Machinery Pete: Big Tractors, Big Dollars

It still surprises folks when I say there continues to be solid to strong buyer demand for high-horsepower used tractors in good condition. They wonder how that’s possible when commodity prices are low and profits are hard to find. Numbers don’t lie, and I continue to see this trend reflected in two different data sets: auction prices and search traffic at www.MachineryPete.com.

The data table on page 56 shows the 20 highest auction prices on track tractors through September 2017. Check out the first Case IH model listed, the 2013 550 Quadtrac with 917 hours that sold at a Sept. 19 online farm auction in west-central Minnesota by the Steffes Group. The $233,000 sale price caught my eye because it’s the highest auction price in 21 months on that model tractor.

This strong hard-cash price is also notable based on the mid-September timing of the auction. Historically, early fall is one of the weaker times of year for prices. The crop isn’t in the bin yet, so farmers aren’t quite sure how the year will wind up. Plus most farmers are busy, which cuts down on crowds on-site and online.

In late September, we filmed a farm estate auction in southwest Michigan by Schrader Real Estate and Auction Company for our Machinery Pete TV Show (which airs on Saturdays at 12:30 p.m. CST on RFD-TV and weekly on 36 regional TV stations). The lead tractor at this auction was a John Deere 9530 four-wheel drive with only 578 hours, which was bought several years back primarily for tax purposes. It sold for $175,000—the highest auction price in the U.S. the past 34 months on a John Deere 9530 4WD.

When low-hour, high-horsepower used tractors in nice condition like the Case IH 500 Quadtrac and John Deere 9530 I just mentioned show up for sale, buyer demand is there.

Which brings us to our second data set: search traffic at www.Machinery Pete.com, which features more than 100,000 pieces of dealer equipment for sale.

If we looked at the 175 hp tractor category, search traffic was up 20.6% in September 2017 versus September 2016. Combines, another big dollar, large equipment category, saw a similar 22.5% jump in search traffic in September 2017 versus the same time the year prior. The 100 hp to 175 hp tractor category also saw a search traffic increase of 7.6%.

One angle for strong buyer demand despite the profit picture that sometimes gets neglected is how new equipment sales fit into the equation. The past few years, they’ve been slower. But folks still have to farm. If sales of new equipment have slowed, then it makes sense for competition to pick up for used equipment in good condition when it comes up for sale.

I should note one other factor: Auction prices for equipment in average to below average condition have been sliding. That trend has been noticeable since midsummer 2016 and likely will hold into 2018, I think, on all used equipment categories.

When it comes to high-horsepower tractors, in the past 12 months I’ve noticed a discernible uptick in farmer interest in track tractors as well as combines and grain carts with tracks. When there’s more interest, more folks are pricing both new and used to explore their options.

I’d be remiss if I didn’t mention a couple other trends that help paint the full picture. Note in the data table below seven of the top 20 auction prices on used track tractors this year are from Canada. Late-model four-wheel-drive tractors from Canada have also been a hot ticket item, bringing the highest bids compared with U.S. auctions for almost a decade now.

Remember the John Deere 9530 four-wheel drive I mentioned earlier with 578 hours that sold for $175,000 at a Sept. 25 farm auction in southwest Michigan? Do you want to take a guess where the buyer was from? Yep, a phone bidder, from Canada.