Limited quantity of four-wheel drive with tracks
This year has been a year for the booksâ¦ COVID, more COVID and shortages of everything from tractors to microchips.
Unusual years like 2021 (I’ve never seen anything like it in my 66s) create unusual situations, such as the sale of two identically equipped John Deere 9620RXs that sold at two different Sullivan Auctioneers auctions .
The first tractor, a 2016 model with 1,003 hours, sold for $ 385,100 just before planting.
The second 9620RX, a 2019 model with 1,051 hours, sold in August for $ 398,100.
Both tractors were sold in Illinois.
How do you explain that a tractor three years older only earns $ 10,000 less than a younger version? While we’re at it, how do you explain why the two tractors are bringing in $ 100,000 more than they would in 2020?
The explanation is that it is a seller’s market.
Stocks of new and recent high horsepower tractors are extremely limited.
Now throw into the situation the huge pent-up demand for new technology expressed by farmers hungry for new iron that they have not been able to afford since 2012.
Where are they?
Some four-wheel drive crawlers are available primarily in the Midwest. I also notice decent supplies of these machines in the Canadian Prairie Provinces.
Prediction of large tractor values ââwhen judging use
By David Davidson, Iron Solutions
We are in a time of massive change with shortages of new and used equipment from recent models.
The price of used equipment is more important than ever.
We often read and hear about the depreciation of used equipment, but this is an unusual time: we can take a closer look at something we rarely see: the appreciation of used tractors.
In a typical market, if the average age is lower, you would expect the change in value to increase. Conversely, if the age increases, its selling price will drop. It would be in a âtypical marketâ scenario.
Do you remember the last time we had a typical market? In July, the market saw a sharp increase in value representing an increase of 11% over the previous 10 months. The last time we saw a big increase like this was in 2011 until the summer of 2013 when corn prices skyrocketed.
All of this suggests that the price of corn is influencing demand for equipment and driving up equipment prices. But the scarcity of equipment is also at stake today. Recently we heard about empty dealership lots.
To find out more, we can look at the length of time used tractors have been on dealer lots.
In the post-high-priced corn period of 2012 and 2013, there was an overabundance of used equipment. Many dealerships had difficulty moving their used inventory over the next four years. At one point in the spring and summer of 2019, dealerships held inventories of used tractors for almost a year.
Since then, the average number of days used tractors stay in the field has declined, with some dealers holding inventories of less than 50 days on average.
Let’s take a look at a set of six specific models, focusing on the 2017 high horsepower quadruple tracked tractors from John Deere and Case IH.
The graph above shows the depreciation of six 2017 models, by quarter, from 2017 to fall 2021. It is unusual to see two consecutive quarters of appreciation, especially at the rate we have seen most recently (summer to fall). 2021). The average value of these six models has gained almost 5% since spring 2021 and just under 7% for the John Deere 9520RX, in particular.
What could the future hold for us?
Using a tool called IronForecast, we can fit some variables in a predictive model and look at some scenarios until fall 2022.
Among other variables, IronForecast allows us to adjust future forecasts for price volatility, supply used, and commodity prices.
In the graph below, the solid green line represents the actual use value of a 2017 John Deere 9570RX typically equipped until fall 2021. The three dotted lines represent three scenarios of what could happen to the value. of this model over the next 12 months. The gray dotted line in the middle represents a base case most representative of a typical market. The dotted red line represents a scenario where the used supply corrects to slightly above normal levels and corn drops back down to $ 3.00 per bushel.
This scenario would produce accelerated depreciation.
On the other hand, if the supply of second-hand stock remains constrained (by a factor of 70% of normal) and corn drops to $ 4.50, it is possible to imagine this 5-year-old tractor finding all the value that it has lost since 2019. This scenario is represented by the dotted black line.
What does this mean for buyers of high horsepower tractors? While limited supply and high demand are pushing second-hand prices up, it might be time to consider buying new.
If this trend continues, look for dealer and manufacturer incentives on new models. If you find a used model that interests you, act quickly and be prepared to pay more than you would expect in a âtypical marketâ. The sellers are aware of the shortage and will adjust the prices accordingly.
Analytics data comes from Iron Solutions (ironsolutions.com) and its products IronGuides, IronAppraiser and IronForecast.
December 8: Steffes Group (steffesauctioneers.com) will host a multi-party farm equipment auction in Mason City, Iowa.
December 8: Wieman Auction (wiemanauction.com) will host its annual year-end consignment event near Marion, South Dakota.
December 9: The Great Plains Regional Online Event, hosted by Ritchie Bros. Auction (ritchiebros.com), will include equipment located in Kansas City, St. Louis, Minneapolis and Lincoln, Nebraska.
December 16: US Auctioneers (usauctioneers.com) will hold a semi-trailer and trailer auction in Milan, Illinois.
December 20-21: Sullivan Auctioneers (sullivanauctioneers.com) will host an online auction for dealers and unqualified farmers from multiple locations.