End-of-Year Auction Update12/18/2022
With only a couple weeks remaining in 2022, some farmers are still looking for Section 179 deductions. Reading into both the combine and tractor market, we continue to see a tale of two stories play out.
With a few larger dealer auctions hitting the block, the monthly combine auction supply numbers are starting to shape up. The GIF below, cut from Iron Comps' Market Trends, shows the expected seasonal 'U' shape of combines at auction from August to December. While the shape is consistent year-over-year, the supply this year is about 30% higher than last year, but still lagging 2020 numbers by approximately 10%.
Diving deeper into December auction sales (this year in light green) in the cut below, we see the twist this year over last December (shown in dark green) is supply of lower hour combines. Last December's biggest bulk of auction combines were in the 3,000 - 4,500 machine hour range comprising almost 40% of sold supply (vs. 34% so far this December). This year that bulk group moved to the 2,000 - 3,000 range with 29% of sold supply (vs. 23% last December). This boils down to a better quality machine making its way to the market.
While this month still has some more combines in store, we do have a good subset of sales data to run an early estimated index number. The past few months of higher supply appears to be having the expected effect. With the data so far, December values are estimated to be 5-10% off their highs from this past spring and summer. Still relatively strong compared with last year, but over-supply is likely cooling this market.
Finally, an exception to the overall cooling of the market may still reside in those combines with less than 500 separator hours. The combines within this month's index with less than 500 sep hours all produced significantly higher than average index values, meaning they are still bringing a premium at market.
This year's tractor market has been one of great expectations, and you can continue those high hopes for at least the short term. The supply has not yet returned like it has for the harvesters, but don't forget about demand. With commodity prices leveling off, and other inputs continuing to rise, farmer sentiment is growing cautious. This aligns with Purdue's most recent Farmer Sentiment rating of 102. The early estimate of our TZ Row Crop Tractor Index is slightly softer, down just a couple points from last month's near record high. The outlook is not bleak, but be on watch in the months ahead.
Within Iron Comps' Market Trends (GIF below) we take a closer look at just 300+ HP tractors sold at auction these last 30 days. The view before the first click shows that supply has not, and likely will not, reach the highs of last December. On the click we expand into December sales results, with supply of almost all hour groupings of tractors this year (light green) with less than 6,000 hours not matching the already limited supply we saw last year (dark green). This would be a good indication values will remain strong over last December. Yet, when we scroll down and eventually compare average prices by hour range of this month compared to August, parity comes into view. It's a mixed bag of which hour ranges this month vs. August brought higher values.
It is an early into this data, but there are signs that this tractor market may coming back down to reality.