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 In this episode of the Farm Equipment Used Equipment Remarketing Roadmaps podcast, brought to you by the Dealership Minds Summit, Casey Seymour and Aaron Fintel of Moving Iron LLC discuss the slowdown in the ag equipment marketplace coming off a strong first half of 2023. They also talk about the auction market and how auctions are going to impact used equipment valuations come this fall.

 “If you take a look at what's going, I have this pit in my stomach right now as I look at auctions start to come in and where the values are trickling into and what's that look like and how those things are coming into play that we are headed for a rough fall as far as values go,” Seymour says."

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Full Transcript

I am Kim Schmidt, Executive Editor of Farm Equipment. Welcome to Farm Equipment's Used Equipment Remarketing Roadmaps Podcast. In this episode, hosts Casey Seymour and Aaron Fintel of Moving Iron, LLC talk about the used equipment market and how auctions are impacting it.

This episode of the Used Equipment Remarketing Roadmaps Podcast is brought to you courtesy of the Dealership Minds Summit. Let's jump in as Casey and Aaron discussed the slowdown in the ag equipment marketplace coming off a strong first half of 2023. They also talk about the auction market and how auctions are going to impact used equipment valuations come this fall.

So how have you been, buddy?

Slinging iron, rolling hay. That is literally every minute of the day, one of those two.

That's good. You've been good?

Yeah. Probably should have different hobbies, but been good. Can't complain.

A lot of people say that about me, too.

Living in a swamp.

It is. I tell you what, there is a fun fact. The month of June, Scotts Bluff Nebraska was the wettest place in the country.

Yeah. I heard that on the radio. They're like five inches or seven inches ahead for the year.

Which, when you get five to seven inches...

That's a start.

But it's been an unusually wet year. I don't know that it's ever-

It's been cool.

...been like this. I mean, it's been wet and cool, but not like this, since I've been out here. Anyway.

No, '19 was kind of similar to this. And I want to say, was it '17 maybe? Something like that. '16 maybe. But yeah, it's not very common.

Been very consistently wet.

Yes. We went from maroon on the drought monitor to dark blue on the root zone monitor.

Yeah. Right. So it's been an unusually wet year. We've had plenty of moisture. We don't really have the heat to come along with that, but we've gotten about everything else. Crops look good. We've got grass as tall as I've ever seen it.

Yeah.

And usually by now, even when it's wet, it's turning brown, and it's not [inaudible 00:02:26].

I swapped grass hay that touched the push bar on the front of the head.

Look at that.

Can you believe that?

Yes. Considering what [inaudible 00:02:34].

It wasn't brome.

Yeah. So it's been a crazy year, and I think we can say that we start looking at what's going on in the equipment side of the business. It has been a crazy year for sure. So if you take a look back, rewind the tape here a little bit, go back to '22, everything was kind of rolling through there when you saw stuff not showing up on the [inaudible 00:02:58] and use equipment crunches and this, and that, and the other thing. A lot of on-farm income that got kind of deferred to '23. So that first quarter of '23.

First half of the year '23 has been really very strong when you look at equipment sales across the board. But it kind of feels like to me, we are seeing a... slow-down is not the right word to use, but it's just a little more caution in the market than we've seen in the past.

If you are in this business of selling farm equipment now, you have to sell.

Right. Yeah.

You guys are still buying stuff. Equipment's still moving. You just can't say, "Hi, here's a tractor. Oh, here, got a pen?" And I think it takes a little selling now.

Yeah. And I think some of that pressure that we're feeling about the slow-down in the marketplace, is just what you just said. I mean, we've had conversations with guys about what's going on in their marketplace and those kind of things. The response to me has been, "Well, I think we're getting a few tractors on the market. We're starting to see tractors pilot." Like, "Oh really? How long have you had them?" "We had these for 30 days?"

Right.

"So come on, man." I mean, up until two years ago, if we had a tractor for three or four months, that was pretty common. I mean, it was not a big deal. Even up to six months.

Yeah. I was going to say six months. Don't even think about moving a tractor yet.

So I think there's a lot of that readjusting back to what normal is now. And I kind of taken look at that and it's just the things that we see happening now aren't oh my god, the sky's falling, oh my god, things are back to normal.

Yeah. And I would say from where normal started before the ramp up, we're still way better than normal.

Oh, sure.

But it just takes a little effort now. And the other thing from the dealer standpoint, it would be great that we have no inventory, let's keep it clean. Let's keep banging stuff out and just run lean and mean and as healthy as can all be. And that's a beautiful idea. But the reality is everything else just slows down so much. You can't keep that going. You know what I mean? You can, but it would take everybody 24/7 doing that to even have a shot.

Sure, sure.

So I think when you're looking at it now, it'd be a good, from a dealer standpoint, it'd be a great time to readjust what your levels are, your tolerance levels-

Sure.

... if you will. But it's not just a "Oh, it's all gone." Well, I also think too, you got to take a hard look at, this is real life. It's not Aladdin.

You got to take a hard look at where you're at and look at the number of dollars comparing dollars to past. I mean, you got to take that out of the mix.

No, the dollars thing is that flew the coop halfway through last year because every thing is so crazy high.

Yeah. You got to start looking at units. And I think if you go back and look at units where you're at now, where you're pacing at, go back and look at some previous years and see where you're, what you're pacing, where you're kind of matching up to and start looking at demand because demand has changed dramatically. And it's not like we've talked about on here before, the strands of buyers and what those look like and where those stratospheres are and how those things stack up. And the one thing I'll say about more than anything is how hard and fast those buying groups are right now.

I mean, if you take a look at where they're at, there are not a bunch of people jumping from a 9770 and going out and buying a brand new seven S770.

Right.

And I can pass booms where you saw that kind of stuff happen primarily because of cost and what that looks like.

It's like your 2,500-hour tractor buyer, he ordered that one new one and now he's back to the 2,500-hour tractor.

Right. Yep.

And that's purely due to interest more than machine price. Everybody knows that the new or the one-year-old stuff is pretty girthy on the price scale, but that is not usually a deterrent at all compared to what interest rates are.

Right.

And nobody's paying 15% or shouldn't be. You can run paper on machinery under 7%.

Sure.

That's not that damn bad. But when you're coming from one, it's a lot. And that's what I think something else we're facing, we had such cheap interest for so damn long that was just instantly carved in stone with everybody. And that's where we're at. So now that we're in, yeah, it's a little heavy, but it's not crazy by any stretch. It just, it's a lot of breaks. So if you go back to 2006 and look at interest rates, then they were five and a half to 6%.

Right. Right.

But you're also buying a brand new combine for $180,000 or 250, right? So now you're buying that same combine at six and a half percent interest, another percent higher and twice the price, no big deal. So it does make, but if you look at the grand scheme of things on a microcosm, what has the average farm yield done in those 17 years?

Well, sure.

Yeah. I mean, it's economics of scale. Granted, there's no way that farm bump that much, but things change because things change.

Well, sure, sure. What's your $225,000 trade difference or whatever it is. The last time, they bought one might have said whatever, 25,000 trade difference. Today they're buying that same machine of 225,000 trade difference, but it's got two or three times as many hours as it did. And so that's the thing I think you're looking at. And I think another thing too, if you're looking at the market where that and how that plays together is.

Or quite simply that 225 is 350.

Yeah, pretty much. And the other side of that too is you start looking at buying activity that you see happening now, and it's very similar to what you saw in '17, '18, '19, where a certain stratus of equipments was started showing up as being a very popular machine to sell like the 3,500-hour tractor or the 800 to a thousand-hour combine. Because a lot of that had to do with Maya got this much equity and the one I'm trading in, I got this much cash and the banks, that's what they're going to let me do, right?

Right.

And so I can go in and do that and they're going to finance this amount and away we go, and that machine fits that thing. You're starting to see more and more of that pop up. So what I'm saying that the market's going back to more of a "normal feel", that those are the things you see in a normal marketplace. It's not all rushed to one side or all rushed to the other side. It's a little bit of everything going on, everything's churning. These guys just aren't coming in and saying, "I'll take it." They're like, "Oh, let me think about this one for a minute."

Right.

I mean, there's a lot more, I don't know how to word that, more thorough thought processes involved than just, here, sign this. And that's a normal market.

Yeah, absolutely.

That's a normal market.

Absolutely.

So we've ventured back into that. Now, all that being said, I think it's worthwhile for us to talk about the auction market today because today is what, July 7th?

7/7.

7/7/23. So we're close. You know what I mean?

Close to 7/8/23.

Yeah, that's 7/7/25, then you'd get seven seven plus two plus five is seven.

Oh.

You see where I'm going with that?

Neat. Nice save.

Anyway, if you had that kind of squared away and you were thinking about what was going on with the upcoming auction marketplace, to me, we've talked about how we would see this coming and there's going to be some opportunities to really do some things. The amount of stuff heading into auction right now, every week is just getting bigger and bigger and bigger. And it's not just combines, it's everything, man.

Right.

It's eight hours, it's high horsepower of row crop tractors, four-wheel drive sprayers of all things sprayers. I've seen sprayers on the market and there's like four sprayers that we had in the United States.

Correct.

You know what I mean? Why are you putting that on an auction?

Right. Well, that could be, here it is, turn everybody loose on it and see, maybe that's the strategy because that does happen.

It does. But still, I just don't-

You're not in control.

Yeah. You're kind of throwing the dice out there and hoping that you get [inaudible 00:12:48].

Right.

And you might get a four.

Right?

So I think if you take a look at what's going, I have this pit in my stomach right now. And as I look at auction, it start to come in and where the values are trickling into and what's that look like and how those things are coming into play, that we are headed for a rough fall as far as values go. And I think if you're going to start seeing a deterioration in value... Because we're seeing some deterioration in value right now, but it's not like, oh crap, combines lost 25% last month. No, it's everything across the board's settling in, plus or minus a few thousand dollars.

Right.

You know what I mean? As far as our price goes. And again, auction values aren't like they're... No, not month you'll lose 30 grand on whatever. Again, it's a few percentage points here and there and it's not a big deal.

We'll get back to the discussion in a moment. But first, I wanted to thank our sponsor, the Dealership Minds Summit. The Dealership Minds Summit returns August 1st and 2nd in Bloomington, Illinois with a focus on sales management. To download the program and register, visit dealershipmindssummit.com. Now back to Casey.

I think as we head into the typical fall auction cycle, we are going to see a significant amount of machines get put onto the marketplace and you're going to see something happen-

Right.

... with the market. I mean, what's your feeling on that?

Well, we've talked a lot about when this does fall, it's going to be as painful as '14, but completely different. Because in the '14 fall, it was 11 billion things we got to move. Now, it's 10 but 11 billion at stake. So there's far less machines to move machine population-wise, but the losses per machine could be far greater. Now, the other thing involving that is with that machine population, we didn't have three customer segments all jumped to one.

Sure.

Like we did in 10 through 12.

Yeah, sure.

The old 9,600 traded on a new 9770, we didn't deal with that this time.

Right.

So that is a big benefit, keeping the machine population down. But there are some machines out there that are going to be just absolutely gross when it hits the chopping block. I personally think maybe we're a little further away from that than you do, but we're looking from two different things. You put the canary in the coal mine, I'm the first one that sees it dead. You know what I mean? You know it's coming and then it's like, "Oh, shit." rewind real quick, pivot.

I think that what I'm most concerned about is that one segment is going to jack it up for everything else.

Oh yeah.

You know what I mean? That's what I'm concerned about.

Yeah. Well, and this is just my one-minute take on it in review. That's what happened in with the 14 stuff, combines and planters drug, everything else way way way down. I think this time, you're going to see even tractors, and I think you're going to see that this time for sure, just like you're saying. Just because you have sub such substantial dollars involved in everything, that there's no choice but it's going to pull those 22, 23, 24 tractors down with everything else warranted or not, that's the market.

Yeah. So when I'm looking at the sale bills as they come through, one thing we saw the last time something like this happened was that it was very heavy combines of planters.

Right.

We're not going to see that this year-

No.

... or this time around. You're going to see very much a pattern of a little bit of everything. And there might be more of one thing than another, but it's not going to be heavily dominated by combines or planters, or it's just going to be few of this, few of that. It's just going to be a-

Right. And that's not to say that it won't be combine heavy, but it won't be a glut. And combines and auctions are always going to be a thing because they're a hell of a lot of dollars sitting there for as far as the dealer's concerned 10 months out of the year. So the dealer side of it is always going to be lumping them off at auction all the time. But to your point, it's going to be a more even mix and we just don't have the machines.

The other thing too, that I think is going to be different about this time and it is going to be people like us that watch and pay attention to it and see it happen is that, if you're a spectator of auctions and you're watching auctions, what's the one thing that's not as big of a deal as it used to be when in the auction world, the big one day we're going to sell off 12 million worth of in one day.

Oh, right, right, right.

So you can be a dealer now and say, "I want to get rid of 25 combines", for example, whatever. And you can get with these online auction companies and you can sell three combines a week and every one of these sells for two months and sell 25 combines. And if you don't know any better, you just think that these got three combines or so. You know what I mean?

Yep.

I think that's going to play a psychological game of people that...

Oh, absolutely.

Because now they're going to see, "Oh, did you see those 25 combines sell or wherever?" I mean, you remember how we used to do that. We'd get all excited. We'd be like, "oh, we going to flat and watch that one."

Right.

Well, now you don't have that spectacle anymore.

I know. And that's a shame.

It is. I miss the Dog and Tony show. It is and it is. You know what I mean? Because now if I'm a guy buying a combine, I might be keeping track of how many combines come up for sale.

Right.

And you keeping track of values and those kind of things. But the psychological effect of watching 25 combine sell, and then after that sell's done, in your head, you're like, that combine over there is worth this much money now.

Yeah, exactly.

Watching three sale... Okay, the next one, I mean, whatever. It's just you don't have that psychological disadvantage, I guess, that we're going to see now.

As the seller.

As the seller.

Yeah, disadvantage of the seller. Yeah. Or as the buyer, to your point, you got to watch five different auctions instead of oh, I can go to that one that day and see 55 class eight combine sell.

Sure.

Now, it's oh, I got to watch this auction this day, that auction that day. And that makes it, like you were saying, the psychology of it, unless that guy is super dialed in on all of that. Well, they sold 10 of them yesterday and they brought this. They sold one and it brought this. But then the next day they sold one over there and it brought that, and then the next day they sold one over there and it brought that. Who's watching that close enough?

Yeah. It also might have an effect on pricing to where we don't see a huge fall off the cliff in pricing because that's not fresh in anyone's mind when they go to the next sell.

Right. I don't think... I was going to say something. I changed my mind on that. From from the buyer standpoint, from the seller standpoint... And this is the angle I thought you were going with it. I don't think you're going to see the cliff just because of there's so many dollars involved. And I think the potential losses per item, like I mentioned before, are going to be a big, big, basically foot riding the brake all the way downhill. You know what I mean? Does that make sense?

Yeah. I mean, the scenario that you're laying out there, to me, it allows to see more consistency in auction values, a sell over sale.

It's a zero entry pool, not a jump in the 10 foot.

Right. Right. Say you have 10 machines, you got 10 machines that sell, I mean, everybody's got an online auction now.

Right.

I mean, freaking everybody does. Everyone's got an online auction. And if you watch a sale and you see 10 machine sell in one day, but 10 machine sold, but you were watching two of those 10 sell. So you see himself for whatever, $200,000 or whatever the number is, right? And the next time one comes around your mind, well, this is worth $200,000.

Right.

You don't know what the other eight did. The other eight might be sold for an average of 180, but you saw those two sold for 275.

Right.

So the consistency in sell over sell might actually be tired, because there's not, again, that whole like, oh man, we had two auctions. You'd see that happen to be one sale would bring good half, whatever, 10 or 15 on. Then two weeks later, there'd be another one that had 10 or 15 on it, and then three weeks later there'd be one like 25.

Yeah. And you want to be first or last, not in the middle.

Yeah. So you watched 45 or 50 combines sell in one month, all of which were big chunks.

Right.

You can still watch the same 45 or 50 combine sell now, but it's one hitters or two hitters in the same sell all the way through. And I think that is where there's an opportunity that the way the auction market's setting out. And unless you subscribe to something that's going to give you cumulative data of all these auctions that happen, it's going to be hard for you to sit there and say, "I know what the auction value for combine is." And I know there's a lot of free online places out there that they can go find those things, you can find that data, but it's not... Well, everyone doesn't get everyone's stuff.

Right.

You know what I mean? Machinery Peak does a good job with that, Tractor Zoom does a good job with that. But you start looking at some of the other ones that are out there, they're not getting, they know they 1500 auction companies sending them stuff.

No. Exactly.

You know what I'm saying?

Exactly.

So that's the thing there. So if you don't have access to that stuff, then you don't really know.

Right.

So when you watch one or two sell in your mind, this is what the market is.

Yeah. That makes perfect sense.

Instead of, I watched 15 sell today and they started [inaudible 00:25:25].

Yeah.

That might have a completely different look and feel than what we're used to.

Yeah. Yeah. I think you're exactly right. I think it will be that way, but it'll be interesting to use a term you haven't used in a couple of years, where the soft bottom will be as we get late summer, early fall, if guys are liquidating in preseason, that kind of thing. It'll be interesting to see how far off that soft bottom is from say, 12 months prior, which will be a huge, huge gap. And then how far is soft bottom from, well, anybody will give us a check at this number.

Right.

Is it going to be a marshmallow bottom or a wet clay? Like it's firm, but it's still soft.

Very slippery.

Yeah.

I think, I'm looking at that too from, it'd be interesting to see how many guys are done at the end of '23, how many retirement sales you're going to see. Because they hit their lick now twice and this is-

Now they're going to punch out.

Yeah. So I think, some of the guys that were not quite ready to retire in [inaudible 00:27:07].

Well, yeah. Okay. Put that in correlation with the average age of the farmer, right? 65 to 70, probably. Boatload of boomers in there. So that guy was in his 50s the last time he hit a lick, and then we went through the shit and then, oh, one more good one. Now I'm done. I think it'll be, for lack of a better word, a cleanup of the rest.

I think you're probably right.

You had the early look at it this way. In the 14 through 17 auction cycle, you had the early boomers.

Right.

Now in the 23 through 26, whatever auction cycle, you're going to have the rest of them.

Yeah. So I think that's going to be interesting to watch how many consignment sales or retirement sales are out there, how we start seeing coming up in end of '23, early '24. I'll play a big part of it as well. So I never really gave that much thought about the auction thing till we started talking about it. I was kind of thinking in my head. I've kept saying like somewhere is going to dump 25 combines on one day, and it's going to be combine market is going to go out.

I think because of the potential losses, nobody's going to do that.

Well, if they do decide to do that, they'll still sell their 25 combines, but it'll be over two months.

And scattered.

And scattered. A.

Well, just look at it this way, everybody's kind of doing their own auction data management experiment there.

Yeah. That'll be interesting. That's going to be interesting to watch how that plays out. That's a new dynamic that we've not seen before.

Right.

Online auctions aren't anything new, but that's kind of your choice now. I mean, staff and those guys out there, there are still doing the online live auction thing.

But it's rare.

Yeah.

Even your smaller town guys are pretty much online, it worked and it's way less cost for them.

And the buyer wants that.

And now the buyer wants to go and have his hot dog and a Pepsi and talk to the neighbors and all that. Man, we need the Dog and pony show.

Not the guy in Georgia.

The problem with online auctions is-

And so in Nebraska.

... it's too damn easy to sit at your laptop in your office and buy shit all day. That's the problem with online auctions.

Very true.

And then, oh, we got to go pick all that up.

Yeah. Dang, I forgot about trucking. Oh yeah, trucking. Forgot about that. All right, man. All right. Good place to stop. Any last thoughts you want to throw out there before we close it down.

Not that I can really think of. I mean, it's stuff clicking and guys are looking, reach out, man.

Thanks to Casey and Aaron for sharing their conversation with us. You can keep up on the latest industry news by registering online to receive our free newsletters. Visit www.farm-equipment.com. For Casey as well as our entire staff here at Farm Equipment, I'm Kim Schmidt. Thanks for listening.