Farm Progress

Amid economic downturn, machinery prices lower

Demand for new farm equipment plummets as production costs, interest rates rise

Andy Castillo

June 18, 2024

3 Min Read
Massey Ferguson tractor on display at the Farm Machinery Show in Syracuse, N.Y.
RECENTLY SOLD: An increase in new and used machinery inventory is driving equipment prices down at auctions and on dealer lots. Pictured is a Massey Ferguson tractor on display at the Farm Machinery Show in Syracuse, N.Y. Andy Castillo

Plummeting farm machinery demand due to falling crop prices and rising production costs continues to drive down sale prices at the auction block and on dealer lots. New machines are getting log-jammed by high inventory, so prices are being slashed to make room.

“Dealers are a little concerned with inventory. That’s going to cost them in the long term with interest rates as high as they are,” says Kim Rominger, president of the North American Equipment Dealers Association, adding that the economic downturn comes as dealers are finally catching up on COVID-19-era backorders. “They’re going to have to retail for a little less. That’s going to cause used products [inventory] to increase, and we’re already seeing increased activity at auctions for used equipment.”

Declining prices

In its latest market report, Sandhills Global noted that used high-horsepower tractor inventory has increased by almost 50% since last year. Used combine and planter inventory is, likewise, up by more than 30%. The high inventory continues to drive prices downward.

“An ongoing influx of newer, more technically advanced, and more expensive, high-horsepower tractors has left a still-growing number of late-model inventory on dealers’ lots,” according to a brief about the report. “These late-model, high-horsepower tractors depreciated at roughly 10% to 20% year over year in May.”

Adam Meyers, regional service manager at Kansas-based Baldwin City Heritage Tractor Meyers, can speak to this data from experience. “Right now, I’d say we have too much inventory,” he says. “The last two months have been the slowest we’ve been in a long, long time.”

Meyers, who’s been in the business for two decades, has weathered several economic downturns. He cites a 2017 lull driven by drought that hit dealers particularly hard. After a period of growth and expansion, things are pulling back. The cycle is predictable, and the reason is clear: “Commodity prices are down. Inflation is up. The weather hasn’t helped us a whole hell of a lot,” Meyers says.

Economic difficulties

In March, there was concern that the Francis Scott Key bridge disaster could impact farm equipment inventories. The collapse killed six and halted channel traffic to the Port of Baltimore, which imports more farm machinery than any other U.S. port.

Tim Wentz, field director for the Northeast Equipment Dealers Association, says equipment was unaffected. The port reopened fully in June.

“Manufacturers pivoted and were able to use other ports, with a few exceptions,” Wentz says, noting that New Holland experienced some delays. “I haven’t heard any strenuous complaints from dealers.”

The current economic environment is difficult for both farmers and dealers, and there’s no end in sight. With inflation continuing to rise, the Federal Reserve signaled this month that it aims to keep interest rates steady by making just one cut this year instead of three.

Political opportunities

While challenging, Wentz says lawmakers can ease the burden by reinstating bonus depreciation in full. The Tax Relief for American Families and Workers Act of 2024, which passed the House and is currently stalled in the Senate, would do just that.

“It makes permanent bonus depreciation at 100%,” Wentz says. “They need to get it done now. It shouldn’t be a partisan issue. Interest rates are beginning to take a toll. I’m surprised — my experience in the past [is] when the stock market goes up, people are feeling comfortable with their discretionary income.”

But while the industry as a whole is in for a challenging few months, there’s some upside. Rominger says the Farm Bill should be reason for optimism from both dealers and farmers alike.

“We’ve read the Farm Bill, and we’re behind the Farm Bill as it’s written right now,” Rominger says. “I think it is going to be good. It’s going to keep money going to farmers.”

About the Author(s)

Andy Castillo

Andy Castillo started his career in journalism about a decade ago as a television news cameraperson and producer before transitioning to a regional newspaper covering western Massachusetts, where he wrote about local farming.

Between military deployments with the Air Force and the news, he earned an MFA in creative nonfiction writing from Bay Path University, building on the English degree he earned from the University of Massachusetts Amherst. He's a multifaceted journalist with a diverse skill set, having previously worked as an EMT and firefighter, a nightclub photographer, caricaturist, features editor at the Greenfield Recorder and a writer for GoNomad Travel. 

Castillo splits his time between the open road and western Massachusetts with his wife, Brianna, a travel nurse who specializes in pediatric oncology, and their rescue pup, Rio. When not attending farm shows, Castillo enjoys playing music, snowboarding, writing, cooking and restoring their 1920 craftsman bungalow.

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