Last month I wrote a column entitled “The Lost Years: 2021-23 Model Years Impact on Future Equipment Supply” discussing a shortage of used equipment based on the need for more production in model years 2021-23. Coupled with the rising cost of new equipment and used equipment lacking the supply, used equipment values will stay elevated compared to past years. In turn, producers will keep their equipment longer and rebuild and upgrade their equipment. At this point, we are merely looking at the absolute tiniest tip of the Upgrade Kit Iceberg.

In any area of our lives, technology is moving at the fastest pace in human history and is only accelerating. As a result, millions of gadgets are sold that make something on your 5-year-old car do what the new model offers. 

The same is true for ag equipment, whether it’s John Deere Performance Upgrade Kits (PUK) or Precision Planting Upgrade Kits for planters, and the hundreds of robotics companies working to improve and adapt models daily. 

The “Space Between” I wrote about last month will be filled with upgrade kits, especially as autonomous vehicles arrive. Autonomous kits will have a retrofit point back to a particular year of tractor. When this happens, the tractor becomes strictly a power unit, and the technology will be associated with the implement or components. 

For example, a 10-year-old sprayer chassis could have one-year-old wet system technology. Rebuilding the chassis multiple times will be a common practice, much like updating the technology associated with the wet system.

Upgrade kits will be the great equalizer for the year segments with a low machine population. However, with that said, you could be talking to a producer who has bought their last completely new machine from the factory. 

New and used equipment pricing and the lack of specific hour ranges will have upgraded technology adapted to the powertrain currently available to the producer. So, this opens a whole new used equipment marketplace. What happens if Gen 3 or Gen 4 technology is replaced with Gen 2 technology? 

The used equipment marketplace will have very distinct halves; one half powertrain units and the other previous generation technology. The powertrain unit’s worth will be based on what generation of technology it can be adapted to, not totally on mechanical condition. The second half of the marketplace will be the components. 

Keeping with the sprayer example I used earlier, a sprayer is traded, and the chassis is capable of the latest Gen 4 technology but currently equipped with Gen 2 technology. Therefore, the chassis and the wet system will have different values. The wet system is sold to a producer upgrading from Gen 0 or Gen 1, and the chassis is sold to a customer with a Gen 4 wet system.  

Used powertrain chassis and used components will be bought and sold separately. So, for example, a producer might buy the wet system in Mississippi for the chassis they have in South Dakota. The chassis can upgrade after a new wiring harness and some software is updated, but the same chassis they have used for the past 10 seasons has been updated 3 times and is brand new: again. 

This is what the future of the ag equipment space looks like to me. Equipment too old to have retrofit systems applied will be an issue. The export market is part of the relief valve but only part of the complete answer. More and more late-model, low-hour equipment is going through export channels, especially now more than ever. 

The supply chain issues in North America pale compared to the supply chain issue international markets bare. The lack of used equipment in most international markets will tremendously affect pricing for available used equipment supplies in North America and Europe as developing countries upgrade farming practices and equipment and further drive the demand for technology from upgrade kits. 

The evolution of the ag equipment market over the next 5 years will have a faint nostalgic feel of today. In 10 years, nothing will look or feel the same. Therefore, dealerships need to look ahead and wrap their minds around what is already smacking them in the face.