The 8370R tractor represents one of John Deere’s largest and most valuable row crop tractors in the current 2021 market. With a 2019 price of $407,000 for a base model off the line in Waterloo, this workhorse presents a great opportunity to analyze current row crop tractor values and trends. There is quite a bit of uncertainty among buyers and sellers about how these larger tractors will sell as we approach this epic end-of-year flurry of used machinery sales. An already highly anticipated season for updating machinery has had a shot of adrenaline with more supply chain issues and recent strikes at John Deere UAW facilities.
Good decisions need to start with good information. We begin with 33 historic auction sales of the 8370R in this Iron Comps Insights, covering sales from 2018 to just a couple months ago on August 23rd. The historic auction data provides the price trends. Depreciation ‘curves’ will also be calculated to add detail to those price trends. In addition to the analysis on auction trends, Tractor Zoom is now able to compare those to dealer list pricing. Dealer list values provides a more complete picture of average current row crop tractor values. If you are unaware, dealers can now promote their equipment free-of-charge on Tractor Zoom and many have! One billion dollars of equipment has already been promoted just this past month. If you are an equipment valuator, this is also helpful to you. You will soon be able to use Iron Comps to appraise more of the low-hour, late-model, high-quality equipment commonly found on dealers’ lots. There are currently 50+ listings of 8370R’s on dealers’ lots in Tractor Zoom, which are also used later in this analysis.
At the risk of sounding like a broken record, yes, values are up. For this type of tractor with a lot of horses (370 of them under the hood), the annual increase of 15% is on par with what we were seeing early this summer with comparable average engine hours.
With the 15% annual price increase noted, we move to a quarterly view of the same data. Quarterly statistics provides a more detailed glimpse at the effect of hours and potential external variables on the sale price. The graph below again pits the average sale value (in the bar graph) against the average hours of the 8370R’s sold (in the line graph).
Just like the 8370R, there is a lot under the hood here. Spend some time contrasting quarters to understand the impact that the engine hours, pandemic, disrupted supply chain, and bull market might have had on the tractor values over this relatively short period of time.
One such thought experiment is to match up Q4 in 2019 to those same months in 2020. If you can remember to that time frame (excusable if you cannot… a lot has happened), we just started to experience this strong rally in the grain markets after years of a suppressed farm economy. That resultant strong demand boosted quarterly average values up 15% despite the hours also increasing (10%). What would happen if the supply were also severely disrupted during that same time? We will find out soon enough. Last quarter’s incredible jump in value was driven mostly by the fact that the few tractors that were brought to auction were all low-hour. Yet, those few sales are not unrelated to the demand AND supply pressures. Tractor Zoom has had 60% less 8370R’s go up for auction these past two quarters than a year ago.
If you are trying to paint a picture of any dynamic market, avoid broad brush strokes. The average current row crop tractor values are higher this year, but not distributed equally across all age of machines. The current dealer listings vs auction sales graphs below show this disparity.
Take note that this next graph can be misleading if you are simply looking for the price premium applied at a dealership. At first glace it looks like the used equipment at a dealership is $90,000 higher. This is not the case since the dealer listing data here is from the current market. Most of the auction data is historic when prices were about 15% lower. We get to a closer period comparison later. The dealer listings and auction graph does provide valuable insight though. The depreciation trend lines have almost an identical slope, reinforcing the idea that the auction market has a heavy influence on dealer list price strategy. If you have another interpretation of this, I’d love to hear it.
Our final figure below helps control for this dynamic market with the same current dealership listing data as above, but now compared to just 2021 auction sales. Side note, I usually prefer a true curve to represent the depreciation of categories of machines, but when you have small subsections like we do, a linear best-fit line tends to work better for comparison.
Here are three observations about current row crop tractor values to glean from this graph.
1. Auctions are Driving this Market. Low-hour, late-model tractors are bringing values at auction that are extremely comparable to dealer list price. An economic sign that the supply is extremely tight and demand equally high. Dealer pricing, in this scenario, probably needs to be updated more frequently. Same goes for appraisers adjusting fleet valuations.
2. Mid-hour Dealer Premium. There is slightly more separation of values between auction and dealerships (approximately 5-10%) for machines in the 2,000 – 4,000 range. Farmers tend to have more warranty or maintenance assurance off a dealer’s lot, which could explain some of that premium. It could also be tied to trade-in deals.
3. Residual Value is Strong. Props to Deere on an apparently high-quality tractor that lasts (cannot personally attest, as I have not yet operated one of these). There are only a handful data points, but if those tractors above 5,000 hours bring anywhere near the list price, they will be comparable to similar tractors sold earlier this year with just 3,000 hours.
Even with a stabilized commodity market (sans oats!), most other signs are pointing up for machinery values. Expect a limited number of prime row crop tractors to make it to the auction market. When they do, don’t be surprised if auction prices rival those machines on dealer’s lots. Some farmers are going to try anything they can to offset their taxes. When they cannot find the equipment they want in their backyard they will turn to their phones. Shipping a tractor across a few states will not deter a farmer from purchasing like it might have pre-pandemic. Times are a changin’…