Machinery Pete: Used equipment market outlook
It's been a good run.
For the last five years, since mid-2004, used farm equipment values have been on the rise. I've documented the underlying reasons many times in Successful Farming magazine and also here on Agriculture.com. The rising price of new equipment, the availability of new equipment, pent-up buying demand being released, the number of farm auctions becoming much more scarce, the level of good used equipment on implement dealer lots falling.
Wait, I'm I saying used equipment values are about to fall?
Not exactly. Just that conditions may be changing. More question marks beginning to appear. Not so much concrete things at this point, just possible sign posts pointing to the edge coming rising used equipment values.
And those sign posts are?
- Tightening ag credit. I don't monitor the daily goings on of regional ag lenders. But I do talk to a lot of them that have used our Machinerypete.com web site for 10+ years. I think like all lending in general, requirements are simply tightening up. Things still fine, but looking forward, you have to wonder with all the stress in the cattle, dairy and hog industries how things will play out in late 2009 into 2010.
- Weather stress. So wet in large areas of the midwest. How will the extremely late planting affect yields? Looking forward to the next 6-12 months, will folks in these affected areas feel like spending top dollar for used equipment purchases?
- Economics 101. The law of supply and demand. How much pent up buying demand has been satisfied in the last 18-20 months, both on new and used equipment purchases? Quite a lot. Looking forward, is it possible we'll see a higher number of farm auctions in the next 6-12 months? Yes, it is very possible. So potentially fewer buyers chasing more available equipment. You can do the math.
Now I would qualify this by saying there is still a very powerful force working in favor of continued strong used equipment values, the rising price and limited supply of new equipment. Will sales of new equipment remain strong? Will the supply of new equipment remain tightly controlled? If those two factors remain as they are, then there should continue to be a high premium placed on acquiring very good condition used equipment, whether that be a used planter, stalk chopper, combine or tractor.
So basically, just a lot of variables out there right now in the used farm equipment market. Best thing you can do if you plan on buying, selling or trading any used equipment in the coming months? Work hard to stay on top of current, I repeat current, used values. It's a moving target.
It's been a good run.
- It's been a few years now, but the used equipment market may well see a return of regional price differences the second half of 2009, especially considering the very wet areas that faced very late planting dates. Will good used equipment be available for less money in these regions?