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Used premiums have gone up

GREG PETERSON 12/05/2012 @ 1:00pm Greg Peterson writes "Machinery Pete" column for Successful Farming magazine and appears on the Machinery Show on RFD-TV, talking about trends in the used equipment market

The premium has always been there, it's just bigger now. I'm talking about the premium that buyers have been and are willing to pay for the very nicest condition used farm equipment available for sale at auction.

Generally speaking, farm income levels have had a good run the last few years, so that obviously plays a huge part. But just as important are the relative scarcity of auctions and the ever-rising prices of new farm equipment. That's the perfect recipe for rising used values on the good stuff.

The last few years, as I've compiled auction sale price data from all over North America on all types of used equipment, new record-high auction sale prices are being set on a monthly basis. Check out the data table at left that shows recent auction sale prices on very nice-condition 160-hp. to 180-hp. tractors. You'll find that there are 16 record-high sale prices in the list.

Tip of the iceberg

Sometimes it's surprising how much the old-record auction sale prices are being eclipsed. Two good examples stand out.

• A 2004 John Deere model 8120 tractor with 1,033 hours sold for $138,000 on a March 31, 2012, farm retirement auction in northeast Iowa. That $138,000 was $29,000 higher than the prior record sale price, which was a 2005 John Deere 8120 with 1,020 hours that sold for $109,000 (then a record price) on a March 15, 2011, auction in west-central Illinois.

• A 1996 Case IH 7230 tractor with 1,220 hours sold on a September 3, 2012, auction in southeast Minnesota for $95,000. That represents a full $27,000 above the previous high auction sale price I'd seen on a Case IH 7230, which was $68,000 for a 1996 model with 1,600 hours that sold on a November 17, 2007, auction in Iowa.

Drought has little effect

Notice the sale date on that Case IH 7230 that sold for $95,000. It was September 3 – the end of the summer of the drought of 2012.

Granted, southern and central Minnesota fared much better than other parts of the country in terms of having more rainfall and a good crop. But I noticed a definite trend beginning in mid-August 2012.

It was a trend of sharply rising auction prices – even from severe drought areas. The trend carried right through September and into mid-October.

Take a look at the second item listed in the table, the 1985 Allis Chalmers 8070 tractor with 3,600 hours that sold for $34,500. Note when and where that Allis Chalmers 8070 tractor sold: September 7, 2012, in east-central Missouri. Pretty deep color of red on the drought map in that part of the country, and still a new record-high auction sale price was set.

Another example is the 1980 Deere 4640 with 4,996 hours that sold for a new record-high price of $36,000 on a December 3, 2011, auction in northwest Illinois. This was a one-owner tractor. Auctioneer Dale Jones emailed me the week leading up to sale day about the 4640 and said, “Pete, you wouldn't believe how many calls we're getting.”

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