Can You Roll a Profit with an Old Baler?4/26/2021
This time last year we wrote about the seasonality of balers. The summer dip in values still exists, but that was a flat commodity market. The price of all machines since last harvest have been nuts! Just last week we were talking with a farmer who purchased a new farm down in Tennessee. With that farm came a relatively new Vermeer 504R round baler. The farm was needed. The extra baler… not so much. Iron Comps came in handy to let the farmer know what he should expect from this yellow iron round roller, and it got us thinking. “Could farmers have invested in machines last year, and now having held them for 6-12 months, turn around and resell them on the open market for a profit?” Land appreciates, but machine values almost always head downhill with time and usage. Is 2021 a unicorn of an opportunity for you to turn a profit on that under-utilized baler in the back of your shed?
The round baler market has responded to 2021 like all other machinery. The average price of all used balers was relatively flat from 2019 into 2020. The overall average price did increase 3%, but the 1st quarter average price (remember the seasonality lesson from last year?) dropped 12%. Either way you slice it though, 2021 has been making hay! An average round baler sold in the first quarter of 2021 is 25% more than the same time in 2020, and even 10% higher than this time in 2019.
But our question needs to be based on more specifics than descriptive statistics can provide. With a few clicks in Iron Comps Insights, I was able to pull up dozens of sales from one of the most popular models to ever roll off the Vermeer Mile in Pella. The 605 Super M. Two particular balers provided a great example of this contrast. The first sold at the beginning of this market rally in early September of 2020, and the second in the midst of this run in late January of 2021.
Although produced in separate years, these Vermeer 605 Super M’s both had the same high-end features and sold in the Midwest. The 2020 sale went for $19,750 and had a 7,150 bale count. The 2021 baler sold for $22,500 with slightly more than 11,800 bales counted. Despite the higher bale count, the more recent sale went for $2,750 more than the model sold last year! That is 14% more for a baler that has already produced 65% more bales.
As we get further into this bull market, it is getting to be more and more important for farm businesses to understand their collateral leverage and that it is not just your grain that is drastically appreciating in value! If you are not yet using Iron Comps, you can head over here to find out how much more your machinery is now worth!