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The new reality in farm auctions

In his blog this week, Lee Hart takes a
look at the pending Viterra takeover deal and ponders this question:
when does big business become too big for its own good?

Shortly after I read Lee’s blog, I came
across another reminder that all businesses seem to be getting
bigger. A press release from Ritchie Bros. auction company proudly
stated that firm had just broken its single-day record at an

equipment sale. The company’s permanent site in Brisbane Australia
saw U.S. $54 million worth of machinery sell in a one day. That
surpassed its previous record by U.S. $20 million over a sale held in
Minneapolis, Minnesota, in 2006.

The press release said there were over
1,600 on-site bidders at the Brisbane sale along with a host of
others registered on-line.

As I think back to farm auctions I
attended as a kid in the 1970s, those events that saw 100 or so
people gather seem to have little in common with today’s sales where
proceeds now figure in the hundreds of thousands or millions of
dollars. The average farm auction now has a staggering value of
equipment in the lineup. Bidders don’t even have to actually show up
at the sale site to buy something. Many machines are sold to faceless
internet buyers known to the crowd in attendance only by their bidder
number.

It’s clear this growth in auction size
isn’t any more likely to go away than the trend of international
grain companies continuing to get bigger. The number of auction
companies has declined as has the overall number of sales held each
year. There are a few big players now, but Ritchie Bros. is emerging
as a dominant force, using its permanent sites to host mega events
around the world at regular intervals.

These large sales have even changed the
way equipment deals are made. There are many more reasons for selling
equipment through auctions now than there used to be. Dealers
frequently liquidate inventory or acquire it through auctions.
Farmers can opt to negotiate cash-only agreements on new machines at
a dealer and use these large auctions to move their old machines.
Apparently, at least a few now do exactly that.

I’ve spoken to a couple farmers that

have gone that route and they liked how the numbers worked out. But
they did have to accept some risk by putting their used machines into
an unreserved sale. Selling prices are rarely guaranteed. But auction
companies argue that risk for sellers isn’t what it used to be,
because they now use technology to reach a much bigger group of
potential buyers than they could a couple of decades ago. The broad
reach auction companies have and the new trends in the industry seem
to be equalizing selling prices and machine availability across the
country.

Equipment sold in one province or U.S.
state may head directly to another, or even to another country. Long
gone are the days farmers would only attend auctions sales close
enough to allow driving home that new tractor or combine in a few
hours, which made sale prices subject to regional influences.

Those of us that saw auctions as a way
to pick up some cheap, older machines or newer equipment at wholesale
prices are seeing those opportunities diminish.

Has big in the farm auction business
become too big? Clearly, it depends on your point of view, the scale
on which you operate and what you expect to buy and pay for anything
you acquire at one. Along with those reduced opportunities for bargains come new ones, providing benefits in other ways. And if you’re selling, that might be a different matter
entirely.

How do you see things?

Scott

About the author

Machinery Editor

Scott Garvey is the machinery editor for Grainews.

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