Dollar-plus cotton, beans near the teens, corn pushing $5.50 or higher and $7- to $8-wheat have many growers ready and willing to pay more for good used equipment — if they can find it. That’s the feeling of equipment auction and implement companies who’re looking for a good 2011.
Planters, sprayers, tractors and harvest equipment that can handle more acres and yields are in demand across major production areas. So used equipment handlers believe growers looking to upgrade their equipment need to have plenty of feelers out there.
Gary Dewitt, general manager of Dewitt Auction Co. in Sikeston, Mo., says equipment markets are strong, but availability is tight in much of Missouri and other regions. “There’s not a lot of good used equipment (for auction sale). And there’s not as much at the dealers, either,” says Dewitt.
A North Carolina auction owner says equipment availability is tight. But he likes the possibilities of strong sales when supplies loosen up. “I think prices are going to be good for sellers, if we get some equipment out there to sell,” notes Frank Godley, co-owner of Godley Auction Co. in Charlotte, N.C.
“If farmers had good crops they got a lot of money for them. I think late-model equipment will sell pretty high. But just finding equipment is going to be the problem. I think that with the good crop prices, some growers who wanted to sell out may be staying around a little longer.”
Colby Flaming, general manager of Western Equipment, LLC, an Amarillo, Texas-based John Deere dealer network with eight locations in the Southwest, can’t keep enough new cotton or grain harvesting equipment to meet grower demand. And that spins off into less good used equipment that would be traded in on new models.
He stresses that growers need to allow six months or more to find the exact used equipment they want. “If growers don’t already have the new updated equipment they want, they’re probably in trouble,” says Flaming. “The struggle for guys who haven’t made decisions and lined up what they want is — what they want, and what they get, might be different.
“Cotton strippers are in short supply,” says Flaming, adding that support equipment like quality boll buggies are also rare in many cases. “For grain, combines are also in short supply. What a grower wants may not be available for a while.
“We’ve sold out of new planters and have seen a lot of good late-model planters move early. Like with other equipment, growers wanting to upgrade their planters should start the process of finding what they want six to eight months out, or even almost a year in advance.”
“Farm equipment that is well maintained is bringing full-auction retail,” says Ron Stock, CEO of Stock Auction Co. and Bigiron.com, equipment handlers out of Columbus and St. Edward, Neb. “Machinery that’s older and in not as good a shape is still bringing a good market price.”
He says many growers want to increase their efficiency through bigger equipment. “Farmers with 12-row planters want to go to 16 or 18 rows,” says Stock. “Those at 18 rows want to go to 24. They’re looking for bigger planters.”
GPS, variable rate application and other more high-tech equipment is in demand, but supplies are squeezed. “Farmers want equipment that will match GPS equipment they may already have or which has good high tech equipment installed,” says Stock. “Mapping and GPS hit about five years. Guys are doing a lot more gridding on their farms. Getting fertilizer right where they want it is important to them. They want equipment that will handle those demands.”
Dewitt says that a horizontal line at about the Missouri Bootheel splits where he sees more demand for GPS. “From here north it’s about 50 percent or less,” he says. “From here south its 70 percent or more because of more level fields and fewer obstructions. But like much equipment, there isn’t as much of that type of equipment available.”
The conservative nature of many farmers plays into when they spring for equipment upgrades. Some note that they’ve seen high prices before and watched them fall faster than they went up, such as in 2008. The added tax deduction incentives likely will loosen up buying at a time when growers are still skeptical of market volatility.
“Generally, farmers are conservative with their money,” says Stock. “They either have money to spend or are trying to save money on taxes.”
There are actually better tax advantages for equipment purchases through the Internal Revenue Service Section 179, which provides a deduction on equipment purchases for business owners. Revised laws increased the deductions for equipment from $250,000 to $500,000 for 2010 and 2011, says Mikal Willimon, CPA specializing in agricultural accounting for Brown, Graham & Co. in Spearman, Texas. That’s an incentive for producers to upgrade equipment, he says.
“It’s a big benefit for those upgrading equipment,” says Flaming. “We have the best tax deduction we’ve ever had,” adds Dewitt. “Since you can take up to $500,000 in a deduction, there’s an incentive to buy. I see a lot of farmers who will update equipment in the next couple of years.”
“The increase in tax deductions will probably increase the demand for better equipment,” says Stock. “Any time a farmer can buy something that saves on taxes, he factors that in.”
New equipment may be worth the cost in the long run. In addition to the improved tax deductions available, the first-year bonus depreciation on new assets remains 50 percent of the original cost. For example, if you buy a planter for $50,000, you can take $25,000 in depreciation the first year, then depreciate the remaining $25,000 using normal Modified Accelerated Cost Recovery System (MACRS) depreciation schedules.