Machinery Pete: Spring Brings Buying Opportunities

January 6, 2016 02:29 AM
 
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It’s back to the old days. At least, that’s where it appears we are headed with machinery auctions. 

After a lengthy stretch of historically low numbers of auctions back to 2007, Machinery Pete auction data show times are changing. 

The table below shows machinery auctions have climbed since mid-2015.

The nearly 50% jump in machinery auctions year over year during October 2015 was eye-opening. The increase in machinery auction activity was evident in the free, searchable “Auction Calendar” database at machinerypete.com. In October, we often had well over 4,000 pieces of equipment listed from the 1,000-plus auction firms in our network.
    
Wow! All The Upcoming Sales. The big jump in machinery auctions isn’t a surprise. In late spring 2013, as corn and soybean prices dropped sharply, I wondered how long it would take older farmers to begin to retire and sell their iron. My guess back then was two years. 

Bingo. Understand the forces at work. The average American farmer is approaching 60 years old. These producers survived the 1980s and other ups and downs, then they enjoyed the best profits of their careers from 2007 into early 2013. 

As humans we collectively overvalue the recent past; what’s closest in our rearview mirrors. When commodity prices fell in spring 2013, farmers thought, “It will probably get better, and $7 corn will be back.”

Only it didn’t. Minus the strong profits, farming wasn’t quite as fun. Come mid-2015, we saw more older farmers hang ‘em up. You wouldn’t believe the number of calls and emails I got late in the year from folks thinking of retiring. Many had quite a few late-model items. 

That’s the kicker. Many of these retirement or estate-sale farm auctions feature a lot of large late-model used farm equipment. Why would they buy all that new big stuff when they were so close to calling it a day? One reason is tax write-offs.

Now the question is: How will the big rise in machinery auctions affect used equipment values? Our sale data did not show a softening through November 2015. Yet as I wrote this column, we were diving into the busier auction months of December through April.

The continued high price of new farm equipment still tends to pull up the value of good used equipment, particularly used equipment 10 or more years old that’s in really nice condition.

Await Price Dip. Here’s one actionable bit of truth: From the 1990s until 2005, there was a much higher level of machinery auction activity, like we’re seeing today. Prices tended to weaken come March 10 or so, on through the summer and into early fall. 

The last three weeks of March and early April tend to be a super busy time for auctions. It will be a good time to be a buyer again in 2016, I think. 

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In the market for used equipment? Check out the all-new Machinery Pete marketplace. Shop for used machines from across the country and search more than 85,000 listings for free, using innovative tools for farmers and dealers. Visit machinerypete.com.

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