Casey Seymour of “Moving Iron LLC” predicts used tractors will decrease in value by 15 to 25 percent this year.
Seymour’s experience is rooted in tracking used equipment trends in dealerships for the past 17 years and consulting with dealerships about new and used equipment as well as sales processes.
There are several fundamental principles about the used farm equipment business that I believe will get questioned this year, Seymour said.
Late model and low-hour equipment will always sell, used equipment values always reflect the most current price increase, and tractors always sell no matter what.
It’s hard to ignore the number of tractors, especially row crop tractors, in the market right now. Seymour said.
The supply shortages that started in 2020 and ended in 2023 added a scarcity premium to the price of many products.
It didn’t matter if it was toilet paper or farm equipment, prices increased dramatically over that time period.
Government programs, high-yielding crops, and higher commodity prices led to record-high on-farm income. Upgrading an aging fleet became a priority for farmers.
With the hangover of 2012 and a contracted commodity market, the average age of the on-farm equipment fleet in 2020 was between seven and 10 years old. That was the oldest the fleet had been since the 1940s.
With more cash in hand, the equipment order writing filled quickly. Lack of supply and screaming demand drove prices up.
The most updated machine was the row crop tractor. During this time, orders were written, and few machines were delivered. Machines were pushed out and, in some cases, canceled and re-ordered later. The orders were there, and tractor builds were in the queue.
According to tractorhouse.com, as of January. 1, 2024, 11,607 tractors 175 horsepower and greater are listed for sale.
From 2017 to 2020, 1,000 tractors were taken off the market. From 2020 to 2023, 10,000 tractors were taken off the market.
A year and a half later, half of the 10,000 tractors depleted were added back to the market.
“I expect current inventory levels to equal or exceed 2017 and 2018,” Seymour said.
The highest number of tractors recorded on the market was during a three-month stint from March to May 2015. During those months, the number of tractors on the market exceeded 20,000 each month.
Since then, the number of used tractors 175 horsepower and greater for sale has not surpassed that threshold.
The other issue facing the used tractor market is the number of late-model, low-hour machines with record high pricing.
Between 2020 and 2023, equipment manufacturers increased their prices by 40 percent.
Supply chain disruptions and lack of materials causing factory delays led to this increasing scarcity premium dividend.
In 2017, a new tractor had an average price of $328,600; in 2020, the price was $363,700; in 2023, the price was $491,800. From 2017 to 2023, that’s an increase of $163,200 or 50 percent.
To add further disruption to the market, the prime interest rate in 2017 peaked at 4.5 percent and the current rate is 8.5 percent, an increase of 188 percent.
“All of these factors set up the used tractor market for a fall. I am expecting used row crop tractors to decrease in value by 15 to 25 percent,” Seymour predicted.
“Unless there is a significant crop production issue this year, I do not see a scenario where used row-crop tractor prices don’t struggle,” Seymour said.
The auction market will continue to have row crop tractors listed, further feeding the decline in value. This will be a year where tractors don’t always sell.
“I also want to be clear that the decline is not because of the economy. The decline is caused by supply catching up with demand and the erosion of the scarcity premium on pricing,” Seymour said.
“Like any bubble, there is a correction when it pops, which resets the market to the new normal. This is not the first in the ag equipment market, and it will not be the last,” Seymour concluded.