Effects of the Coronavirus on Used Ag Equipment Sales3/29/2020
Is COVID-19 Pushing Values Down?
As more and more states enact stay-in-place orders for all non-essential personnel, the used farm equipment market appears to churn along, although early warning signs indicate this trend may not last. Analysis of over ten thousand agriculture equipment auction sales across the US has shown a definite shift in the type of auctions taking place. While first quarter average sale prices are higher year over year, the trend for many equipment categories is downward, which is opposite that of a year ago. This, at a time when agricultural uncertainty is at a high point, may be the beginning of a longer economic orientation.
Besides the coronavirus, some of the other obvious downward pressures on equipment sales are lower and volatile commodity prices, resilient land prices, the incomplete resolution of the trade war with China, a general reduction in 2019 crop yields, the RFS waivers’ negative effect on the ethanol industry, and changing weather patterns. All equating to strong negative pressure on the profitability of America’s farmers.
Considering all these challenges our farmers are facing, it is a wonder we have not seen a reduction in the ag equipment resale values over the past year, as shown below in Figure 1. Perhaps this is less wonder, and more a testament to our farmers’ perseverance and the support they are offered by their community partners.
There are some buoying effects that have mitigated these hardships, and perhaps are propping up higher YOY sale prices. Namely financing. Farmers are not as leveraged as they were in the early 80’s, and now have access to relatively low interest rates. One other supporting factor may be that many farmers are gravitating towards low-tech, ‘fix-in-the-field’ models at auctions that don’t require the OEM’s software to diagnose.
Focusing back on the effects of COVID-19, and the 2020 first quarter time span that this disease has been in the mainstream media, there has been a different shift. While the 2020 average is higher as can be seen with the trendline above in Figure 1, the general first quarter trend is downward in a number of high-end categories. Below is a detailed look at first quarter combine values from 2019 (Figure 2) and 2020 (Figure 3). Keep in mind the y-axis in the 2020 chart is nearly twice that of 2019, resulting in average combine resale values being roughly 30% higher, yet still trending down.
One undeniable impact of COVID-19 has been on the bidding platforms of equipment sales. Figure 4 zooms in on the last three months and analyzes onsite vs online auctions. In mid-March (blue arrow), you can see that onsite bidding has paused with the CDC’s recommendation of limiting large gatherings. Onsite-only auctions tend to bring lower average prices, so this move towards all online should not adversely affect the overall prices. The change in overall volume yet remains to be seen as some auctioneers have an easier time than others moving to online platforms.
We will continue to update you on the insights we discover as the information comes in.
Regardless of how this plays out over the next few months, the hardship that your farming client is working through is real and present. It will be vital that everyone has an accurate, up-to-date understanding of their equipment values before making any fleet decisions. Be sure to use this time to pull that information, check in (at a safe distance), and help your farmers prepare to weather this storm.