Machinery Pete: Appreciate a Tractor’s Age

What happened with used farm equipment values in 2017?

To answer that question, we’re going to look at auction price data on the John Deere 4440 tractor. The iconic 130 hp tractor was made from 1978 to 1982. It’s hard to believe, but that model is 35 to 40 years old. Now I feel old.

In 2017, the average auction price on John Deere 4440s was $17,254. That was down 6.3% from the prior year’s average auction price of $18,410. In 2016, the average auction price on John Deere 4440s fell 7.4% which was preceded by a 6.4% drop in the average auction price in 2015. As you can see, John Deere 4440 values have been steadily decreasing since 2014.

Now, you might say, “Of course, John Deere 4440 values have been dropping, Pete—all tractor models depreciate in value as they age.”

Well, you’re wrong. The auction price data I’ve been compiling now for more than 28 years proves my point. In fact, from 2004 through 2014, a span of 11 calendar years, the average auction price on John Deere 4440 tractors remained remarkably steady—in the $19,181 to $21,550 range 10 out of 11 of those years.

But since 2014, the average auction price has been dropping each year. Of course, this coincides with commodity prices dropping sharply from their lofty levels in spring 2013.

One of the key drivers of the decreasing value of John Deere 4440s has been the sharp increase in the number up for sale at auctions during the past few years. In 2015, the number of John Deere 4440s that sold at auction increased 32.3%, followed by a 37.2% increase in 2016. We saw more John Deere 4440s on the auction block in 2017 as well.

Economic theory 101 is at work: An increase in supply results in falling demand.

However, that theory is only true to a point. As commodity prices continue to struggle, buyer demand for used equipment in tip-top condition has actually ramped up. It makes sense if you think about it. Sales of new equipment have understandably slowed, which has shifted more buyer demand to the used market, with a pointed focus on equipment in the best condition.

Hence the five John Deere 4440s you see in the table below that sold for $30,000 or more at auction in 2017. Receiving the highest price at $37,000 was a 1982 model with 3,030 original, one-owner hours that sold at a Dec. 8 consignment auction in northeast Missouri hosted by Ed’s Machinery (www.edsmachinery.com).

It’s also interesting to note from December 2016 to March 2017, we saw a 20% uptick in searches for John Deere 4440s for sale by dealers across the country at MachineryPete.com.

Note the wide spread in geography of the top 20 auction prices on John Deere 4440s sold without loaders in the table below, from Washington to Kentucky to Pennsylvania. Again, the simple truth is the competition for buyers to acquire used John Deere 4440s in the very best condition and with low hours can be intense. I see this trend across all types of used equipment, which folks find especially surprising when it comes to large, late-model used equipment.

For example a 2016 John Deere DB66 36R-22 planter with 7,000 acres sold for $224,000 on a Dec. 29, 2017, farm auction in northeast South Dakota, a sale hosted by the Steffes Group (www.steffesgroup.com). A quick peek at planters for sale on our Machinery Pete website turns up a 2016 John Deere DB66 36R-22 available at Valley Plains Equipment in Jamestown, N.D., for $232,500. There is a very narrow price gap between the “hard cash” auction price and the dealer advertised price.

When times are tough, emphasis shifts to used.

Back to John Deere 4440s. In researching this column, I dusted off a stack of old “F.A.C.T. Reports,” auction price books I began publishing in November 1989. The internet wasn’t a thing back then, let alone social media or cellphones. All our phones had cords into the wall. Anyway, in my first full year of compiling auction data, 1990, John Deere 4440 tractors sold for an average price of $22,071, with a high price of $29,800 and a low price of $16,500.

Twenty seven years ago, not a single John Deere 4440 brought $30,000 or higher at auction. In 2017, a down year by 6.3% from the average price, five sold for $30,000 or more.

I’d say John Deere 4440s are aging pretty darn well.