Prior to the COVID-19 pandemic, auction prices would dip lower in late May and June. That changed post-2020, but Machinery Pete says this normal seasonal dip might be returning.
“Some of the big-ticket items in different categories have backed off from where they were year-end into the early part of the season,” says Machinery Pete.
For example, on June 8 a 2020 John Deere R4045 sprayer with just over 1,700 hours sold for $176,475. Meanwhile, four months ago, a 2018 John Deere R4045 with the same number of hours sold for $187,000.
“Next Man Up” Mentality for Used Machinery
While the seasonal dip is in effect, tractors are starting to revert to pre-2020 prices. The availability of higher quality equipment is starting to dwindle. Farmers are beginning to turn their attention to machinery in decent, not mint, condition.
“If Grade A stuff was selling for fifty grand, for example, and the step below is selling for $40,000, it steps up now and is worth $50,000,” says Casey Seymour, co-host of the “Moving Iron” podcast. “Some of the not-premium stuff is starting to bring higher dollar values because it’s the next man up.”
A 1982 John Deere 4440 with 7,208 hours sold for $32,500. Meanwhile, the average auction price for this tractor model is a record-high $28,839.
“The dollars are finding the really good-condition, dependable equipment that’ll still get the job done,” Machinery Pete says.
The Evolving Strategy for Managing Used Machinery Fleets
When once-new models filter into the used market, it causes older models, usually in the 6- to 10-year-old range, to depreciate in hard-cash value. Due to the high cost of new machinery, some farmers are “going backward” and buying two older machines for the price of one.
“Just give me that slightly older, smaller machine because if I can get it for $82,000, I’ll buy two of those,” Machinery Pete explains.
As farmers face steep auction prices, Seymour believes they may choose alternative routes to buying. He sees a potential future where farmers can rent autonomous machines.
“When autonomous tractors roll out and become a bigger part of industry, that’s an immediate game-changer if you go down that path,” Seymour says.
Machinery Pete compares it to how millennials and Gen Z don’t want to own a vehicle and be in debt.
Listen to the latest “Moving Iron” podcast for more from Machinery Pete and Seymour as they continue to break down the evolving relationship between farmers and their machines.
