Early Sales, Rising Interest Rates Pushing Combine Sales to Climb

6/23/18 On The Road with Machinery Pete: Frontier Ag and Turf
BASF Combine
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As Mike Dorwin looks over his equipment fleet, he’s thankful his machinery is parked instead of still rolling in the field after winter weather in western Wisconsin stuck around into spring.

 

“We had a late April snowstorm, which we thought was going to really put us behind,” said Dorwin, who farms in around Woodville, Wisc. “When the weather turned, it turned beautiful—everything dried up awesome.”

He said 13 inches of snow blanked his fields on April 14. However, the weather flipped quickly, and he was in the field planting less than a month later. Once he started planting, he says the weather cooperated allowing them to finish planting in record speed.

 

“We were finished in 12 days,” he said.

With little forced downtime from Mother Nature and equipment issues, Dorwin said his slightly used fleet of equipment helps with efficiency on the farm.

“We typically run up to 1,000 hours and then roll them,” he said.

It’s that need to upgrade that drives equipment purchase in an area predominantly driven by large ag.

 

“Tractor sales, for the most part, have been sound,” said Daniel Ruck, Frontier Ag & Turf. “Our 4-wheel drive tractors have been solid. Our inventory is in great shape.”

Ruck said halfway through 2018, equipment sales have been performing surprisingly well.

“We're looking to see some strengthening in some of the used equipment values, which has not happened for quite some time,” said Ruck. “That all leads to some positive movement for us.”

A stronger start that’s showing up in more than just Wisconsin.

“I would describe it as generally a bit stronger than most people would have imagined, and it kind of started again last November,” said Greg Peterson, host of Machinery Pete TV. “We started to see an uptick in auction pricing, and I think the underlying root cause here is just pent up demand.”

 

It’s pent up demand showing its face on dealership lots after two to three years of a slowdown.

“I'm kind of seeing it across the board,” said Machinery Pete. “The strength is not isolated to any one particular area. I would say that the hottest segment is continuing to be that the 10- to 20-year-old equipment in really good condition almost whatever it is. That's always been a truth in the U.S market but it's really accentuated right now.”

Strength is also showing up in the combine market The latest Association of Equipment Manufacturers (AEM) Flash Report showed combine sales jumped 50 percent during May, rising from 213 machines purchases in 2017 to 323 in 2018.


“That echoes exactly what I've seen since November on the used combine market,” said Machinery Pete. “I think the auction market tends to show up earlier, but used combined values lifted late 2017 and held the first two quarters of '18. So that's been a good sign.”

“With that pent up demand and the potential for rising interest rates, all of those things are weighing into the fact that customers are making decisions earlier than what we may have expected,” said Ruck.

Those earlier decisions have lead to a 30 percent jump in combine purchases at Frontier Ag & Turf so far this year.

“That's not a huge number for us, because we're so diversified, but we've seen some early purchasing in combines that we haven't over the last couple of years,” said Ruck. “Year over year, we didn't expect that much.”

 

As combine markets climb, dairy equipment is facing intense pressure.

Local dairy farmer Ken Scheps said while the hay crop looks good so far this year, milk prices have struggled.


“We’ve contracted or hedged milk for probably the last 11 years, so if we can break even on a bad year, that's a good year,” said Scheps, who farms in Alameda, Wisc.

 

While factors like milk prices are out of Scheps control, he wanted to be able to manage what he could on the farm. He made the decision about a decade ago to purchase a forage harvester.

“We were getting more acres and more acres, and we just wanted to have more control,” he said. “We had enough help on the farm, and it just a good fit for us.”

Ruck said half of Frontier Ag & Turf’s dairy customer base is custom harvesters, while the remaining half harvest their own feed.


“The forage harvester side continues to be a challenge for us with dairy being where it is and the costs of improving that efficiency,” said Ruck. “That's going to be our biggest challenge to the balance the year.”

 

Machinery Pete said those challenges can create opportunities for someone in the market a position to buy.

“To me it's an opportunity area,” he said. “All you have to do is look at our website—there's quite a few self-propelled choppers available. And when they show up at auction or at the dealership, it's a great opportunity if you're able.”

 

For both Dorwin and Scheps, it’s adding efficiency while trimming costs where they can, helping them weather the uncertainties of agriculture this year.

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