With tight margins upon us, you might not think purchasing equipment is a smart move during this year-end planning season. But Todd Welle, business development leader at Honour Ag, believes otherwise.
Welle joins the Top Producer podcast with host Paul Neiffer to share why continuing to replace your fleet could be a smart move for some operations.
“We see a lot of growers going to auctions and the used market to get that one-to-two-year-old asset, and it’s making sense as interest rates are going down,” Welle explains. “Replacing an asset and bringing more debt to your operation doesn’t seem like the right thing to do, but it’s probably one of the smartest things to do.”
He says there’s a lot of pent-up demand in the marketplace that stems from the high price of equipment over the past few years. However, there’s been a drop in the price of used equipment more recently.
“There was the expectation there was going to be a correction, and the ones who go through these corrections and get some of the good deals will see in two to three years that it was a brilliant move,” Welle says.
Equipment Price Outlook
Welle anticipates the current financial cycle the industry is in to last between 18-24 months - depending on weather, the farm bill, etc. With that trend will come lower production.
“The manufacturers will cut back,” he says. “2025 and 2026 will have lower production and there will be a gap there. It will probably be 2027 before it ramps up again.”
But don’t expect a repeat of what came from the lower production volumes during the pandemic just yet.
“There’s enough inventory out there holding the equiment market together - there wasn’t any inventory two years ago,” Welle says. “Dealers will have some used inventory, and there will be some good deals out there. This won’t be a five-year drought.”
Listen to this episode of the Top Producer podcast to hear more from Welle.
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