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Machinery Pete: It's a Matter of Context

February 12, 2014
By: Greg Peterson, Machinery Pete

GregPeterson blog2

Any fact in and of itself can be useless, meaningless, confusing, misleading and, I’d go so far as to say, even dangerous. But taken in proper context in the light of trusted, relevant information, facts can be eye opening, enlightening and empowering.

Case in point: Almost daily for the past seven months, I’ve been asked: "So Pete, since commodity prices fell off the second half of 2013 and into January, used machinery values must have finally plummeted too, right?"

This line of thinking seems logical. Commodity prices did fall, and profit margins are definitely more challenged. Now factor in the extended, even historic, run of elevated used farm equipment values dating back to mid-2004, and it’s not hard to understand why so many folks assume used values must be falling.

Before I run with an assumption, no matter how solid it might seem, I like to stop and examine the auction sale prices I’ve been compiling for more than 24 years on equipment sold throughout North America. If we narrow the focus to used tractors of all shapes and sizes, in good condition with a bit of age, then I’m here to tell you that our facts tell a different story.

Values on 10-plus-year-old tractors in good condition are actually going up in value—even in light

of softer commodity prices. Don’t believe me? Check out the table below and see for yourself. Pay particular attention to the year, date and noteworthy columns. As I said, it’s all about context.

If I only had one, two or three examples of high- to record-setting auction prices, then no, it’s not a trend. The data table, though, lists 26 examples of sale prices reaching a new record or at the top end since late July 2013 when commodity prices were on their way down. Orange, blue, red, green—pick your color, the trend holds true across brands. It’s interesting to note that each tractor listed in the table is between nine and 40 years old.

Surely used values dropped a little when the calendar flipped to 2014 and the Section 179 limit for immediate tax write-off on any business asset purchase fell from $500,000 in 2013 to only $25,000 in 2014, right? Nope.

A 2000 New Holland 8670 two-wheel-drive tractor with 1,720 hours sold for $66,000 at a Jan. 15, 2014, farm auction in east-central Illinois. I called auctioneer Bill Kruse the day after the auction. He said they were flooded with calls on that tractor, as far away as Pennsylvania, Wisconsin and Iowa.

A common theme I’ve seen lately is a record smashed or almost broken multiple times in a matter of months. For example, a 1993 New Holland 8670 with 2,168 hours sold for $62,500 at an Aug. 24, 2013, farm auction in northwest Missouri. That was the second highest auction price I’d seen on a New Holland 8670 ... until January 2014, when one sold for $66,000.

The scenario is the same with several John Deere models. The record auction price for a John Deere 4650 stood at $54,500 since March 27, 1997. On March 9, 2013, I saw a 1988 John Deere 4650 with 3,043 hours sell for $59,500 at a farm auction in southwest Minnesota. At the end of March, a tractor of the same model and year with 3,424 hours edged out the record by $500 at a farm auction in south-central Montana.

At a Nov. 20, 2013, farm auction in northwest Nebraska, a 1984 John Deere 4650 with 4,566 hours came close to the high at $58,250.

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FEATURED IN: Farm Journal - Mid-February 2014
RELATED TOPICS: Machinery, Machinery Pete

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