The used equipment market has long been an indicator of the overall health of the ag economy. At the worst of times, record-low auction values saw dime-priced combines turned back to sellers at the depths of the 1980s farm crisis.
MARKET-DRIVEN REVENUE
Now, after the late 2010s were filled with government payments (Market Facilitation Program) and the 2020s started with the COVID-19 economic stimulus, market-driven revenue has expanded after back-to-back South American crop issues and Russia’s invasion of Ukraine. This period of elevated farm income is reflected in record-high values for used farm equipment.
Supply-chain disruptions added to strength in the used farm equipment market, as some growers decided to avoid having to wait on parts to fix a grain cart tractor by adding another grain cart tractor to the fleet.
But that would not have happened if farm revenue was not supported by elevated grain prices.
LONG-IRON, SHORT-TAXES
A long-held belief is that it’s best to be “long-iron and short-taxes.” Rather than write a tax check, many growers are willing to increase business expenses by adding equipment. That’s likely to limit downside risk in the used equipment market through the end of the year.
In 2023 and beyond, used equipment demand and prices will be driven by availability of new equipment, prices of new equipment and, of course, farm revenue.
MORE CORN IN 2023?
Corn’s lower-than-expected Sept. 1 stocks, sub-trend-line corn yield, supply uncertainty from Ukraine and weather risks to South American corn crops are upping the need for increased corn plantings in 2023. Potential record-high costs of production will limit the expansion of corn acres, but another year for strong per-acre corn revenue seems likely.
Many ag economists argue the generally tight global supplies of corn expected at the end of the 2022/23 marketing year means it will take back-to-back “big crop years” before corn revenue sees a significant downturn. That suggests another strong revenue opportunity for the 2024 corn crop.
NO EXTRA SOYBEAN BUSHELS
A poor finish to the 2022 soybean crop trimmed yields and erased “extra bushels” in the bigger-than-expected Sept. 1 soybean stocks. Uncertainty about China’s appetite for U.S. soybeans is the major unknown, but that is at least partially offset by increased domestic crush demand.
This fall, the soybean market is not bidding aggressively for 2023 acres, but a production hiccup in South America would get November 2023 soybean futures back to levels to compete for available acres.
As with corn, it might take back-to-back “big crop years” before soybean revenue sees a significant downturn.
