Weaker equipment prices could provide welcome relief to balance sheets this year, near the middle of the year, when low grain prices and persistently high input costs have squeezed profit margins.
“Inventory is growing rapidly and it's being driven by late models.” [like 2021 and 2022]” says Mitch Hellman, sales manager at Nebraska-based information firm Sandhills Global. The company collects a range of equipment sales data for many industries, including agriculture. “Take advantage of that.” [high] Interest rates, commodity prices, and their headwinds are pushing prices down. ”
Ryan Dolezal, sales manager for TractorHouse, one of Global Sandhill's brands, agrees.
“We have observed a significant month-on-month decline in planter auction prices,” he says. “Some of the latest models are selling at auction for 10% to 20% less than they were a month ago.” Asking prices for used planters fell nearly 3% from February to March. .
Meanwhile, prices for used combines have remained fairly stable, while prices for tractors have fallen by less than 1%.
As prices stabilize, sales are increasing little by little.Latest market report equipment manufacturers association Sales of tractors with over 100 horsepower have been increasing for the second consecutive month nationwide.
“We welcome continued growth in sales of tractors over 100 horsepower into 2024,” said Kurt Blais, senior vice president of the industry group. “We remain optimistic about the future of the agricultural machinery market as the planting season begins.”
Compared to 2023, tractor sales decreased by 13.3% year-on-year and combines by 20.4%.
stable production
It's been several years since a pandemic shut down assembly lines, shut down transportation routes, halted the flow of new machinery to equipment dealers and caused prices to rise as a result. Production recovered and prices generally stabilized as agricultural machinery inventories returned to previous levels. Recent Sandhills Global data shows inventories have rebounded above pre-pandemic numbers, pushing prices down.
Researchers expect this downward trend to continue for some time unless a major black swan event occurs, but there are some caveats. For example, unforeseen wrinkles could emerge in the recovery process from the Francis Scott Key Bridge collapse in Baltimore, Maryland, or policy changes included in the Farm Bill could somehow affect equipment prices. Still, they're not going anywhere fast.
“Used equipment will maintain its value. New or used equipment will continue to be in demand no matter what,” said Kim Rominger, president of the North American Equipment Dealers Association. He said he doesn't think he will offer deep discounts to move forward. “I don’t want to say it, but [prices] Sales will remain flat, but most manufacturers don't want sales to increase significantly. ”
Connecting the bridge and equipment
In the long term, the Francis Scott Key Bridge incident on March 26 may impact farm equipment inventories. The collapse killed six people and halted shipping to the Port of Baltimore, which imports more agricultural machinery than any other U.S. port. Last year, a record 1.3 million tons of roll-on and roll-off agricultural and construction equipment, valued at $9 billion, passed through the port. It also ranks first in imports of cars and light trucks, handling a record 850,000 vehicles last year.
Rominger said nearly every major equipment brand uses components that go through Baltimore. Similarly, foreign brands such as Kioti Tractors and LS Tractor use this port to transport finished products to the U.S. market. Maryland Governor Wes Moore expects port productivity to return to previous levels by the end of May.
So far, the collapse has not had a significant impact on equipment prices because dealers have so much inventory. But if the channel closure lasts longer than expected, parts shortages could delay production of made-to-order machines, he said.
“Right now we're on the brink of a turnaround. But depending on how long the ports are closed, there could be significant damage,” Rominger said, adding that with any luck “we should be OK.”
Tax and policy implications
What's included in the next farm bill could also affect prices, but Rominger is optimistic that lawmakers won't take drastic action.
“As long as you keep crop insurance rates reasonable and don't mess with the fuel issues, that's a win,” he says. “They're going to be relatively conservative on the farm bill.”
Tim Wentz, field director for the Northeast Equipment Dealers Association, said another potential tool is bonus depreciation deductions. His group is calling on the government to increase bonus depreciation deductions to 2022 levels, or 100%. The bonus depreciation rate will drop to 80% in 2023 and is expected to shrink again to 60% this year unless Congress passes it. American Families and Workers Tax Relief Act of 2024.
“The other thing is the amount of productive farmland being eaten up by agriculture, especially in the Northeast. agrivoltatics” says Wentz. In the past five years or so, utility-scale solar installations have more than doubled, consuming farmland across the country. This is expected to continue. More than 80% of new solar projects built by 2040 could be built on designated agricultural land, the report says. american farmland trust.
