After a six-month slump in auction prices for large late-model used farm machinery, I could hardly wait for an early November retirement auction in Springville, Iowa. The sale by Hoge Auctioneering featured a beautiful line of late-model farm equipment, all of which was in exceedingly good condition.
I was particularly interested in this auction for one reason: timing. While auction prices for large late-model tractors and combines had been a bit sluggish, prices for all types of equipment with a bit of age but in good condition were holding steady, even inching up a bit.
When November rolled around, along came several competing forces in the used farm equipment market:
- Auction prices have gone up in the fourth quarter for the past 11 years.
- There is an uncertain future for Section 179 of the tax code, which allows for immediate write-off of a business asset (new or used) purchase. For 2013, the limit is $500,000, but that number is set to drop to $25,000 for 2014.
- The reality of $4 corn sank in.
- More auctions than usual are slated for the last two months of 2013.
Among the lineup of late-model equipment at the Springville, Iowa, retirement auction was a J&M grain cart that sold for $22,500, the fourth-highest price ever.
While the first two points seem to point to strong-to-increasing auction sale prices in late 2013, the last two points could deal a blow to used farm equipment values. What effect would these forces have on the east-central Iowa auction? When the sale came to an end, five new record-high auction sale prices had been set, in addition to several other near record-breaking prices.
The 2011 John Deere 9570 STS combine with 188 engine hours sold for $207,000, the highest auction sale price I’ve seen to date. It beat out a 2011 model with 209 engine hours that sold for $203,000 at a Dec. 28, 2012, farm auction in west-central Illinois. Note the timing of that sale—once again, the powerful year-end tax mindset was at play.
Also claiming the top spot was the 2010 John Deere 8245R front-wheel assist tractor with 564 hours that sold for $168,500.
Ah, the power of the tax write-off. Since the first Bush tax cuts of 2002, farmers have made last-minute tax deductions to offset strong income. Faced with the possible decimation of the lofty Section 179 write-off, farmers voted with their checkbooks on this and other November 2013 auctions.
Also of interest at the Springville, Iowa, auction was a nifty restored 1972 John Deere 4320 tractor with 7,000 hours. Auctioneer Andy Hoge told me they got more phone calls leading up to the sale on the 41-year-old tractor than any other piece of equipment listed on the sale bill. It sold for $31,250, a new record-high auction sale price on a 4320.
Interestingly enough, that record price only lasted an hour. At a Davenport, Iowa, collector auction by Mecum Auctions, a restored 1972 John Deere 4320 tractor with 6,800 hours sold for $38,000. This same auction also had a 1974 International 1568 with 2,600 hours sell for $41,500 (a new record), a 1972 John Deere 4000 diesel with 5,400 hours sell for $36,000 (second-highest price ever) and a pair of International 1206 tractors sell for $24,500 and $29,000.
While $4 corn stinks for the grain farmer, it doesn’t appear to be impacting used equipment values yet.
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