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Combine futures?

We're wading into unchartered waters here friends.

I've been observing the used farm equipment market since 1989, tracking auction sale price data on all types of equipment. But I gotta tell ya, I've never seen anything like this. Tons of zany stuff going on out there right now.

A couple of examples. In the last week I've had two callers tell of a new development related to farm land auctions. One caller told of a land auction in the western part of the midwest where the auctioneer charged $1,000 to each bidder for the right to register to bid. There were 50 bidders that bit, which netted the auctioneer $50,000. That's before the land even went up for sale.

Yesterday another caller from northern Illinois told of a call he got from his sister in central Illinois. "You're not going to believe this," she told him. She went on to tell of land available to rent that was put up for auction in central Illinois. Once again, the auction company charged $1,000 to register for right to bid on this land to rent. Before the land was even sold $56,000 was collected.

Let's turn back to farm equipment. While down at the Commodity Classic in Nashville, Tennesee, last week I had guy come up to me in the Successful Farming booth. He told me how he purchased a new 2008 combine last fall. The machine hasn't been built yet, but the guy has already traded the paper on it for a new '09 model.

Combine futures.

Meanwhile on the auction front, record high sale prices continue to pour in from all points. On the subject of combines, how about the 2004 JD 9660 STS combine with 1,187 engine hours that sold for $166,000 on a farm auction in east-central Montana on February 29, 2008. How high is that? And that combine sold without any heads. See for yourself how high $166,000 is by clicking on the link below.

Switching to tractors. Buckle yourseat belt. These prices are amazing. Here are just a few recent examples.

1994 JD 4960 MFWD tractor, 3,455 hours, sold 2/22/08 in east-central South Dakota for $74,000

1997 JD 7810 MFWD tractor, 2,765 hours, sold on same east-central South Dakota sale for $87,000

JD 4760 MFWD tractor, 3,671 hours, sold 3/1/08 in west-central Minnesota for $64,000

1991 JD 4555 2WD tractor, 4,121 hours, sold 2/28/08 in south-central Minnesota for $51,000

JD 4455 MFWD tractor, 5,079 hours, with JD 740 loader, sold 3/1/08 in east-central South Dakota for $61,000

1994 Ford-NH 8340 MFWD tractor, 3,850 hours, with NH 7410 loader, sold 3/1/08 in northeast Missouri for $30,000

Ford-NH 8670 MFWD tractor, 2,158 hours, sold 2/29/08 in south-central Minnesota for $62,000

1980 JD 4840 tractor, 5,448 hours, sold 1/26/08 in northwest Illinois for $30,500

JD 6030 tractor, sold 2/22/08 in south-central Illinois for $16,000

I was asked more than a few times last week at Commodity Classic if I thought this very strong used equipment market would continue. Seemed like folks were of the mind these super high sale prices couldn't continue. But I have to say, I think they will. It's almost a case of how can they not?

Here's what I mean. The used equipment market is tight as a drum. Tighter actually. New equipment is presold and sold out far in advance. Prices of new equipment continue to rise. The level of good used inventory on dealer's lots has really shrunk. Now if a dealer takes a nice piece in on trade, its gone before it even hits the lot. I don't see this changing.

The farm auction scene is very quiet. Just aren't that many sales around. I don't see this changing the rest of 2008 either.

So buyers desparate to acquire the equipment they need are being forced to pay higher and higher prices of both good and average condition used equipment. Very high demand plus very low supply equals lots for Machinery Pete to write about.

If you're thinking of buying, I'd suggest looking at the mid to late summer window. What I've noticed over my years of tracking auction price data is that often times sale prices tend to sag a bit come July through September. Even on items such as late-model combines. It seems counter intuitive, but actually it makes sense. If it's one of those years, like last year, where we've got significant questions on how yields will turn out, buyers on the used equipment market tend to pull back just a bit. Keep their hands in their pockets, and maybe pull out of the bidding a bit sooner.

But if commodity prices remain at record levels and much of the U.S. enjoys good yields this year, what do you think will happen to the used farm equipment market come November & December 2008? How much higher would auction sale prices go?

I almost faint thinking about it.

Click here to download additional sale price data on John Deere 4960 tractors.

Click here to download additional sale price data on John Deere 9660 combines.

We're wading into unchartered waters here friends.

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