Now is the time to be a buyer. You heard me right, 2016.
I’m not one to make bold pronouncements. I report the facts—what our data shows. But when the occasion calls for it, I don’t shy away from making a suggestion.
The last time I made such a bold statement was November 2007. I remember telling farmers if they were even thinking about buying they needed to act immediately. I could see what was coming: A perfect storm for rising used equipment values. Thanks to strong farm income due to higher commodity prices, tightly controlled production of new equipment, rising prices on new equipment, tight availability of good used equipment and a national tax policy in place (Section 179), farmers were in the new and used equipment buying mode.
The perfect storm lasted from late 2007 into spring 2013. Since then, as you well know, the entire ag industry has been recalibrating.
So why am I stepping out now and advising 2016 is the year to be a buyer? It’s a combination of factors,
including what I started to see late in 2015, plus what I see looking ahead.
Let’s focus on the used combine market. There are lots of large late- model used combines sitting on dealer lots. After a soft 2014, our auction data showed used combine values began to find a footing and firm up in 2015. That was until we flipped to the last page on the calendar. Beginning around Dec. 1, 2015, I started to notice softening auction prices, particularly at several wholesale auctions.
Check out the accompanying data table below, showing auction prices on smaller late-model used combines in 2015. Pay particular attention to auctions held in the last six weeks of the year. You’ll notice a decline in sale values. For example, at a Nov. 19, 2015, farm auction in northeast Iowa, a 2011 Case IH 6088 with 776 engine hours sold for $138,500. Eight months earlier, on March 20, an older 2009 model Case IH 6088 with more hours (1,036 engine hours) sold at a nearby southeast Minnesota farm auction for $141,000.
As another comparison, look at the 2012 John Deere S660 with 558 engine hours that sold for $155,000 at a Dec. 9, 2015, consignment auction in southeast Minnesota. On Jan. 29, 2015, a 2012 John Deere S660 with 340 hours sold for $207,500 at a southeast Nebraska farm auction.
As you can see, combine values were stronger in early 2015 but started to soften as the year went on.
Part of the decline in values is due to the significant increase in the number of machinery auctions. In October 2015, the number of machinery auctions increased 48% versus October 2014. The first three weeks of December 2015 saw a 37% jump. This year is tracking to be busier as well.
I also found telling statistics from MachineryPete.com about used equipment for sale by dealers. There are nearly 90,000 pieces of equipment to view on our website, which is updated daily. As traffic to our new website was ramping up this past fall, we did see a 9% to 11% drop in the number of searches for combines beginning the third week of November 2015. That coincides almost exactly with when wholesale auction prices on combines began to weaken.
Which brings me to my point: Now is the perfect time to buy. Slowly but steadily, dealers have started to move used inventory. The trap lies in thinking there will always be plenty of late- model used inventory on dealer lots.
Think for a moment about how new equipment sales have slowed during the past few years. Let’s say 2016 is going to be a slower year for new sales as well. Now look ahead six months, a year, two years, four years and see commodity prices cycling higher and increasing cash flow. At that point, farmers will be in the market for a really nice one-, two- or three-year-old used combine, tractor, you name it, with low hours. But guess what ... to quote our friend Yoda: “Much harder to find then they will be.”
The time to be a buyer is now.
If you’re in the market for used equipment, check out the all-new Machinery Pete marketplace. To shop for used machines from across the country, visit www.MachineryPete.com