By Matt Reese
In what seems to be a strange development, the prices for used farm equipment are actually going for higher prices at auction than when the equipment was purchased new several years ago.
A unique set of market conditions are at play and auctions seem to be driving the market.
“I think most people following the market are seeing that supply and demand is certainly the catalyst for what the markets are doing. There’s still a restriction in supply as the new equipment is really not opened up yet as far as production and orders catching up. We’ve been fortunate to see a lot of equipment come through the marketplace on the used side and I really think people are able to upgrade right now and find good selections and, at the end of the day, they’re paying top dollar for it,” said Andy White, owner of RES Auction Services in Wooster. “Really what the auction is doing right now is bringing buyers and sellers together in a retail setting. Years ago, it was probably considered a little bit more of a wholesale market in some areas. And really now it’s the auction prices that are driving up the entire farm equipment market. These guys that are selling equipment right now, most all of them are actually selling things for more than what they paid for them years and years ago. That’s the resounding theory right now and we’re definitely seeing that.”
Along with a tight supply of new equipment, challenges with finding parts for old equipment are also helping to push auction prices higher.
“If somebody has had a tractor or a piece of equipment that they’ve had several years, we’ve seen the supply chain really restrict what they’re able to do with it. They are using this as an opportunity to upgrade when something becomes available,” White said. “It just makes a lot of sense for them to be able to pick something up where they have a little bit more peace of mind that if they do go down in the field, parts are probably a little more readily available for them.”
Strong commodity prices are at play as well.
“I think we’ve all seen in the past that there are a lot of years where farmers don’t have a lot of extra income budgeted in for equipment,” White said. “So anytime that commodities do see a spike, we see that upgrade in the equipment and now is kind of their opportune time to do that.”
Inflation is another factor.
“We are seeing some inflation, but we’re also seeing the price of new equipment continue to increase, which is bringing the used market along as well,” he said.
These factors are all combining for sellers to get record prices for used farm equipment.
“I think really everybody in the rural countryside is seeing it for themselves. It used to be, you’d come to an auction and you never knew quite what the price was going to be or what you were going to get out of your equipment,” White said. “But anymore, I think we’ve all seen that the auction is driving the market and we’re seeing record prices. It’s supply and demand and we’re seeing a lot of good equipment come to the marketplace. It’s just a great opportunity for these farmers to be able to sell and to upgrade what they need to.”
In times of tremendous price uncertainty, auctions effectively find the middle ground, even if it happens to be higher than ever before.
“At the end of the day, it’s true price discovery. Buyers know they’re paying exact market value for this piece because the guy next to him says it’s worth pretty well the same price. It’s a way for them to enjoy a little bit of capitalism, both on the buying and the selling side,” White said. “And I really do not see a change anytime soon. Until they can fill these orders for new equipment from the factory, we’re not going to see an abundance of inventory on any dealer lot. I think we’re going to see these commodity prices hang on and as long as there’s profitability, there will be a low inventory and demand is going to be high. I think the prices on equipment, land, whatever it is, are going to continue to hold where they’re at, or even maybe get a tick better in certain spots.”