Used machinery inventories are exploding

The first quarter of 2023 saw a large amount of equipment hit the ground, and it hasn’t stopped. Everything delayed or canceled in 2021 and 2022 was delivered in 2023. This is why the explosion in used inventories has been so rapid, except for combines, even when you count the auction numbers. Inventory levels for combines are historically more steady, and I don’t think we’ll see much change there. However, other machine platforms will be the most significant contributors to the auction market in 2024. 

When new equipment started to get tight and used equipment was selling at a record pace and price, combines lagged in the rear. Like tractors, combines are often bought in multiples and traded in multiples. Unlike tractors, combines have a longer, more rigid trade cycle, whereas a tractor is more likely to be updated regardless of the economic situation. This is why combine inventories grow so rapidly compared to other machinery platforms.

Dealer math

Since June 2023, 1,755 combines between model years 2012 and 2023 were sold at auction. Low crop prices and interest rates have dealership inventory managers looking at washouts and inventory turns. When thousands of dollars a month per machine are lost to interest costs, equipment needs to turn, and it needs to turn quickly. If a machine has a value of $500,000 and is financed at a 7% interest rate, the holding cost is $35,000 per year, $2,916.66 per month, and $95.89 per day. Due to this, the amount of equipment headed to auction will continue to rise through the rest of 2024. 

Not just combines

Combines will always be a challenge to balance inventory and price, but now other types of machinery are to blame as well. Tractors are going to be an issue in 2024. While the number of tractors on the market is not the highest, pricing has increased from 40% to 60% since 2017. Tractor supply numbers increased by 1,219 from February to March, and I think we will see a price correction sooner rather than later.

For more on used equipment, listen to my episodes on the Successful Farming podcast on the last Monday of each month. Aaron Fintel and I explore current market conditions and factors driving used equipment. Please tune in to the Moving Iron podcast, where I track the economic drivers of the farm equipment business, and check out movingironllc.com for everything related to Moving Iron.