At the Aug. 26 policy meeting in Jackson Hole, Wyo., Federal Reserve Bank Chairman Jerome Powell spoke about fighting inflation.
“Current high inflation in the United States is the product of strong demand and constrained supply, and the Fed’s tools work principally on aggregate demand,” he said.
The Fed’s responsibility, Powell went on to say, is to achieve price stability: “There is clearly a job to do in moderating demand to better align with supply. We are committed to doing that job.”
Hence the continued raising of interest rates — to create demand destruction.
Listen to Greg Peterson’s Nov. 28 appearance on AgriTalk with Chip Flory:
VALUES ROAR HIGHER
While sectors such as housing and automobiles have seen a drop in demand, we’ve not seen the same in the farm equipment market (new or used). In fact, as our Machinery Pete auction sale price data clearly shows, used farm equipment has only roared higher this year.
I’m not sure I have the adjectives to describe how hot buyer demand continues to be for good, used farm equipment. Sans appropriate adjectives, I’ll offer some recent examples:
- 2021 Massey Ferguson 8735S tractor, 190 hours, sold for $266,000 at a Nov. 9 online farm auction in Newton, Kan. That’s a record-high price for a Massey Ferguson tractor by a whopping $91,000.
- 2014 John Deere 9360R 4WD tractor, 786 hours, sold for $297,000 at a Nov. 7 online farm auction in Hamilton, Ill. That is $47,000 over the previous record price. Oh, and by the way, seven of the nine highest auction prices on 9360Rs have come in the past 11 months
- 2021 Top Air TA1600 sprayer, sold for $92,000 at a Nov. 5 farm auction in Iona, Minn. That’s the highest auction price ever on a pull-type sprayer. The previous high was $75,000 — exactly nine years ago.
- 2008 John Deere 8230 tractor, 702 hours, sold for $212,750 at a Nov. 2 online farm auction in Herington, Kan. That’s a record price by $12,750 and the fourth new high price set on a John Deere 8230 since June.
THE ROAD AHEAD
A factor to watch is if and when farm equipment manufacturers finally increase their supply of new iron. Will it show up all at once? Will there be a bubble of new iron on lots? For manufacturers’ sake we better hope commodity price levels are still strong and remain strong for a good while.
If not, queue up those higher interest rates and say hello to dramatic demand destruction for farm equipment, albeit delayed. Sale anyone?
Check out Episode 51 of the “Machinery Pete” podcast, where Greg discusses when the other shoe will drop for the machinery industry.
Machinery Pete is the most trusted name in farm equipment. Visit MachineryPete.com for free auction sale price data.
