The value of used equipment continues to rise as average December row crop tractors values are 36% higher at auction compared to the same month a year earlier. Inflation of equipment prices has been happening for months, but this current month’s auction sale values are even higher than the average 27% year-over-year increase we presented on earlier this year.
Some of this recent rise is likely a result of one of the most profitable farming seasons America’s farmers have had in quite some time. Farmers were willing and able to spend more to offset higher taxes. Yet 2020 also ended with stronger than expected cash commodity prices if the farmers didn’t lock in prices too early. One other contributing factor may be that expected inflation begets inflation. As farmers anticipate equipment shortages lasting into 2023, they will be more aggressive in securing the machinery they need for next year. If they do this and they believe inflation is coming, then they will be willing to spend more than they would otherwise. With this reasoning it is cheaper now than if they have to buy later.
A case of this increase can be seen on Iron Comps with a couple 8245R’s. One on December 8th 2020 for $152K. The second for $190K on December 14th 2021. The second tractor seen below on the right brought 25% more, despite 100 more hours and being sold at a liquidation auction. Liquidations typically brings less than retirement auctions, which is where the earlier tractor was sold.
The question remains. Will these elevated current tractor values continue into 2022? A driver of inflation is when too many dollars chase too few pieces of equipment. This is certainly the current case in 2021. The tractor supply issue will likely persist well into 2022 and beyond. For this December analysis, 2021 only saw half the amount of tractors sold at auction as compared to December 2020. (Note that we are not yet through all of 2021. Yet, with the holidays approaching, not many more pieces will be sold this year.) Regarding dollars, next year will likely not be as profitable. Sticker shock is already being felt with increased rent, fertilizer, and other input prices. Yet, new crop futures are strong enough that most farmers can still lock in a profit. That is given a decent growing season ahead. Considering all of this, high prices may plateau, but are not likely to recede anytime soon. What is certain is that pieces of equipment are moving fast. If you are in the market for a tractor, save a search on TractorZoom.com to make sure you don’t miss out!
* This Tractor Zoom data analysis includes the following. Row crop tractors with FWD and greater than 175 HP. All were sold at auction for more than $25,000 and not older than 20 years old.