If you didn’t take advantage of recent farm machinery deals south of the border, now is too late
Canadian farmers who ventured south to the United States in recent years looking for hot deals on late model equipment were mostly satisfied.
But the glut is now gone and so are the hot deals.
Used farm equipment expert Greg Peterson, better known as Machinery Pete, said it’s taken five years for the market to adjust to current farm incomes, but a balance of new and used equipment has finally been achieved on dealers’ lots.
Headquartered in Chicago, Machinery Pete has been analyzing and valuing farm machinery in North America for more than 25 years. Peterson spends most of his time on the road travelling to farm equipment auctions. He is widely regarded as one of the most knowledgeable sources of information on farm implement price trends.
“There were still very high inventories up until 18 months ago, but it’s gradually dwindling down. The big bubble has finally worked through the system,” said Peterson.
“Manufacturers pulled in the reins on production numbers. They’re controlling production very tightly. And farmers pulled in the reins, too. They weren’t willing to buy new equipment. Dealers didn’t want more new machinery on their lots and they didn’t want your trade-in. It’s taken four or five years for the system to adjust.”
Peterson said a record number of dealer auctions were held to try and move some of the surplus iron off the books.
Selling machines at a US$100,000 loss might seem like a good way for dealers to go bankrupt, but instead it sparked rapid consolidation. Dealers in trouble were forced to sell to a competitor, often at fire sale prices. That trend was pushed along by manufacturers.
“Manufacturers want to deal with fewer owners. They like dealing with a dealer group who has 20 or 30 stores spread across the countryside. That helps spread the risk for the dealer and simplifies things for the manufacturer.
“There’s a lot of outside money in these ownership groups now. People who previously had nothing to do with agriculture came along and bailed out dealers in exchange for part ownership. I see some of these dealer groups with six or eight owners.”
While Canadian farmers were travelling south looking for good deals, American farmers were travelling north looking for deals because of the favourable exchange rate with the weaker loonie.
“With the internet, everybody knows what’s happening. That’s why we’re seeing farmers from North Dakota driving up to farm auctions in Saskatchewan. They see what’s for sale and if they like it, they get in the truck and go.”
In seeding equipment, some of the excess inventory has been sold, according to Gene Breker of Amity Technology in Fargo, North Dakota. Amity designs and builds seeding equipment in partnership with Agco.
“In our case, most of the fire-sale stuff has finally been sold. I’m talking about new equipment, not leases or trade-ins,” said Breker.
“It was bad through this winter. Nobody wanted to carry inventory of any kind. Dealers didn’t want it. Manufacturers didn’t want it. It was tough, absolutely, for us and everyone else. Farmers got some really big discounts on seeding equipment, for sure.”
Breker said there’s a reason ag manufacturers get into a bind like this. Farmers seldom order equipment in advance. They wait until they get an above average crop with decent prices to update their lineup.
“If you order a machine nine months before you need it, that means you’re gambling on getting an above average return on a crop that isn’t even in the ground yet. Farmers don’t do that.”
Breker said that means manufacturers have to estimate the number of units they need to build and that can lead to oversupply when they guess wrong.
As Canadian distributor for three lines of American-built, short-line equipment (Haybuster, Demco, Teamco), Nick Rempel of Brandon has one foot on each side of the international boundary.
He said the collapse of commodity prices last year changed a lot of attitudes about equipment.
“A few years ago, you were a nobody if you didn’t have a late model SP sprayer, a shiny new tractor and two new combines. Well that’s slowed down south of the border,” he said.
“With our soft Canadian dollar, there are a lot of farmers in the northern parts of the States buying used equipment up here. I see a lot of inquiries on AgTalk (web chatroom); guys asking things like, ‘how do I move a combine from Winnipeg to Iowa.’
“I’m sure that if a group of Illinois farmers got together to buy a bunch of Deere tractors or combines at Enns Brothers (in Manitoba), Deere would get a little grumpy about it. Your typical tractor or combine is zero rated, so they can cross the border both directions without hassle. Not everyone knows that.”
Greg Setter, owner of Setter Manufacturing in Russell, Man., has followed the situation closely. He said when commodity prices fell in 2017, it hit American farmers hard.
“There was a lot of equipment coming off leases early. Those machines had to be picked up by somebody or the dealership has to pay for them. So dealers were willing to sell cheap. It was an opportunity for Canadian farmers.”
Setter said American farmers are buying 10-year-old equipment just to get by, to replace the leased machines they’re turning in. He added that American farmers are in a better position to survive low commodity prices because they average only 10 percent debt, whereas Canadian farmers run an average 65 percent debt.
Setter said he thinks many Canadian farmers ignore good prices south of the border out of dealer loyalty. That bargain basement year-old Montana combine might not look as good halfway through harvest when it goes down with a complex electronics issue and the brand dealership says he busy until next week.