An interesting mix of things are brewing in the current farm equipment market. Here’s what I’m seeing right now:
Used values rose slightly at the end of 2017. See the chart below. My Overall Index rating, which encompasses all types of farm equipment, jumped from 6.5 to 6.7 on my 1 to 10 scale.
Buyer demand for good-condition used farm equipment was strong, despite a very high level of machinery auctions late in 2017.
Search traffic data at MachineryPete.com in late 2017 was up significantly. For example, search traffic for large horsepower tractors was up 67% versus third quarter search traffic. Searches for combines were up 62%, and planter searches were up 106%.
Strong auction sale prices on good-condition machinery held through January 2018.
The president’s Tax Cuts and Jobs Act, which takes effect in 2018, doubled the IRS Section 179 immediate write off limit for purchase of any new or used business asset from $500,000 to $1,000,000.
Price Patterns. As I consider these truths, my mind moves to that happy day when grain prices push higher. When they do, it’s my contention that both used farm equipment values and new farm equipment sales will rocket higher—just like in November 2007.
Auction prices increased beginning Nov. 1, 2017, and held through January 2018. That’s now 13 of the past 15 years used farm equipment values have bolted higher during the fourth quarter. Can anyone say Section 179 motivated buyers?
Stage Is Set. Now consider Congress just doubled the amount you can write off. There’s your box of matches waiting to be struck.
Combine that with the recent jump in search traffic I noted. Many producers have delayed equipment upgrades. But at some point, you need to. This is why we’re seeing the jump in search traffic and competitive bidding on nice used iron at auctions.
So, there’s solid buyer demand. What happens when commodity prices do shoot higher? There’s your can of gasoline sitting next to the aforementioned box of matches. It’s just a question of timing.
Be intentional in your farm equipment purchase decisions. Whenever that match strikes and the gasoline ignites, the farm equipment market could become all about “availability” again. If you’re able, be aggressive in the equipment market now.
If you think used values still could fall, that’s a gamble that could pay off. We’ll see. Know, though, it’s been two years since used values on good-condition equipment leveled off and held steady. You’re betting against that match and gasoline. Good luck.
Greg Peterson is the most trusted name in farm equipment. Since 1989, he has worked with a network of 1,000 auction companies to track used equipment prices. His website, MachineryPete.com, features equipment listings from dealers across the country.