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Grain wagon bids defy gravity

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Wall Street analysts have been calling, wanting my opinion on the current state of the used farm and construction equipment markets. I suppose they are looking for insights into what's happening with used equipment values, and they are hoping the information can shed some light on conditions for new equipment sales in the months ahead.

I'm always happy to visit with Wall Street. During the last conference call, I rolled out something new, my Machinery Pete Used Equipment Price Index. I broke the used farm equipment market down into segments and then assigned a 1 to 10 rating to each market segment, with 10 being the strongest or highest used equipment values.

My rankings were, of course, based on all the auction sale price data I've been compiling for the past 21 years. For the initial index ratings, I focused on the second quarter of 2010.

So, for example, the used hay equipment segment got a score of 5.5, up a bit from 4.0 last year. The last couple years have been tough for cattle and dairy farm operations, and, as such, used hay equipment values suffered. But I began to see auction sale prices on used hay equipment strengthening in late spring 2010, hence the bump from 4.0 to 5.5.

If It Hauls Grain, It's Hot At Auction

The hottest segment the past couple years and still today are used grain trailers, grain carts, and gravity wagons.

From November 2007 through 2008 and on into early 2009, I had this market segment at a rating of 9.5. Auction sale prices were through the roof!

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Prices cooled just a smidge in spring 2010, so on that conference call last summer, I pegged this used grain/trailers/grain carts/gravity wagons segment with a rating of 8.7. Still exceptionally strong used values.

Isolate down to just gravity wagons and I can show you what I'm talking about. First, look at the data table of auction sale prices on J&M 385 gravity wagons (below). Note the Date Sold column. Basically this is a time machine walking back over the past decade looking at what used J&M 385 gravity wagons were worth at particular points in time.

Focus on a pair of J&M 385 wagons. See how back in March 2002 the 1998 Model 385 in excellent condition sold for $3,900 on the auction in northwest Ohio. Now zoom to November 2008 and look at what the 1999 Model 385, also in excellent condition, sold for on the auction in northeast Iowa. $6,000!

Look again at the data table. See how from 2002 to 2006 auction prices were in the $2,500 to $3,700 range. But from 2007 to 2009, sale prices surged to between $4,500 and $8,000 with six J&M 385 gravity wagons selling for $6,000 or greater. Those are some very healthy bids for equipment that has as much as a decade of use on its wheels.

The exact same trend is showing up with all other manufacturer and models of gravity wagons; they are older but worth more money.

Look at the data table on the previous page for a sampling of what some large-capacity gravity wagons have sold for going back to January 2009.

What about the future? I'm looking for continued strong used values on gravity wagons, just maybe not quite as red hot as those in 2008-2009.

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