Machinery Pete: Smaller is Hotter

Bigger is better. We’ve all heard the phrase. In many cases, it’s true, but in the current used farm equipment market, there is another truth at work: smaller is hotter.

Our Machinery Pete data bears this reality in multiple ways. First, let’s focus on auction prices. Check out the data table on page 44 for a look at the highest auction prices in 2017 on tractors in the 115 hp to 140 hp range. Note the number of strong prices from the South. You’ll also notice many of the strong prices came from online and consignment auctions.

There are multiple new record-high auction prices in our data. For example, a 2012 Case IH Maxxum 140 (139 hp) with 501 hours and a L755 loader with 7' bucket sold for $80,000 at a Sept. 7 farm auction in north-central Iowa. Just six days prior at a consignment auction in west-central Ohio, a Kubota M135GX (135 hp) with 197 hours and no loader sold for $56,000. That’s the highest auction price I’ve seen on an M135GX without a loader.

Two additional new record-high auction prices that didn’t even make the list include a 2013 John Deere 6115M (115 hp) with 284 hours and a loader that sold for $65,000 at an Aug. 30 farm auction in northeast Indiana That’s a new record price. The same is true for the New Holland T5070 (115 hp) with 1,528 hours and a loader from central Oklahoma that sold for $45,650 on a May 31 online auction on Purplewave.com. Like the  data table, these examples span a wide swath of geography.

If we turn to search traffic data at www.MachineryPete.com, we’ll again see smaller is hotter. Can you guess what equipment category drew the most search traffic during July and August 2017? If you guessed 40 hp to 99 hp tractors, you’re right.
A common buyer of a 115 hp to 140 hp tractor is a hobby farmer who likely has a well-paying off-farm job. These folks are feeling good, which is bolstered by their 401(k) balances being on the rise. Sales of new smaller horsepower tractors have been strong and used values are holding at a high level as well.

If we jump to the 100 hp to 174 hp category of tractors for sale at www.MachineryPete.com, the search traffic data showed a 3.5% increase from mid-July to mid-August compared with the 30 days prior.

In this case, let’s see how the time frame comes into play. The middle of the summer has not historically been an active period for used equipment sales, at least compared with the busy winter months. Couple the fact search traffic jumped 3.5% with the state of the ag economy and we realize that’s an impressive bump for the mid-range tractor segment in the months of July and August.

Perhaps no stats better illustrate the reality that smaller is hotter than the following two points:

• Right now, there are 132.2% more 175 hp tractors listed for sale at www.MachineryPete.com compared with 100 hp to 174 hp tractors.
• In August and early September, search traffic for 100 hp to 174 hp tractors increased 52.3%.

The used market currently has more higher horsepower tractors for sale, but buyers want smaller horsepower tractors. This is why I continue to say if you’re able, now is a great time to upgrade to a used large late-model tractor. Give your local dealer a buzz. I expect some great deals the second half of  2017.

If you’re in the market for a lower horsepower used tractor expect to pay more ... you have competition.