Tough conditions in the ag economy have farmers pushing older equipment's lifespan through upgrades and "doubling down on repairs. More expensive new and newer machinery is collecting dust on some dealer lots," reports Andy Castillo, in a March 19 Farm Futures article.
The current slow ag economy followed several years of record farm profits post-pandemic. During that period, equipment manufacturers increased their production to compensate, but high interest rates, tariffs and low commodity prices meant inventory piled up on dealers lots, he reports.
“There’s a glut of it. Whether you’re an equipment supplier or a farmer producing mountains and mountains of corn and other crops, we’re the victim of our own success,” Texas ag consultant Pete Weisenberger said in the report.
According to the report:
That could change if pushing equipment to its limit becomes untenable. Despite low profits, some might be forced to upgrade aging equipment — injecting new inventory into the marketplace.
“We haven’t seen much replacement over the last couple years,” said Josh Beal, director of investor relations at Deere & Co. “You have some folks that do need to look to replace despite what we’re seeing with ag fundamentals.”
Newly available used equipment entering the marketplace could “free up the trade ladder,” Beal said, describing a domino effect that begins when one farmer sells their used tractor to a dealer, which in turn trades it for another grower’s machine and so on. It’s not just dealers that should see an uptick in sales if this happens. Inventory at auction, which is also limited right now, is showing signs of increasing availability.
“Dealers are hesitant to say that market conditions have improved,” said Ryan Dolezal, TractorHouse manager, about Sandhills Global’s latest machinery market report. “But increased retail sales and a slight uptick in auction values are a bright spot.”
Castillo concludes writing:
For savvy farmers who’ve delayed equipment purchases, loosening inventory could present buying opportunities in the short term, while others might benefit more from waiting until next year’s anticipated upturn. Either way, as more machines become available, deals can be found by those with enough liquidity to buy quickly.
“When times get tough, prices start coming down. There will be some deals to be found,” Weisenberger said. “Capitalism is always predictable. Some people lose; somebody is going to win. So if you’re in a position to, as they say, ‘get the dry powder,’ you can capitalize and pick up some deals.”
You can read the full article here.
