Ag implement manufacturers, dealers and prairie farmers are predicting declining sales of new equipment in 2020, meaning that a lot of used iron will be swapping places this year.
Agricultural equipment sales across North America is widely expected to be down again this year.
As reported in The Western Producer four months ago, two-wheel drive tractor sales were off four percent in Canada through the first 10 months of 2019, according to the Association of Equipment Manufacturers. Four-wheel drive tractor sales fell 35 percent, while combine sales dropped 25 percent during that same time frame.
Web publisher Farm Equipment.com says nearly a quarter of Canadian dealers expect new equipment sales to drop by as much as seven percent. Twenty percent of Canadian dealers expect sales of new equipment to drop by eight percent or more. Slightly more than 46 percent of Canadian retailers are forecasting flat sales for the year.
On top of that, a large percentage of Canadian dealers fear severe price increases from manufacturers on new 2020 equipment. The increasing cost of new equipment ranks second on their list of concerns.
No matter how you cut it, it seems obvious that a lot of used implements will be looking for new jobs this year.
How does that affect you? If you’ve been on the edge of upgrading to a new combine, but can’t pencil it out at today’s margins, it might be worthwhile to look at moving up five model years. Or maybe you’re sitting on a 10-year-old combine because your dealer gave you a good cash price deal on a new one, and he didn’t want your trade-in, then you have something to sell. For some producers, it might be time to liquidate under-used machinery to generate capital and lower the spring line of credit.
Whichever position you’re in, it looks like you might need a good auctioneer.
Mark Stock is a Nebraska farmer and founder of BigIron Auctions in that state. He says many farmers sit on old equipment thinking they may be able to use it in the future, or they think it’s so obsolete, it has no value.
“We find that the latter example is an especially prevalent attitude amongst our sellers. That misconception could be the only thing standing between a farmer and a decent cheque,” says Stock, one of the early pioneers in internet-based farmland and implement auctions.
“For example, older tractors are always a hot item and typically sell very well. They hold value longer than equipment like combines, which tend to depreciate eight percent to 12 percent per year. Forage harvesters, which go through heavy wear-and tear always have higher maintenance costs and lower retained value.
“We see some potential buyers staying away from more modern, computer-run tractors due to the fact that they require more specialized training to fix. As a result, they’ll be out of commission longer (when something goes wrong).”
Stock says this winter has seen an increased demand for planters, drills, sprayers, tillage and haying equipment. For farmers with those items sitting in their sheds, now is the time to put them on the market.
“BigIron has reinvented the way farmland and farm equipment is sold to meet the needs of buyers and sellers. We have an unreserved online auction platform. With all the precautions over the CoronaVirus, now you can buy and sell from the comfort and security of your own office,” Stock said in a phone interview.
“The other thing to consider is that whenever the farm economy gets tight, guys tend to delay major purchases and buy used versus new. A lot of iron gets moved across the landscape in times like this.
“I think we’re going to see a lot of brand new and slightly used combines selling at really decent prices this year. There’s always been a lot of combines in the marketplace. If you watch the major OEM websites, they’ll have maybe 2,500 combines advertised at their dealerships. And that’s just one colour. The ones with higher hours go to Mexico. Some go overseas.”
He says most farmers don’t like a big crowd poking around their yard on the day of the sale. That’s the old way of doing things. He can now run sales completely on-line. His crews do the documentation, photography and video recording of the machines running and driving. He has staff on site for the day of the sale to answer questions from buyers attending via their mobile aps.
“We have a pretty extensive video requirement for any machine that has a motor or moving parts. We document it pretty well. You can see how the machine works on your screen, even if you’re not there.
Jordan Clarke is a sales director for Ritchie Brothers in Rouleau, Sask. He says there are still a lot of farmers who have older equipment they’ve more or less forgotten about, and they haven’t yet come to the realization that they can sell the stuff and put money in their pocket.
“There’s an attitude that if an implement is no longer needed on your farm, then it’s just junk. Guys don’t realize there’s going to be a farmer somewhere who needs that exact machine you have. One man’s trash is another man’s treasure,” says Clarke.
He says another factor preventing farmers from putting older machines up for sale is the thought that they someday may need it. In the case of an expanding farmer who is upgrading the implement lineup, that seldom happens. The old combine or old tractor sits until it has deteriorated to junk level. Before they get to that stage, those are the implements that a young starting farmer may need.
“When you look at prices on new 2020 equipment, they’ll probably be higher than ever. A lot of farmers who had been looking at new machinery will instead be looking at updating their current lineup by five or 10 years. Obviously, the auction world will be the first stop for those folks.
“There are a lot of producers here on the Prairies who updated their entire lineup five or six years ago. They may be looking to move up to year-old or two-year-old machines now. That’s going to put a lot of really good equipment up for auction shortly. It’s a chance to step into some late-model equipment.”
As of press time, Clarke said all auctions with human participants bidding at their sites are still scheduled to proceed as planned. Ritchie Brothers conducts about 160 prairie farm auctions per year, but the increased activity in their on-line Iron Planet auctions has greatly reduced the number of people attending live on sale day.
“On-site participation has been declining, not just recently, but over the past 10 to 15 years. When I first got into this business 13 years ago, a big auction would have 800 or 900 people on site. We just don’t see that anymore. Two hundred people on site is about average now. We still have as many or more bidders, but they’re nearly all on-line.
“The demographics play a big role. Because of their age and the farm economy, we’re seeing a lot of older farmers retiring now. Technology is giving younger farmers and expanding farmers the opportunity to farm more land more efficiently.”
Clarke commented on an old adage about auction sale pricing, saying that an auction is still the most accurate means of establishing the true value for an object, whether it’s on-site or on-line.
“It’s the most transparent form to determine what an item is worth. When you have legitimate players bidding against each other, they’re setting the value. It’s not a value set by the manufacturer. It’s not a subsidized value. It’s a true value.
“For example, this spring in Regina, we have a whole lineup of 2019 John Deere equipment. Those pieces will compete with prices on inventory at the John Deere dealers. However, the dealers can offer the buyer things we can’t, such as extended warranty and trades. And some guys like to sit with their dealer and discuss the machines and the trades and options. We can’t do that.”