Knowing What Your Equipment is Worth During Crazy Equipment Markets
As an equipment appraiser, I often get asked “What are you seeing out there in the equipment market?” And for the past few years my typical response has been, “Well, there’s plenty of equipment out there, but good quality, low-houred equipment seems to be in high demand, and it seems to be holding its value pretty well.”
This statement held true for a long time as commodity prices were unimpressive and farmers needed to tighten the purse strings in order to make ends meet. This usually meant holding off on some upgrades, or trying to get another year or two out of a piece of equipment. If the budget did allow for an upgrade, farmers needed to make sure they were getting as much as they could for the money they were able to spend. Often times, this meant buying a quality, well-cared for, low-houred piece of equipment rather than buying new. As much as they wanted it, that new piece of equipment just wasn’t in the budget.
Fast forward only a few months and we are now in the world of $6-7, even up to $8 corn… and let’s not forget $15 soybeans. All of a sudden, the once full dealer lots are now near empty, and the seemingly endless string of “excess inventory” and “retirement” auctions are now fewer and farther between.
Over the past few months, the equipment market has been flipped on its head, most notably the used tractor market. It took a little while to take off as farmers were hesitant about the reality of the new commodity prices and how long it would last… you know, way back at the beginning of the year, in the days of $4-5 corn. In January and February, the market was opening up to show higher demand for not just quality low-houred equipment, but also quality equipment with higher hours… as long as it was in good shape, there was a demand for it. But now, since people have gotten a taste of $6+ corn, the market has officially taken off.
As more and more farmers have decided that now is the time to make some purchases, we are witnessing the fallout of years of delayed upgrades from all types of farmers. We’re seeing that they’re not just upgrading their equipment, but they’re adding to their line of equipment as well (purchases without trades). Dealer lots are now low on new and used equipment, and not only that, but buying new could force you to wait until next year to take delivery. This recent spending spree, combined with some manufacturer production issues, has created a situation that is forcing farmers to deal with a whole new set of challenges that we haven’t seen in a while; mainly low supply and high demand.
So what do we learn from these quick and drastic fluctuations in the equipment market?
It teaches us that no matter what the market is doing, it’s critical for farmers to stay informed and stay current on what their equipment is worth. When corn was $3-4 and money was tight, farmers needed to make sure they were getting a fair price for their trade, they needed to make sure they weren’t overspending, they needed to stretch their dollar as far as possible, and they needed to make sure there was value in the transaction being made.
With current $6-7 corn, farmers need to know much of the same things, but they need to know it quicker.
It’s also not enough to know what the equipment was worth last year, or even 6-8 months ago, as some equipment has actually appreciated in value during the recent uptick in the market. As supply issues become more of a problem, farmers need to make quick decisions, they need to have their homework done ahead of time, or they could potentially miss out on that deal they have been waiting for. The dealer isn’t as desperate to make that sale, and they’re not going to wait long for the farmer to make their decision. There’s also the farmer that has been contemplating retirement, and they need to know if it makes sense to sell now and take advantage of the current equipment market, or farm for a few more years and hopefully take advantage of the higher commodity prices.
Whatever the case may be, we see the importance of knowing what your equipment is worth today. And, with things changing so rapidly, having real time data is essential. One exciting new project the Appraisal team at Compeer is working on is partnering with the team at Iron Comps to create an equipment list for our clients that updates in real time with current auction data from around the country.
There’s never been a better time to take advantage of the benefit from innovative new tools that can help you better manage your farming operation. If this is something you’re interested in, or if you would like to learn more about Compeer’s equipment appraisal services, please reach out to one of our team members.
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