As inventories of new farm equipment pile up and consumer demand wanes, dealers are approaching the used machinery market with caution.
Despite low commodity prices, high interest rates, and economic uncertainty, the recent Ag Progress Days, held from August 13-15, saw continued enthusiasm from dealers and manufacturers showcasing new farm machinery. However, as manufacturers offer discounts and financing to expedite the sale of new equipment, the market for used machinery remains volatile.
Derek Weaver, Sales Manager at Agriteer, noted that while farmers are holding onto their machinery longer before trading it in, a surplus of used equipment is accumulating. “The used equipment inventory is building up, and we need to manage it carefully,” Weaver stated.
Dealers face limitations in offering significant discounts or financing on used machinery, unlike the flexible promotions seen with new equipment. The current market contrasts sharply with the pandemic era, when demand was high and inventory was scarce.
Weaver commented on the challenge, saying, “It’s been a struggle adapting to the fluctuating market and balancing new and used inventories. During the pandemic, we could sell anything. Now, we’re contending with aging stock of both new and used equipment.”
Despite these challenges, there is cautious optimism about future market conditions. Brad Hershey, Chairman of the North American Equipment Dealers Association, noted that high interest rates are currently unsettling for consumers, but he anticipates stabilization as the year progresses. The upcoming presidential election is also influencing consumer hesitancy, with clearer trends expected after November 5.
A recent report from the Association of Equipment Manufacturers highlighted a positive development: U.S. sales of four-wheel-drive tractors rose by 18% in July compared to the previous year and are up 5% year-to-date. These new tractor sales often lead to trade-ins of used machinery, potentially balancing inventories.
Nonetheless, inventories of used equipment remain substantial. A report from Sandhills Global revealed a 58% increase in the inventory of used tractors over 100 horsepower compared to last year, leading to a decline in auction values. Used planter inventories, though slightly reduced in the spring, are still higher than last year, with auction values stabilizing but trending downward.
Jay Gainer, General Manager at Messick’s, emphasized the need to maintain well-stocked lots despite high inventories and reduced demand. “Customers expect quick access to equipment, so we need to keep our lots stocked, whether it’s new or used,” Gainer said.