Takeaway

The presenter argues the used agricultural equipment market is turning, with retail values for some models now following auction prices higher. This shift is driven by strong farmer demand to upgrade fleets amid high new equipment costs and persistent supply chain issues. The key takeaway is a bullish view on good-condition used machinery, with the presenter seeing the trend continuing through year-end and into Q1.

What the presenter said

• The retail market for used ag equipment is starting an uptrend, with 8R tractors showing a 2.5% to 5% value increase in the last 60 days. [01:00]
• This follows a 6-12 month period where auction market prices were already increasing. [01:56]
• Farmers are increasingly looking to buy good condition used equipment due to high new equipment prices and a desire to update their fleets. [02:09]
• Major OEMs like John Deere are bringing back employees, signaling positive internal forecasts for future demand. [02:29]
• Supply chain issues persist, affecting the availability of parts and equipment, and farmers are advised to keep essential parts on hand. [06:11, 07:15]
• Compared to two years ago, there has been an 84.2% decrease in 1-2 year old used equipment sold at auction, despite a 28.8% increase in the total number of auctions. [19:07]
• This reduction in late-model used inventory is a result of dealers successfully clearing stagnant stock from previous downturns. [19:38]
• Farmers are showing a "coalescing mindset" to prioritize buying used equipment over new, driven by high new prices and the operational need to keep farming. [16:51]
• A multi-year equipment plan and a strong dealer relationship are critical for farmers to navigate market fluctuations and secure financing. [25:42]

Trade ideas

• Instrument: Used agricultural equipment
  • Direction: Long
  • Thesis: The market for good condition used equipment is in an uptrend, with prices increasing due to strong farmer demand amid high new equipment costs.
  • Entry: Not specified, but the presenter notes "no better time than now to do it" if in the market.
  • Target: Higher prices through year-end and into Q1.
  • Stop: Not specified.
  • Horizon: Short-term
  • Conviction: High

Levels and data cited

• Auction Prices:
  • 2014 715 Quadtrac (812 hrs): $491,830 (US)
  • 2015 715 Quadtrac (1188 hrs): $513,800 (US)
  • 2013 John Deere 8235R (458 hrs): $225,000
  • 15-year-old John Deere 4730 sprayer (785 hrs): $210,000
  • Automotive diesel in Iowa: $6.50/gallon
• Data References:
  • Casey Seymour's data: Retail value for 8R tractors increased 2.5% to 5% in the past 60 days.
  • Machinery Pete's data: 84.2% fewer 1-2 year old equipment units were sold at auction on September 16th compared to two years prior, despite 28.8% more auctions being held.
  • USDA: Forecasts that overall acreage for 8 major row crops will fall by 6 million acres (2.4%) over the next 10 years.

Risks and what would invalidate this

• Broader economic headwinds, such as fuel prices and interest rates, could dampen market momentum.
• Persistent supply chain issues could continue to affect parts and new equipment availability.
• Uncertainty around trade and tariff policies can disrupt the market.
• Weather events or disruptions in other major ag regions like South America could impact crop prices and farmer sentiment.
• Consolidations and shakeouts in the farming industry could alter demand dynamics.