on the other side, the used values will be surprisingly high,” he said. “But you have to take great care of it.”
Peterson, of Rochester, spoke about the changes in the used machinery market at the Clay and Wilkin County Soybean and Corn Growers Association annual meeting earlier this month in Moorhead. Peterson writes a blog on his website, www.machinerypeteprices.com , writes a monthly column for national farm magazines, and he’s active on social media.
He also has a weekly TV show on RFD-TV, a national cable channel aimed at rural America, and regular segments on the news program, AgDay, and weekly radio show, AgriTalk.
Preston Dagen, Clay and Wilkin County Soybean and Corn Growers Association board chairman and the district sales manager for REA Hybrids, said growers were “quite surprised” by how much the value of large, late-model used grain machinery had fallen.
“Information on the value of used equipment was very important from an analysis standpoint,” he said. “When it comes time to valuing your current farm situation, from an equity standpoint, or evaluating your ability to upgrade or expand your equipment, the information Machinery Pete was giving us was vitally important in assessing how to make that decision on a farm.”
Bob Krabbenhoft of Krabbenhoft Seed and Supply in Sabin, attended the meeting and said it was an “eye opener” to see how the used equipment markets are trending.
“It was interesting to see what the numbers were on some of the newer equipment, how it had trended down so much while at the same time the older tractors were actually increasing in value,” he said.
While the change doesn’t affect him directly, Krabbenhoft said, it does affect his customer base.
“With the price of equipment going down, it frees up more money, but then you have to look at the whole economic situation, too, the reason the price of equipment is going down is because farmers aren’t making as much money now and don’t have as much to spend as they did two or three years back,” he said.
The six key factors in high used equipment values, Peterson said, are:
• Years of strong farm income;
• High or rising prices of new equipment;
• Tightly controlled production of new equipment;
• Low numbers of machinery auctions;
• Historically low interest rate levels; and
• Tax incentives for buyers
“People have been asking me for four years now when the bubble is going to burst on high used equipment values,” he said. “My response was, when two of those six flip.”
For grain farmers, Peterson said, the first factor changed when commodity prices fell. Peterson also heard from auction companies that there were more inquiries from farmers about retirement sales.
“When you interject more used equipment for sale at the same time when fewer people are feeling like buying, guess what will happen to the prices,” he said. “They’ll go down.”
Farmers, dealers and manufacturers have also been wondering all year what their tax write-offs would be for used equipment, he said.
“That point No. 6 is bigger than you can imagine in terms of importance,” he said. “Farmers get creamed on taxes, so this became one area where they could minimize taxes with equipment purchases.”