Used equipment values weaken
I have always shied away from too much prognostication. Carnac the Magnificent I’m not, but I do try to read tea leaves for the used farm equipment market.
In late 2007, I wrote, "Folks, if you are at all thinking of buying that good used (fill in the blank), do it now, because used equipment values are about to shoot higher." They did, and values have remained elevated.
Since late 2007 when commodity prices shot higher, we’ve been around all-time highs. Note the end movement on my "Used Value Index," which displays slightly falling used equipment values during second and third quarter 2013.
Values are still strong, just getting a bit weaker. This trend is driven by a softening of values on big ticket late-model used equipment, particularly four-wheel drive and 200+ horsepower tractors. For the first time since 2007, we’re looking at altering the supply and demand chemistry.
Let’s say $4 corn hangs around. Let’s also say Section 179 of the tax code write-off limit for new and used business asset purchases falls to $25,000, as it’s scheduled to do from its high of $500,000. Do you think the "fun" of farming might get lost in 2014 sans the record-profit environment?
Retirement Auctions. Consider the average age of farmers—just over 57. How many farmers have (more like haven’t) retired in the past five years? Why quit when times are good? I’ve been writing the last three years about a 50% plus drop in the number of machinery auctions. It’s hard to find good used equipment, so when it does show up, values are high.
I tread carefully down Carnac trail, but I’m wondering if we could see more machinery auctions come 2015? If so, better buys might be ahead. However, if you’re looking to trade or sell, we’ll see.
Since 1989, Greg Peterson has compiled more than 500,000 auction prices, which he updates at www.machinerypete.com. To read his blog and watch auctions, visit www.agweb.com/machinerypete. E-mail him at email@example.com.