Welcome to Moving Iron with Casey Seymour and Greg Peterson, the podcast for anyone and everyone involved and interested in the business of equipment. If you want to understand what trends and market forces are impacting the price of your iron, you've come to the right place. Buckle up. It's time to move some iron.
Hey, welcome to the Moving Iron podcast brought to you by John Deere. I'm Clinton Griffiths. Of course, I'm here with the founder and the man himself, Casey Seymour. Casey, good to see you again. You've kind of got something a little different you're doing these days.
Yep. Yeah. I went back to the equipment space. I'm back to the dark side and over here on the used equipment side. Just trying to figure out how to make the wheels on the bus keep turning. Yeah, with this used equipment stuff that's out there.
Yeah, absolutely. Well, we're going to keep you here on the Moving Iron podcast as we go and we'll be bringing you in every week to get your insights and input and just keeping folks up to date, which is what they've come to expect from the great work that you've done and built here over time. So, I guess with that said, Casey, kick us off. What have you learned in the last week that you think translates well to this equipment market?
Uh, you know, that's a good real quick, I want to say this.
They finally brought a guy in that's a professional broadcaster [laughter] to run this show, right? That's what they did, right? They got Clinton over here now to run this show like it should have been ran for the last 10 years. So, I'm excited about this, Clinton.
Well, I'm excited too and I'm excited to talk iron and obviously it's going to be a lot of fun, but I'm going to be part of the discovery process here with all of your listeners week after week. And I'm hopefully going to ask some questions. We'll get comments, we'll read comments and we'll try to ask the questions that people want to know and keep picking your brain the way that you've been sharing it with everybody for all these years doing this podcast. But Casey, it's fun to be here and I think it is a good time and a good time for a transition here because we are starting to see a little bit of that maybe in these markets.
Yeah. You know, so let's go back a couple of weeks, right? So, there was a lot, there was just a heaviness that laid weight over the marketplace because you could feel like there was stuff moving but and it felt like people were ready to start stepping out and looking at some stuff. And then you started seeing the corn market take off, you know, after the Pro Farmer crop tour went through and you know, the USDA came out and said, hey, we're raising the number of acres that we had but we're not actually raising any yield. So what they're saying is more acres with less yield across those acres basically, you know, and I think Pro Farmer talked about that. They showed that in the results. So now you started seeing the corn market take off and by no means is anybody out setting anybody's hair on fire by any means, but what you are seeing right now is a good opportunity for some old deals that were kind of lingering out there to get a little more life in them. And now people are starting to take a hard look at stuff again and they're starting to think about what it looks like. I truly am anticipating a strong fourth quarter. And that's, you know, I'm going to use air quotes here when I say strong, right? But I mean, comparatively speaking, it's going to be a strong fourth quarter. And I think as you look into that first quarter of the year, you know, you start looking around here and you start saying, well, what's $6 corn look like to the used equipment space? What's 650 corn start looking like used equipment space? I've even listened to, you know, Chip a couple times throw out $7 corn. What's that look like? And there is a path to that. It's not some crazy outlandish thought process, but you know, I'm looking at it at 550ish, you know, 575, 585 corn and what's that mean for used equipment space? And I think it frees up a lot of things where it gets some people whole again and they got have a chance to step back into the marketplace and we're starting to kind of see that start happening right now.
You know, and I think you're right on there, Casey, as we look at the big picture here. And I really do think this pathway is there, a pathway to see some improving incomes out there in farm country. You know, cattle's been pretty good, obviously, that side of things. But when you get to the rowcrop side of things, we just needed a spark. And you know, you catch a little bit of a spark with what we heard from the Pro Farmer crop tour. Well, now we've continued to have some of this wet weather. Now we've had some high heat. All of those things start to kind of really work in as we go out and begin harvest, which is kicking off around the especially the southern tier states. And then, you know, we're not even talking yet, and we haven't really even started factoring in what this El Nino situation is going to look like in South America. And you layer all of these things on top of each other and it starts to build a story and a story begets a little momentum and you kick off this momentum and all of a sudden man we've got a lift. And so as I start to think about equipment needs and obviously this time of year is whenever we're using equipment hot and heavy, you know, how does that mindset start to work there? Thinking about okay, what am I going to trade? Am I going to buy something new? What am I going to look for in terms of cash flow and financing? Put me in the mindset of that, Casey.
So, at this time of the year is when most guys are starting to have that conversation, right? They kind of know what they're going to have. They kind of know where their yields are going to be. At least they think so anyway, right? And they've ran those numbers and they've talked to their accountants and they're going through those things and what's it look like if X happens and they got a bunch of scenarios laid out right now. Then they're taking inventory of what they've got. Things like this when they pop up. I always kind of go back because my time in this industry started in 2006. So I've got the old-timers that talked to me about, you know, when I was in my 20s, the old guy in the office that was 40, he was telling me all the stories about the late 90s and the early 90s and the late 80s and all those different hiccup points that we saw happen throughout agriculture. Well, I go back and look at 2008. 2008 was great, recession happened. Deere really stepped back, Case stepped back. Well, these guys all stepped back of what they can of producing and really slimmed up the amount of equipment that was on the marketplace and it took probably 18 months, 24 months for that to get full bore again and that's what you saw, you know, 2012. So you're ordering stuff now for like right now you're going through order writing periods and you're ordering that stuff now for 27 delivery, right? And so that money won't be recognized. So anything that happened with the marketplace is going to be recognized in 27. Whether it was good or bad, it'll all be recognized in 27. Well, if you go back and look at the 2010 order board for 2011, that's the first time you really start to see it pick up. And I feel like we're headed back to that again to where we look into 27 into 28 ordering. We're going to see some stuff there. Now the used equipment space, there's no real lack of, you know, 21, 22 and 23 model stuff on the marketplace even though during that time frame during COVID it was hard to get production and those kind of things, there's still plenty of that stuff out there. So if you're looking at that 3 to 5 year old stuff, there's going to be more demand for that and especially if you go out to 10 year old stuff there's even a bigger demand for that stuff. So, if it's good quality stuff right now and you've heard Greg talk about it a million times on here, I'm sure people talk about here, but where those auction rallies are coming in on those things and we're starting to see a stronger and stronger space. Now what that means is that when you're looking at the value of equipment today, you're going to start seeing things that are maybe not as nice as this previous stuff was because the cream got taken off the top but the prices stayed the same. Now, when the good stuff comes back in, it's elevated even higher, right? So, it's dragging those prices up, and we're starting to see that happen where you're starting to drag some prices up and some of that starting to spill over into that late model hour stuff that we see where there's getting to be some movement there. Not a bunch, it's not going crazy by any means, but the thinking behind that is, you know, I may or may not have bought a new combine every year, for example, or every 3 years or five years, whatever the trade cycle was. I'm not going to do that anymore or I'm going to buy this one-year-old machine. So, some of that conversation is starting to come into play. Hey, I need to start looking at some tractors and those kind of things. And those one to three-year-old machines are really starting to get some traction on them. There's a lot of good interest rates out there on those too, by the way. You know, there's a lot of 24-month waivers out there that you see where, you know, 0% for 20 months and then, you know, it's followed by standard rate after that. But, you know, there's some good opportunity to see some effective interest rates out there. You know, 3.9 to 4.9 in that range when you start figuring how those two things come into play. So, I think right now the process that folks are going through is what is it? What do I really really need on to right now to get me through either harvest or hey, when harvest is done, I'm not going to spend, you know, x more dollars on this machine. I'm going to trade it in, get a different one. Those kind of conversations are starting to gain some ground. Even so, because when they're looking at post-harvest, I'm going to do some updating here. Hey, I'm going to defer some stuff into the first quarter and then I'm going to start making those purchases. So, that's the kind of stuff I think is happening right now.
Casey, I want to throw a couple of questions at you here. Just on the peripheral and it's really around making these decisions on top and living in a world where yes, prices are better, but our input costs are still high. I mean, we look at this diesel price. I mean, national average near $6. Do you feel like that's a wet blanket at all on some of this demand or is it one of those things where we all know, listen, we all know it costs money to fuel these things? It's part of the factor. And we know that probably these record prices ain't going to last forever. And so I'm going to go ahead and take opportunities when there are opportunities for equipment. Which one of those things do you think factor the most?
Yeah, man. This diesel thing is for real. That's the... it's wild, isn't it? It's just wild. I can't believe how much it's gone up over the last couple of weeks. But, you know, if you're... it's an input like everything else is.
Yeah. And it's definitely just one of those things when you really think about how it layers in there, it's absolutely going to factor into, you know, I think this time last year, something I read the other day, like this time last year, the price of diesel was 350 a gallon and now it's, you know, 565 a gallon or whatever it is now. So, you know, so it's almost doubled in price, you know. So, but that's yeah, it goes right back to that whole thing of there's definitely a... that's going to go, it's going to factor into someone's purchasing idea.
It has to eat some cash flow, right? Absolutely.
I mean, that's and the capital's not available to then translate and turn into, you know, what you're seeing for your equipment or what even is available for you to make those equipment purchases or to consider them. This is interesting. So McKinsey and Company, they do like a survey. I think it's every year, every couple years where they do a global survey of farmers. And you know, I know farmers in other parts of the world are not American farmers. And so there's, you know, take a little bit with this with a grain of salt. But one of the things they talked about is the importance of preserving cash. And basically, and this won't surprise you at all, Casey, but whenever they said, you know, whenever they're looking at margin pressure, and farmers want to maximize their short-term ROI because of that pressure, you know, fertilizer is often the number one thing we talk about that they'll reduce, right? So, farmers will be like, "Yeah, well, I'm going to use less nitrogen, phosphorus, potassium." But number two, the things they defer is equipment. And so like in this survey they found that, let me see what it says here. Farm equipment: 16% of farmers cite equipment as an area to cut first while 36% expect to fund it first as profits recover. Showing the largest positive swing across categories. Now you can look at that as a downer but I also look at it as pent up demand as in potential velocity here as these prices come in and maybe things shift. I mean, we get diesel price down, all of a sudden you've got, you know, grain prices up. I mean, you could see this thing take off, couldn't you?
Oh, yeah. Yeah. And I think what you're... when I first started doing this, you know, equipment was typically one or two. That's kind of what it was, you know, and then you went down to your input. Now it's flipped completely around. I mean, it's now, you know, if you top 10 things, it might be seven or eight now. Sure. And it's kind of trickled its way down there every year from that point. But I will say looking at where equipment's at today, the price of equipment is going to also play a strong factor into that, right? And as you're looking at what do I really need to do right now? What's it going to cost me to do that? Are maybe some performance upgrade kits, precision upgrade kits, those kind of things, are those on the table now where you start looking at what am I just looking for? Technology or am I looking for a... do I need a better powertrain like those kind of things that come into play. All those things are going to factor into that and it's going to be a mix. You know what I mean? I can't tell you that I think new equipment is going to be a limited group of people that buy new equipment because just because of what it costs new, right? It's just expensive, which then is going to, in my opinion, because of the number of people that are buying new equipment, you're going to have a demand structure that's going to force used equipment buyers to look at their equipment at a different rate of change, right? So maybe I roll my equipment every three years. Maybe now I'm going to have to do it every five years because of a price and b availability of what I want and when I can get it, right? So that could have some playing that which then will prop up used marketplace into not such a low low and not such a high high, right? It's going to be kind of in a band. And I look at it more as this thing kind of goes along. Of course, you're going to have your huge crop prices that come through every so often. You're going to have these really low crop prices come by so often, but because of where demand's at and where supply is going to, I feel like it's just going to kind of keep it in a medium range there that's not going to be this huge wide swings. Now, biggest thing that's going to draw from that and make sure that happens is, you know, how far out will these dealerships and manufacturers sell based around the marketplace? And I've said this for a long time. I know farmers spend their money 12 months in the rears, right? I mean, like they get the money, they grow the crop, then they get the money, then they go spend it. And that's typically 12 months after the fact, right? And that's when they get everything done. So that's why you saw in 13 or 14, we were still selling the hell out of equipment. It was just going crazy. Right. Crop prices didn't represent what was going on in the marketplace. So, but in 2012, those that did have a crop had a lot of money, right? And they spent that money in 13 and 14. No reason for it to be there because the crop price wasn't there, but they had the capital to spend and they had tax reasons and everything else to make it happen. I think this is going to be a similar situation when we see that now I think 27, 28.
Do you think there's a category that sees a little higher push this time around? Is it combines? Is it sprayers? Is it tractors? All of the above?
You know, I think man, you know, that's a good one. I kind of look at the combine fleet that's out there and, you know, a lot of guys did go through 21, 22, 23, and those that could do it did update and they should have some good stuff out there. But those are the kind of machines like if you're looking at your basic loader tractor, there's not a lot there that you have to worry about from a wear perspective, right? Sure. Not a lot there. Combines, choppers, sprayers, those kind of things where there's a lot of moving parts, a lot of wear things, those kind of things that are moving around that require a lot of maintenance. You hit some pretty high points there, right? You know, you spend a bunch of money, then you don't spend much for a while, and you spend a bunch of money, then you don't spend a whole lot for kind of go back and forth, right? And you're trying to hit those valleys to where, hey, I'm going to spend the money now. I'm going to get the good out of it now. I'm going to go trade it off. I think I look at combines as being a potential area to see some movement. I think there could be some good movement there. Just because of the age of the combine that's out there and the amount of hours that they're putting on machines because that's one thing we've seen over since COVID is that the hours of use on the machines on average have gone up year-over-year like and we're starting to see more of that take place. So that means there's more maintenance especially on the combine, especially on choppers, especially on those kind of things where there going to be a little more maintenance. How much maintenance do I want to do or how much I want to pass on to the next guy. And I think that's some of those conversations that are being had. I see combine sprayers, those kind of things having a bit of a run. But you look at four-wheel drives right now, too, and they're not doing so hot. And I think, again, it goes back to price and it goes back to the availability of horsepower that's out there. And I think there could be some, you know, the 9RX, 8RX, you know, those kind of things, those K squad tracks, those kind of machines out there, could see a run too because of they're going to update, you know, hours. You know, they could like again, they're spreading a lot of hours across these machines. They could be updating some stuff. So my personal opinion I think the stuff right now where there's where you're seeing a delay in the marketplace for people coming to buy combines, four drives, sprayers to some extent, I can see those kind of machines really really taking off and running and seeing some good movement in the marketplace. By no means are they going to go buy them all by any means but you're going to see some movement there.
Yeah, that's right. Well, Casey, give me your final word for this week. As you kind of get back to work there. Give me some final thoughts here for folks as they prepare for this week. And we do have, you know, there will be another USDA report that comes out in early September here, first week. So we're going to be, you know, adding a little more context to this market hopefully.
Yep. Yeah. You know, I think if you're in the marketplace to buy something, now is the best time to do it. I'm just going to... I mean, if you wait till December, I think prices are going to be higher and you're going to have to pay more for something than you pay for it now. So, if you're really in the marketplace and you're really considering about buying something, I think right now is the best time for you to do it. If you wait till December, it's not like it's going to double in price or anything like that, but I think the prices will go up. And I think if you're looking at doing something, you know, now is the best time to do it because like I said I think as the year continues to go, you know, coming off that seasonal low that we saw in pricing in May and June where we saw a huge drop off in values and now it's come right back up. And typically what happens in these marketplaces is that whatever happens in June, if the market's ticking up in June, it just amplifies that to the end of the year, you know, and vice versa. If it's going down in June, it just keeps getting worse, right? So, we saw that huge tick up coming out of June into July and into August so far. And we've seen a good tick of value coming out there. So, I don't anticipate seeing that stop. So, if you're in the market, no better time than now.
