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Machinery Pete: Bright days ahead

Our nation's future?

It can certainly seem all doom and gloom these days. The folks in Washington aren't helping matters. Serious problems abound, yet nothing constructive happens. Bickering. Posturing. Gridlock. What became of the common good? What became of talking to each other, of working together?

But I see hope.

Where? In our nation's young people.

I see how hard they work. Back in the early '80s when I was in high school? Seemed no one had any homework. Today? I've seen our two daughters and their friends doing two to three hours plus of homework. Every night. AP and IB classes. Classes for college credit. All there and good kids are taking advantage of the opportunities.

I've also noticed how kids today work collaboratively. I think this is good. Seems to me my generation and preceding ones were more into going it alone when it came to school, studying and work. Kids today reach out for the answers and resources they need. Social media is helping.

Last week, two high school kids reached out to Machinery Pete.

I received two emails, one from a high school junior in Iowa working on a class project, the other from a high school senior in Missouri looking for advice on how to buy his first tractor. I had very good email exchanges with each young lad. They both agreed to let me share our correspondence here. So here you go, the questions posed by our young friends, followed by my replies:

Dear Greg Peterson,

My name is Andrew Langel. I am a senior at Kingsley-Pierson High School in Kingsley, IA. We are doing a project called a research paper and we have to contact professionals in certain fields to give us some information on a subject of our choice. I chose Ag Marketing. I was hoping you could give me some information on equipment prices. Why is used equipment worth more now than it was when it was new? Would you advise new young farmers to buy good used equipment or new equipment that will last but cost a little more? If you could answer these questions it would be much appreciated.

Thank You, Greg,

Andrew Langel

Pete's reply:

Andrew,

Thanks for your note. Glad to help. I have a daughter that is a H.S. junior myself so I know about all these big projects, good stuff. I think you have selected a most interesting topic.

There are a lot of folks trying to figure out right now why & how used farm equipment is worth as much or more now that it was new or used years ago. I have spoken with (3) financial analyst on Wall Street in the past month and each of them asked same question as you just did. I think there are a couple forces at work that have caused our present situation:

* SUPPLY & DEMAND
The "supply" of used farm equipment in good condition is at an all-time low right now in my 20 years of tracking the used equipment market. Let's start at the top. Equipment Mfg's (Deere, CaseIH, Agco..) used to make new equipment and send it out to dealers. New combines, tractors, balers would sit on the lot waiting to be sold. Not now. New tighter manufacturing processes designed to maximize efficiency (stockholder's DEMAND efficiency & tight production control) took hold and now basically if you want a new combine, tractor or planter it's YOU BUY IT THEN WE'LL BUILD IT. This pretty much a game changer. So just as this new reality was setting in what happened? Price of steel shoots up back in mid 2004. So immediate price increases in all types of new farm equipment. Customer (farmer) gets conditioned to rising price of new. New prices continue to inch up until we hit Nov. 2007. What happens? Commodity prices surge wildly higher. So then what happens? A torrent of pent up buyer demand is unleashed from farmers. Folks who for years have put off the purchase of a new tractor, combine, planter now have increased $$ in pocket and are ready to spend. But now have to buy and wait 4, 6, 9 months for delivery of new product. So ok, they may decide to opt for a nice 2, 3, 5-year old used tractor, combine or planter. But not as many were made & sold over last 5 years. Not as many on dealer lots (and fewer implement dealers around too by the way due to fast consolidation...pushed by Mfg's). So alright, those would be buyers
turn to auctions. Guess what? # of machinery auctions has dropped like a rock over last few years (see attached Powerpoint slides).

Add this all up and here's what you get: more willing buyers chasing less available New & Used farm equipment. A perfect recipe for RISING used equipment values.

I have attached a Powerpoint slide presentation from a speech I just
gave on Tuesday (Feb. 16th) in St. Louis at the "Farmers for the
Future" conference. I think you may find some helpful info in the
slides.

Please, any questions just let me know. Happy to help if I can. Best
of luck on your project......I think you're headed for an A+ :-)

Greg
Machinery Pete
800-381-0423
www.machinerypete.com

I realized in my reply I didn't respond to the second part of Andrew's question: "Would you advise young farmers to buy good used or new equipment that will last but cost a little more?"

That Andrew, is a really, really good question. In fact in my conversations I've had with farmers looking for equipment over the last year and a half or so, quite often we come around to the realization that with the very high prices the best used equipment is fetching, buying new could well be the more prudent play.

Here's the next email I received, from 18-year old James Tucker from southwest Missouri:

Pete,

I'm an 18 year old kid from Southwest Missouri -- could use your insight. I watch your segments on the Machinery Show and I really enjoy hearing about the latest trends and prices in the equipment auction world.

Don't want to take up a lot of your time. I am trying to find a 4050, 4250, 4450, 4055, 4255, 4455 with cab, MFWD, and a Power shift that has fewer than 6,000 hours on it and has been taken excellent care of. I know the obvious places to look are websites like tractorhouse, fastline, usfarmer, machinefinder, ironsearch, equipment locator, agdealer, an all the rest, and I HAVE LOOKED, but I am really looking to buy from an OWNER and not a dealer, as I am looking to get a great deal and eliminate the middle man. Every once in a while a private seller comes up on those previously listed websites but I am in a bit of a time pinch to get a unit before spring. My price range is $30K or less but would go up to $35K if that's what it was worth.

I am contacting you, Greg, because I believed you may be able to point me in the right direction. I am just an 18 year old farm kid who is trying to make the right decision. My dad is getting older and the power shift is a good option for minimal clutching. You see a lot of country and a lot of tractors and I am just trying to get a good deal. I figured you may have a few good contacts or some better places to look just off the top of your head. I take a tremendous amount of pride in the care I take of my equipment. We have a 7810 with 3,700 hours and it is a beautiful machine. I wax it twice a year, as well as our 946 mo-co and 467 baler. They are all over 8 years old, but they all look and perform as if they just rolled off the line. The tractor would be going to a very caring home. I am finishing up my senior year in high school and I don't really have the time to look on the auction block. We're north of Springfield, MO and the area is the rocky Ozark Mountain plateau so big farming in the immediate vicinity is not exactly booming which puts a heavy limit on the amount of local trading of these type of machines going on.

I can't tell you how much I appreciate your time and I hope the show is going well. Don't rush to get back to me, if you can find time at all I would be very grateful.

James Tucker

Pete's reply:

James,

Thanks for your note & for watching the show! Let me just say, I'm
very impressed with your thorough approach to this task of locating
the tractor you're after, systemic & well thought out. I think this
type of "long range" thinking at your age.....bodes very well for your farming career. I'm sure you'll be very successful.

Ok, as for locating tractors for sale by private sellers. I'd suggest couple avenues. First would be the emerging online auction sites. Nice in that you aren't required to be there, yet still afford a decent opportunity to check out the tractors before the online auction ends. And I would add that from what I've seen, these online auction sites at this point (they're still pretty new) seem to produce sale prices that are a notch LOWER than traditional auctions and definitely 1 to 1 1/2 notches lower than you'd find on dealer lots. The (4) online auction sites you should keep an eye on:


www.bigiron.com (out of Neb., by Stock Auction Co., great guys)
www.purplewave.com (out of KS, rapid growth, coming on fast)
www.ironplanet.com (started in CONST EQ, moving more into ag)
www.ebay.com (can be frustrating with all the "reserve not met" auctions, but potentially a way to save $$)

I would also begin to search the old fashioned way, regional weekly ag newspapers, but use their web sites. Most have "Classifieds" sections, worth checking out. I'll list the regional ag papers I've been checking for years below. I think if you do straight Google searches on each one, you'll quickly see their web site links:


High Plains Journal (KS, up to SD, down to TX, also called Midwest Ag Journal now)
Grass and Grain (KS)
Farm Talk (KS)
Midwest Messenger (NE)
Farm & Ranch Guide (SD, NE, ND, WY, MT)
Farm Forum, sometimes called the "Green Sheet" (SD)
Iowa Farmer Today (IA)
Iowa Farm Bureau Spokesman (2 editions, east/west IA)
Illinois Agri News (IL...very good paper)
Farm World (IN)
The Land (MN)
Agri News (MN)
Wisconsin State Farmer (WI, dairy area, potential softer values now)
Country Today (WI, see above)
Delta Farm Press (south....equipment generally bit cheaper)

Ok, next here's what to do. Go to www.agriculture.com (Successful Farming magazine's web site) and click on "TALK" on top of screen, then click on "MACHINERY MARKETPLACE". You can do a FREE "WTB" (wanted to buy) post here. You'll need to register first, but it's no hassle, free, so worth it. I'd mention as you did in note to me that you're a H.S. kid, 18 years old, looking to buy from private party, etc. May strike a seller out there as kinda cool to sell their tractor to such a committed young farmer.

Let me also do this for you....I'll add a little blurb to my "blog" on Machinerypete.com, mention I just got an email from a young Missouri farmer looking for these model tractors....if anyone out there has one for sale, to drop me an email and I could then give them your email so they can get in touch.

Hope this info helps! Best of luck with your search....keep me posted.

Greg
Machinery Pete
800-381-0423
www.machinerypete.com

Now you see why our young folks give me hope?

Breaking into any career, let alone farming, isn't easy these days. It takes smarts, ingenuity and desire. It needs to come from the heart. You've got to want it. You've got to stay after it. When you don't know you have to reach out for help, for answers.

Like Andrew and James.

Our country's future? I see bright days ahead.


See Pete's auction prices on JD 4250 Tractors >>

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