Are Farmers Reaping the Benefits of the Draper Head?
A portion of this article was originally published in the September 2020 Successful Farming magazine.
The emergence of draper heads, and the premium price tag they carry, has been a point of coffee-time contention for farmers over the past 10 years. Now that these platform harvester heads have been around for a decade, an increasing amount are showing up at auction and in Iron Comps.
Sales seasonality of traditional auger-style bean heads is very predictable. A moderate sales volume surge in March and April, strong pre-harvest peak in August, followed by the typical, tax-driven auction surge that most implements share at the end of the calendar year. The prices for these traditional heads remain consistent, with a slight premium realized in the beginning and end of the year. These patterns have held steady over the past three years. Draper month-to-month seasonality cuts a similar path. It is the year-over-year changes where the two headers start to diverge and the insights roll in.
On first pass, it seems like drapers are losing favor. The average auction values of drapers fell from $36K in 2018 to $26K and $33K in 2019 and 2020 respectively. Yet the devil is in the details and that is where we need to go to fully understand a trend. The summer of 2018 saw higher values across many equipment categories because we had $10 beans. A year later beans dropped to $8 and we have not topped 2018’s highs since. (Small caveat... Nov. '20 beans broke the $10 mark the morning this was published!) To account for this year-to-year market-induced fluctuation, we need to look at the differences within the year. Here is where the premium paid between consignment and retirement auctions is significant. Consignment auction values tend to represent the floor of the market, and retirement values almost always deliver the highest auction prices.
The table above showcases the average annual values of auger and draper heads sold at consignment and retirement auctions. The far-right column is the premium that those retirement auctions brought over consignment for each type of header. The auger head fluctuates down when the bean market took the big hit in late 2018 into 2019, but has rebounded in 2020 (for reference, combine values have moved in a similar fashion). The premium of draper retirement auctions, however, does not spring back in 2020.
Do not interpret this as farmers not finding any value in a draper head. A more likely explanation is that farmers, with a few more harvests running these heads, are finding a more realistic value of the draper head. The resurgence of the bottom side of the market, with a $5K increase in draper consignment values into 2020, could indicate some farmers are looking for the ROI that a less-expensive draper may return with better yields and faster harvest speeds. The top of the market, represented by retirement auctions, grew at a much slower rate relative to consignment. This closing of the gap is also likely ROI driven and an indication that the hype the draper once enjoyed may be coming to a close.
Another factor that is likely increasing the price elasticity of these drapers is what economists call ‘durability’. The more durable, or repairable, an item is, the more price sensitive consumers will be towards new purchases. While many of the drapers out there are anything but easily repairable, the very comparable substitute of an auger bean is very durable. In fact, in just one afternoon last summer I repaired a bean head with two other guys, a layer of poly, a cordless drill and rivet gun. All for less than 500 dollars. Perhaps the ‘bright and shiny’ has worn off the draper head?