A few years ago, the combine sitting unloved on the local dealer’s lot would be getting a little cheaper with each passing month. But not these days.
“We have 70 per cent of our dealers saying their used equipment (inventory) is too low,” says John Schmeiser, CEO of the Western Equipment Dealers Association (WEDA). “And we’ve also seen month-over-month price increases on used tractors and combines that are sitting around, primarily just because of the delay getting new equipment.”
The supply chain problems plaguing manufacturers and delaying the delivery of new machinery has many producers turning their attention to the used equipment market, with more buyers vying for a smaller-than-usual number of machines. And that has put significant pressure on retail pricing.
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“Because customers are being advised that wait times for delivery of new (equipment) are pretty bad or being pushed back, it’s kind of driving them to used equipment,” Schmeiser adds. “Especially right at harvest, there was a run on used combines.”
When supply is low and demand is high, prices inevitably rise. WEDA surveyed its dealer members to see just what has been happening to prices of machines on their lots.
Here’s what the survey revealed. For combines, January saw a one per cent price increase. April saw another one per cent. May, June and July each saw two per cent bump ups. Then things really started to climb. Three per cent more in August and five per cent in each of September and October.
“Historically, what we’d see is maybe those same numbers but in reverse as negative numbers,” Schmeiser says.
For tractors, the picture was similar.
January saw a three per cent increase. One per cent in March then three in both April and May. Following that, prices started jumping even faster. June and July each saw four per cent gains, August, five, then September and October six per cent each.
And remember, those are compounding month-over-month increases.
At Prairie auction sales last season, Ritchie Bros. Auctioneers saw roughly the same trend.
“I would say our business is probably at a high point for quantity, quality and pricing,” says Jordan Clarke, sales director for Canada Prairies division at Ritchie Bros. “From January to the end of April (2021), which includes a lot of our farm auctions early in the spring, there was almost a 10 per cent increase year over year. In the last three months (of 2021), in our business we saw a nine per cent lift year over year.”
The demand for pre-emissions equipment, which had driven up prices for those machines a few years ago, as Tier IV and Tier IV final regulations came into effect, no longer seems to have much of an influence anymore.
“I don’t think that’s much of a factor anymore,” says Clarke. “I think if you gave someone the option of pre-emissions versus not, they’d probably take pre-emissions. But we don’t see the pricing change on certain models. We don’t see that as a factor anymore. I’d say the sweet spot is probably the two- to five-year-old machine, depending on what category you’re looking at.”
As the growing season approaches and producers think about hitting the spring auction sale circuit to pick up an extra machine, what will prices be like?
“I would think, honestly, it (the used equipment market) is going to mimic a lot of what we saw in the last half of 2021,” says Clarke. “From all of the information we’ve seen, it’s going to take a while for manufacturers to catch up to demand. I honestly think there’s going to be strong demand on the supply that’s out there.
And don’t expect to find many bargains on dealers’ lots either.
“Used equipment (availability), in general, is at some of the lowest levels we’ve ever had,” says Schmeiser.
