If you buy it, we will build it
Got a pair of famous lines from the big screen and the small screen bouncing through my head as I sit here writing this week's column.
First I'm thinking of the phrase Kevin Costner's character Ray Kinsella hears whispered while out in his Iowa corn field in the 1989 baseball movie 'Field of Dreams.' "If you build it, he will come."
When it comes to the current farm equipment market, a slight twist on this famous line is needed: "If you buy it, we will build it."
After getting burned by excess inventory in the '80s and '90s, farm equipment manufacturers have changed their ways. Efficiency is the name of the game today. No more rows and rows of new stuff sitting on dealer lots. If you've priced new equipment the past few years, you know the drill. . . agree to purchase by October 1st and you'll have your new tractor/combine/planter by said future date.
I heard of a recent meeting a manufacturer held with Wall Street analysts on site at one of their production plants. Despite slowing sales of new equipment in the recent quarter, the manufacturer smartly played up how their streamlined manufacturing process would serve the company well through the downturn.
If you buy it, we will build it.
Of course, this recent shift in manufacturing practices has had an effect on the used farm equipment market. A very big effect.
If ag equipment manufacturers are producing fewer new pieces of equipment and producing and delivering them on a "just in time" basis after they have actually been purchased, this means the supply of high quality later-model used equipment available on the market has shrunk compared to years past. By a lot.
While the supply has decreased, demand for quality late-model used equipment has increased the past couple years. Once again, by a lot. Whether it's the skewed supply and demand, high cost of new equipment or simply a couple good years of farm income in 2004-05, there's no doubt about it, used equipment values have been higher since the summer of '04.
This brings to mind Arte Johnson's famous phrase from the classic old TV show 'Laugh In.'
"Interesting, very interesting."
Here's an example of John Deere 455 drills.
$35,500 for a 2002 model 35-foot 455 drill sold in south-central Kansas earlier this year
$33,000 for a 2002 model 35-foot 455 sold late last year in east-central Washington
$27,500 for a 2003 model 35-foot 455 sold in northwest Minnesota last year
Click here to download a PDF with expanded auction price data I've compiled over the last ten years on John Deere 455 drills.
Simply proof that very nice late-model used equipment, such as these drills, attracts a high level of interest from buyers these days. Watch for this trend to continue.
Click here to download a PDF with expanded auction price data on CaseIH 5400 drills.