Dealer and auction lots remain empty
Neil Messick has come to accept a bad situation.
A year ago, Neil Messick of Messick Equipment was frustrated. The southeastern Pennsylvania dealership was short on everything but good-will ... and even that was beginning to run out.
Messick was not alone. Farmers across the country, desperate to upgrade equipment, found dealer and auction lots empty.
Dealers of all brands were out of machinery and were running low on some parts.
Manufacturers of both agricultural and construction equipment lacked everything from tires to steel components to computer chips.
A year later, the situation isn’t any better.
“Our equipment allotment for 2023 is already sold, and we’re only taking orders for new equipment to deliver in 2024,” Messick says. “Now some domestically made items like hay equipment are in better supply, but large ag equipment is almost nonexistent.”
The impact on farmers is telling.
About 45% of producers recently surveyed as part of Purdue University’s Ag Economy Barometer reported that insufficient supplies have impeded their equipment purchases.
Late-model and large-horsepower tractors have led skyrocketing dealer and auction prices on used machinery. Sales on three-year-old and newer tractors over 300 hp. increased 31% this past summer as availability of new tractors has not improved.
For manufacturers, the lack of supplies has created a nightmare situation.
“We are having to pull nearly completed units, whether it be grain carts or strip machines or seed tenders, from the manufacturing line and send them out to a hold lot because we couldn’t get a particular component to complete the machine,” explains Brett Unverferth of Unverferth Manufacturing.
Often it isn’t big-ticket components that are fouling up manufacturing.
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“We had to set aside anhydrous applicators, for example, because of a lack of knives or grain carts because we couldn’t get seven-pin connectors for light kits,” Unverferth says. “And we have had to create a ‘rework’ team whose job it is to add missing components to machines sitting in storage.”
Manufacturers have become adept at shopping around for different vendors to supply their needs, but that doesn’t always pan out. Early planning has been futile.
Ordering components and supplies a year in advance is no guarantee a manufacturer will receive them in time, says Curt Blades of the Association of Equipment Manufacturers (AEM).
Some supply issues have improved, but getting back to business as normal seems far off.
“A year ago, we thought that maybe supply chain issues would have improved by now. That didn’t happen,” Blades adds. “What makes it tough for manufacturers is that it is a huge challenge to get an answer from their suppliers when normal will return.”
Exacerbating the situation is that farm machinery is not the only manufacturing segment affected by supply issues.
The situation is even worse with construction equipment because of high demand for machinery caused by a three-year building boom. This has resulted in manufacturing lead times that grew from three months to more than eight months over the past two years.
More than 95% of AEM members are experiencing supply chain issues. Plus, manufacturers are being slammed with major price increases for supplies and have turned to boosting salaries and offering hiring bonuses to entice needed factory workers.
|Machine Tactics for the Times|
• Order early. Forecast your machinery replacements now and plan to order at least a year in advance. “We have started taking orders this fall for equipment that won’t be delivered until 2024,” says Neil Messick of Messick Equipment. Planning is the key, adds AEM’s Curt Blades. “Your dealer and their manufacturer can certainly help with that effort since they know when the equipment will eventually become available,” he says. “And look beyond next year, planning out two to three years for equipment needs.”
• Anticipate parts needs. Parts have largely been in good supply, but that is no guarantee certain parts will be available when you need them. If you are planning to rebuild your planter or swap out shovels, points, or discs on tillage equipment this winter, order replacement parts for those projects now.
• Shop the internet for used iron. “You may have to not only look across the state, but across several states to find the machine you want, particularly if it is late-model and in good shape,” warns Luke Sullivan of Sullivan Auctioneers. If you find machinery at a distant dealership, work with your local dealer to secure a purchase and arrange its transport. In addition, internet sites such as machinefinder.com, auctiontime.com, or fastline.com also provide a good monitor of what is available in used equipment. The search tools on these sites can help you find how many of a particular model and year tractor or combine are available and what dealers are asking for them.
• Sell idle equipment. There is no better time than now to sell equipment that is sitting unused in the machine shed. Consigning such equipment has never been easier or more secure. “You may never get a better price for used equipment than now,” adds Mark Stock of Big Iron.
Cupboard is Bare for Used Iron
In a rush to find equipment replacements after discovering new iron wasn’t available, farmers have scoured dealer and auction lots for replacements. The run on late-model, large equipment in good condition wiped out available inventory in 2021, making 2022 the year for like-new prices for late-model machines.
“It’s unreal how fast used machinery is selling,” says Scott Cook of Cook Auction.
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For Cook, the situation presents a double whammy. His family’s online auctions and monthly live consignment auctions are constantly being challenged to find machinery. Cook’s job is traveling the countryside, buying iron for resale.
“Talk about some gut-wrenching decisions,” he says. “I might pay a premium price for a tractor one week and wonder if it will bring that at auction a month later.”
The bigger challenge is just finding equipment.
“Whether it’s construction equipment or farm machinery, the good stuff sells fast and sells high,” Cook notes. “You better be prepared for sticker shock because the prices some of this equipment is bringing are astronomical.”
A good example of this is Deere’s popular large-horsepower 8320R tractor.
The graph below illustrates the sky-high price climb such tractors have been experiencing. These prices, compiled for “Machinery Insider” articles in previous issues, are the average dealer asking price sought for two-year-old 8320Rs.
The trend line reflects the dog days of used machinery prices that occurred from 2014 to 2019 followed by the fervent demand for late-model used horsepower since 2021.
The Silver Lining to Used Iron
A turnabout with used machinery is beginning to present itself, however.
Sluggish sales of new equipment between 2013 and 2019 shorted restocking of used inventories.
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However, new equipment purchased in the past three years is starting to come in on trade and replenish the used marketplace.
The Sandhills Global report (associated with AuctionTime.com) shows the decline in used inventories seems to have reached a bottom this past summer.
At press time, year-to-year used equipment inventories were down 22%, but the downward trend of the past three years appears to have reached an end.
Until three years ago, auction lots would be filled with rows of used equipment, particularly combines, self-propelled sprayers, and tractors.
Large Tractor and Combine Sales
The Association of Equipment Manufacturers (AEM) graphs sales of large-horsepower tractors and combines for the past four years as well as the five-year average of these sales.
The graph lines (below) mirror each other, following in nearly lockstep with the five-year average.
These lines reflect typical sales since 2013 when commodity prices dropped. Yet commodity prices started to climb late in 2020 and continued to soar in 2021, remaining strong this year.
This should have sent sales for 2022 off the charts, but sales of new large tractors and combines remained the same because of the lack of machinery.