Welcome to Moving Iron with Casey Seymour and Greg Peterson, the podcast for anyone and everyone involved and interested in the business of ag 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.
Hello and welcome to the Moving Iron podcast. Got Greg Machinery Pete Peterson on to talk about what's happening in the marketplace, but this edition of the Moving Iron podcast is brought to you by John Deere. Greg, how you doing this morning?
I'm doing well, Casey. How you doing?
Doing pretty good. Doing pretty good. It's uh that's a nice weather come through. We've got some rain our way and and uh it is uh picking up. I was down in Kansas for a couple days and crops down there on I was on the eastern side of the state. It's a totally different story than the than the western side of the state, but things looked like they were okay. So, it'll be uh interesting to watch how the wheat plays out that tell two two different uh sides of the state there. Obviously, western side of state's in bad bad shape, but if you look at eastern side of state, there's still some stuff there. So, it'll be interesting to watch what uh all the custom crews have to say once they roll through the eastern part of Kansas.
All right. We're getting some rain up here in Minnesota finally, so uh catching up a little bit, recharging the the soil. So, uh yeah, hopefully that'll uh make for a good uh a good 26.
Hope so. Hope so. All right, Greg, let's talk a little bit about what's going on in the auction space right now. As you take a look at uh this last couple of weeks here, what are you seeing that's popping out to you?
Well, I I think we're drifting back to historical norm where you get into late May, June when uh generally speaking, there's a little bit of back off in pricing. I do still think we're seeing really good condition, particularly tractors and construction equipment been very very strong. That might be the strongest uh sector we're seeing right now, the heavy equipment out there at hard cash auction pricing doing very well. Uh but, you know, again, just seeing a little bit of the a little bit of the back off. It's like uh you know, we don't really know how 26 is going to play out. So, some of the big ticket items in different categories can back off from where they were year-end into early part of the season. So, kind of got uh a few more examples along those lines. KCNO1, we were talking before we started recording with sprayers. And uh there was a sale Monday kind of out in Western North Dakota had a a 20 model John Deere R4045 just over 1,700 uh engine hours on that thing and it went for 176 475. And I got looking in our Machinery Pete auction prices and back 4 months ago in February, uh market maybe overall just a little bit stronger we saw uh an 18 model with the same hours. I think DPA auction sold that one out of like Vermillion, South Dakota, but that was 187. So, there you go. 2 years older, same hours, 4 months ago 187 versus now you know, that 176. So, again, that's kind of what I'm talking about that little bit of kind of drift off that we used to see that the first 20 plus years I did this uh compiling prices and then COVID and everything and the supply chain mess the last 7 to 10 years that trend kind of went away. But they they might be coming back again.
Yeah. Yeah, it's you know, it's funny you say that. So, you start looking at those two machines. They're both three ones. Six years old, one is eight years old. And I will say that one thing that I have noticed in my career that as you look at the if you get past about you start drifting into that older than 7 years old type of thing, 6 to 7 to 8 years old like that that little band right there. That's when you start looking at um the year doesn't matter as much as the hours. And as you're as you're kind of walking your way through that, so that could have been some of it there, too. Just the hour a little bit of hour difference and those kind of things, but you are right. This time of the year between end of May through about mid-July, that time frame typically does point towards a a slightly softer marketplace. Now, that being said, I've also seen that be one of the hottest times in the in the world to have sell stuff, but typically, historically speaking, this little band of time right now is typically the um the the the quote-unquote harvest flow of the year, right? When you start looking at auction dot I. Am. But from this point forward, you start watching and auction values start to change because now you're starting to see um as uh spring crops get harvested and um the fall crops start getting harvested, and you start working into um uh you know, corn, soybeans, those kind of things towards the end of the year. A lot of folks have a really good position in their mind like, "Hey, I think we're going to be this." Or, "Hey, I think we're going to be that." And they start looking at at at what what adjustments do you start making as you work your way through that. I will say this, the guys that I have might either friends of mine that I've been talking with um around the country, I'm still getting this uh the last-minute kind of rush to buy things. And like for example, there were a lot of planners that were getting delivered in May still, you know, to guys and they they they're used ones that guys had just found and they've made a decision to pull on you know, they were getting delivered uh in mid-May, you know, so that kind of tells you something that hey, you know, we're we're looking for exactly what we want to find for the price we want to pay, and we're not we're not in a rush to do anything, right? If we need to run our planner for one more year, then we're going to do that, but once I find the one I want and it's exactly what I want and it's exactly what I want to pay, and the numbers work for trade and everything else all like then I'm happy with all that then I'm moving forward but up until then I'm not I'm not in a big hurry to do it. I see that across the board. Yeah.
Yeah, I'm seeing the same thing Casey. It's just it cuts on condition.
And so when when it's like you just said when it's exactly that item uh the farmer's been looking for uh they'll get aggressive with it. So, you know, I'm thinking Saturday on my way in uh Minnesota, Winnebago, Minnesota, which is kind of just north of Blue Earth if you're not familiar if you're not from our land of 10,000 lakes. It's really good black dirt country, South Central Minnesota just north of I-90. Uh a farm auction there J.J. Wise Auctioneering had the sale. I think it was Bruce and Sheila Helland farm retirement sale, but uh a couple items on that sale jumped out. Uh it had a '21 model John Deere 8R 230 with uh 1,565 hours on it and that brought 172.5 which when I parse the data that's the second highest auction price on an 8R 230 with over 1,500 hours in 14 months. You know, it's not any type of record, but it's very solid hard cash number I thought. Same sale had a a skid steer, a '20 model Bobcat T595 only had 319 hours on it. So, a little unusual there with 6 years old, but that brought 47,895. That just snuck into the top 10 highest auction prices ever on a T595. And the real eye-opener Casey this is what I was telling you about before we started recording, but a '14 model Timpte uh and it was a low 40-ft range about 42,000 bucks for a 12-year-old grain trailer. Very nice but to get over 35 up over 40 at for that age. Again, when people find the quality uh you see some prices like this.
Yeah. Yeah, and that points there, too. Also, kind of what we've talked about here a little bit as well is there's a gap in the middle of the uh of the of the inventory space right now. You start looking at that 5 to 12-year-old stuff. There's That stuff has been picked over pretty well.
And and it's actually we're at the point now to where um what was a five-star grade A piece of equipment um might have been a four and a half-star, four-star grade A piece of equipment um you know, a couple months ago now it's just switched its place. Thing about that that I found about that grade that helps that brings the market up with it as you start working your way through that is as that quote unquote lesser condition machinery replaces the the really good machinery uh condition machinery. Yeah, it just it doesn't the price doesn't change, right? If grade A stuff was selling for 50 grand for example, and then that the the the the one step below was selling for 40 grand, it just steps up now and it's worth 50 grand, right? So, now you start it just places itself. And we're starting to see some of that happen a little bit where you're starting to see some of those I'm not saying junk by any means, but I'm saying like not not the premium stuff anymore is starting to bring some higher dollar values because that's what's you know, the next man up, right? It's the next best thing that's out there and that's what if you want it, this is what's bringing. That's where we're starting to see a little bit of that, too.
Yeah, I think what's what's playing into exactly what you said, Casey, is that supply issue of used that we keep referring back to and uh so much tighter. It's just it's continually tightened over the past uh 2 years now. And uh you know, there's certainly be some dealers definitely that you know, still trying to work down inventory levels, but we're at the point when I actually heard a large dealer say, you know, I can't believe I'm saying this, but I wish I had more good used equipment cuz I could I could sell it instantly. And so, that tightening does accentuate and like you say, maybe that tractor that was would have been a six out of 10 uh now is maybe a 7.2 out of 10 just cuz the scarcity. So, for example, again, you're drifting into the pre-DEF and it can get emotional and all that stuff or whatever, but doesn't change the fact that on Saturday in uh Royce City, Texas which, you know, pretty far south, I saw an 82 model 4440 Deere tractor with 7,000, let's see, it had 7,208 hours on it, power shift, went for 32.5. Now, that made me look to see the average auction price on a 4440 this year, of course, made from '78 to '82, so they're no spring chickens, but the average auction price, Casey, is 28,839 bucks so far this year. That's if you look on a annual year yearly basis, that's the highest auction price ever on a 4440. The the record was back in '23, kind of the tail end of that supply chain stuff uh coming out of COVID, and the average was 27,839. And now, it might fall the rest of this year, but we're we're sitting over 28,000. And when I see a nice one out of Texas, you know, and we love our friends in Texas, but uh you know, I've been doing this 36 and a half years, and it, you know, used to be that Mason-Dixon line uh across about central Missouri uh that doesn't apply when again, when you find a nice tractor, which that one was, you see those strong dollars uh And my friend Brent Olmer with Olmer Auction Service up out of Ashley, North Dakota, he sold two John Deere 4630s the last couple months. One was 30,000 and one was 29,975. And they're not collector tractors. They're I mean they're just good solid workhorses and we see the same on the red side. Uh So the dollars are finding the dependable really good condition dependable uh equipment that'll still get the job done.
Yeah. What is that old saying, Greg? If you drink enough anything looks good, right? So that's that's that, you know, if you take a look at some of these things that are out there. So That's uh that's
I've only seen one auction I've only seen one auction, Casey, where actually beer was served at the auction. Uh
I bet you they got more money for that one than they did anywhere else.
Machinery Pete data said that was a very good sale. And I won't I'll just say it was late December of 2011. And it was in Minnesota and it was 10° below, but the Busch Light was flowing. And that was a way to keep
you warm. Keep you warm, Greg. That's all it does.
It does in the winter yeah.
All right, man. All right, so simple we're talking a little bit about what you see happening in some spaces here. So we were talking a little bit before we got started on on on the sprayer space and what that looked like and where those things were headed. Um kind of looking at the overall marketplace for sprayers right now. Um It does does I think it sprayers fall in the same place right now. Combines and sprayers typically have a have an ebb and a flow with each other a little bit. When I in my as I look at this stuff, you know, combines typically are doing good, so are sprayers. Sprayers Combines are doing bad, typically sprayers are doing bad. And I think a couple of things for that. One is um they fall into that not as bad as a combine or a chopper or something like that, but the wear part issue thing and it's not so much that there's a lot of wear parts that they have to worry about it, but it's the stuff that they're spraying through those that have the corrosive nature of which and those kind of things where you got to like worry about did I get it cleaned out good and those kind of things and and it's a it's a it's kind of a bigger animal um to to kind of jump in front of. As I look at the the sprayer marketplace right now, I'm seeing um there's you know, obviously there's some late model R stuff out there, but the uh like the R4045s, the R older R4038s, the um you start looking at some of the some of the Patriot sprayers and those kind of things. Um As you as you're watch that stuff group, what's the volume that if if if you have a of a barometer on this all, but what's the volume of some of that older I'm talking like you know, five to seven, five to 10-year-old sprayers out there in the marketplace? What's that volume look like as you start seeing that come through the auction space?
Well, if we talk sprayers, I mean my head on a volume side Casey would run towards you know, more of the one, two, three-year-old ones we've been seeing jammed through the auction market the last couple years uh as dealers were you know, addressing the issue back in 24 of having uh quite a bit of excess. So, you know, I would say in the five to seven, eight-year-old range you know, generally that a little bit of that tightening you mentioned at the top of our conversation today. Uh generally speaking uh again versus two years ago. Uh one thing I do find really interesting over the years to monitor is when a new model series comes out and you know, it takes a couple years and then it starts to filter into the used market. So, like on the sprayer side now of 412 hours, the 612 hours, uh as we see more of those, what happens to the model previous and from a hard cash auction perspective? And we see it with sprayers, definitely see it with combines, uh and you know, there's some pretty aggressive depreciation going on there in that, you know, that's that's 6-10 year-old age range. Uh not to say you can't have a very nice one that come along and, you know, set people off and bring out a premium at auction, but most of them, like you say, have have just kind of are a little bit tired and they it is what it is and they they bring what they bring, but it can be a pretty sharp cliff. Uh particularly now when the price of new is so got so high. So, you got that level, then you got your 412, 612 hours or your, you know, whatever, the same Patriots. You know, what are they doing hard cash? And then a little you got your 6-8 year-old and it can be kind of jarring and then honestly, that's that gets back to why I started doing this all those years ago. So, you could you know, don't guess on that stuff, but really, really pin it down to what it's worth. So, when one comes along, whether it's at auction or private or dealer, it's like, that's a good that's a good number. I I can feel good being aggressive buying that thing. Or conversely, like, that one's going pretty high. I should sit this one out. So, uh Now, you sat in the chair of, you know, as used equipment manager all those all those years, decades dealing with with the with that older model series. What what are your thoughts on uh say sprayers here on like the R series, the R4045s or the same with the Patriots?
Yeah, so I know. I mean, to me I watched those auction prices come through and to me they they feel strong. They don't I mean, I'm not shaking my head going like, "Oh my god, the sky is falling." I'm also not going to sit here and tell you that man, they're bringing, you know, top dollar values means either. I think they're somewhere in that upper third as far as value goes. When you start watching that, you know, historically speaking, right? And one thing I will say this though, and this is something that I've I've watched for a long time. I probably some I have some really smart used equipment guy friends of mine and and they were uh we used to sit around and talk about stuff all the time. And one guy brought up to me the correlation between four-wheel drives and sprayers. And I'm like, "All right, you got to explain that one to me." Cuz I'm like I'm I'm dumb, right? So, I'm trying to figure my way through this. And he goes, "Whenever four-wheel drives um start to take off and run, sprayers fall off. And when when sprayers take off and run, four-wheel drives fall off." And then he goes, "It's about a 5-year cycle." And I go, I go back and look at my stuff and I'm sure stuff yeah, right there it is, plain sight, you know. And the only thing I could think of was that it was the switch between about every 5 to 7 years or so, these no-tillers have to go back in and kind of rip the soil up a little bit, kind of get kind of things kind of squared away, kind of get, you know, break through a few things and you saw a peak in in four-wheel drives and the horsepower for tillage and those kind of things. And um it's interesting and it would be interesting to study to go back and look and see now where our I cuz I know four-wheel drives aren't doing well at all. I mean, that's just not a that's not a very big demand um market out there right now. Uh I'm not saying they're not doing well. That's not That's not accurate, but they're they're not top top of the list right now of things that people are out buying. So, is that correlation back into play and are we going to continue to see this this ebb and flow um with the sprayer versus versus um uh four-year market. Now, me and said I also look at these one and two-year-old sprayers that are sitting in the market and I don't see a lot of movement with them right now either. And that's so but I I can say that, you know, insert whatever one or two-year-old piece of equipment you're not seeing a bunch of people coming up and down go get one of those. So, um what's it's direct correlators back to price and I think the thing about pricing a piece of used equipment from a from a new one um there is the yeah, the math that shows the appreciation and those kind of things but there's also the the math that shows what someone's willing to pay for it on that uh at what at when when you get to that that used equipment level, right? You know, if it if if a new one is X, then it should be Y. That's there's that's a pretty good easy math problem to stump with but the issue that we see right happening today is a new one is I'm just throwing a number out here 700,000 bucks and I go do the math and you kind of figure out okay, well, you know, say it's say first year depreciation is 25% and you're looking at you know, a 175,000 dollars difference off of that. So, that puts you down in that 625,000 dollar range as a book value, right? And you start working your way through it to where you want to you know, your your margin expectations and reconditioning and everything else. Say you're at 650. Well, if I can buy one for 700,000 or buy your used one for 650, which one are you going to buy, right? Especially when dollars are that big, right? So, now you start looking at that's got to be does it need to be 500,000? Does it need to be 450? Like what's that number need to be to make a used guy enticing up to come and buy it? And then I'll pick on I'll pick on, you know, class 11, class 10 combines, you know. Um, looks like to me the buying public's about 600,000 bucks is about all they're willing to pay for something like that on a one-year-old machine based on auction history of the last two and a half years. So, where where is So, when you're pricing a machine it comes back into retail, yes, the dealer's going to get a little more money than auction, right? That's that's going to happen, but it's not hundreds of thousands of dollars more than auction, right? Those are going to There's there's there's a level there that it caps off that says, "I'm willing to give you more because you're a dealer and the things that you're going to do for me comparatively." So, that's the tricky thing right now when you look at this marketplace.
Well, there they are, mocking you.
See you next year,
That weedy area that's got you thinking, "Man, I hate that spot. Wish I'd sprayed better." Get the last laugh with a sprayer upgrade from John Deere. Precision upgrades that can increase your sprayer's performance like ExactApply, advanced nozzles to give you more control and more speeds. It's just one of the many precision upgrades you'll find at John Deere.com. Now, let's see who's laughing.
Looking for more accuracy, more productivity from your current planter? Let's get exact with precision upgrades from John Deere.
Start with ExactEmerge and get accurate singulation and spacing at 10 mph or choose ExactShot to promote early root growth and cut fertilizer costs. And with FurrowVision, save time by verifying seed depth right from your cab. Visit JohnDeere.com/planterupgrades and see why nothing runs like a Deere.
Well, I I think, yeah, you're you're right, Casey. And imagine Okay, let's just do a little thought exercise here. Imagine from the way things are, the way farmers feel right now, imagine if we had as much used inventory on dealer lots as we had exactly 2 years ago. How auction pri- auction prices right, we'd be singing a different story. Uh right, so the supply that's that's that's that new normal we you know, you coined that term quite a while ago. We keep talking about it. I think it's held up the auction prices. So, I heard something the other day from an auction. I won't I won't say who or where, but it was Machinery Pete. Uh it was like, "Okay, how was the sale today?" And it was like, "Tillage and sprayers were awful. Tractors were good." Now, I've heard that kind of verbage for 30 and you have too for 36 years. The general and I get it. I mean, we're humans. That's the way we talk. But that general I I never want to hang my hat on just a wide general statement. So, again, on the sprayer specifically on the sprayer topic again, let's look at that R 4045. Two similar machines, the 18 model brought 187 in February. The 20 model on Monday just went for 176 and 1/2. So, that to me that's more accurate than saying, "Oh, sprayers were awful." It's like, "No, they're they're slid a bit the last 4 months hard cash. Totally, you know, we see these ups and downs. But uh you you identified one of the biggest well, the biggest driver in the whole thing is the cost of new. And that uh you know, dictates even when dollars are tight. If you got 500 acres, you got 5,000, you got 50,000 acres, you got to do what you got to do. And to do that, you want and need reliable equipment. Now, right now farmers are definitely in the used mindset. And the interesting thing to me is the supply of used is tightened so much that I just I haven't seen this particular moment before. When we went back a decade ago plus 13, 14, 15, 16 uh there was this overhang of supply that it didn't tighten like it has now. So, it's just a really interesting time to try and figure out. I think that's why we're seeing now like that 42K on that 1050 that 12-year-old 1050. It's like, well, that doesn't make sense. It's like, well, it kind of does if you consider where we're at on the supply side and what a new one costs.
Right. Yep. So, I think I need to have a need a correction here. I think I said 650 in my last example it should have been 550. So, all the all the math nerds out there, I corrected myself. So,
Well, you just proved our point though. That's the numbers are so high.
That 550, 650, 750, oh my goodness.
So, but I you know the the key factor is it's depreciation is depreciation. That's what it is, but you know, when I first started doing this, you you know, I'll pick you know, a 9770 combine brand new in 2000 8 or 9, I can't remember when it was, but like 235,000 bucks. You know, it was 250,000 bucks for a brand new one. And now and now you're and so now you take your you do your depreciation off that, your standard depreciation off that and then say it's, you know, about 25% or so and you know, you're looking at 50 grand, right? Right. You know, that that was enough swing to like, all right, so I can you know, for 175,000 you know, 180,000 I can get a used one, a 1-year-old used one. Or I can pay $250,000 for a new one, right? That spread was enough to keep people people there, right? Well, what I saw happen across the spectrum coming out of COVID is that those same kind of practices were were were still being employed. And it was your your 150 100,000 50 75,000 back of a new one. In theory, it makes sense. Dollar per hour-wise, it makes sense, but when you look at if a new one is 80,000 bucks or something like 100,000 bucks, and you're going to be $75,000 less than that, I mean, which one you're going to buy, Greg? You know what I mean? Like
I heard a farmer podcast last week, Casey. It was really interesting. It was sort of a younger guy, looked to me like 30. And he was saying, you know, we we bought our S790, and this could be any color, red, yellow, it doesn't matter. It's just, you know, you know, and he's like, boy, I'm sort of thinking, wouldn't it be nice to have just two solid 9770s? And yes, and then maybe they can't do capacity-wise, but but it's getting into the math is math, what you what you just said.
