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. I've got some big news for me. I mean, so I've got a... I've recently joined the Farm Journal team, and they were gracious enough to put Moving Iron Podcast on their network here, and I'm excited about that. And I'm more excited about the fact that I get to share this time with the one and only Greg 'Machinery Pete' Peterson. Greg, how you doing this morning, man? Hey, I'm doing well, Casey, and so excited to have you on our Machinery Pete Farm Journal team. This is fantastic. Yeah, looking forward to it. It's going to be a lot of fun, and even more, you know, followed your stuff for a long time, so it's going to be a cool journey here to have this conversation with you once a week about what's going on in the equipment space. Well, I love it, and hats off to what you built with Moving Iron. You know, the event that you have, Casey, and the podcast, fantastic, going deep around the discussion around machinery values and trends. You've done great work, and yeah, just excited to be a part of what you got going here. Well, thanks a lot, Greg. And you know, I think the best way to start this episode off is here we are, it's what, first of February here, and a lot of turmoil on the marketplace right now. A lot of people trying to figure out what's going on, a lot of uncertainty of sorts. We got a new president in, so again, that kind of alleviated some of those uncertainties as to what team we had to play for when those things came through. But I, you know, I keep... I'm a... I like history, so I go back and pay attention to like what's going on in the past, those kind of things. And Greg, I like your opinion on this. When I look at where we're at today in the marketplace, it reminds me a lot of where we were coming out of 2016 going into 2017, and the fact that a lot of the dealerships had bled for two and a half or three years on through auctions and those kind of things. Commodity prices had shrunk, and they started to kind of rebound a little bit. 2017, we started seeing retail, the auction values start to get tighter. We've seen a lot of that today too. See, if you look at where we're at, I think a lot of dealerships are kind of done with the auction thing at the volume and scale that they've done things in the past, as well as where we see, you know, commodity prices have rebounded, starting to see some movement there, and we're starting to see some closure there between the gap of auction value to retail value. Things are getting tighter. It feels like a lot of things are similar. The thing about 2017, it didn't get you better, but it didn't get any worse, and I kind of feel like that's where 2025 is going to be at. So what are your thoughts on that?
Yeah, I think that's very insightful, Casey. I'm with you. You know, history, and of course, I kind of come at it hard from the data angle. Data history, been compiling 35 years, all these auction prices, and also looking at the dealer advertised price point since 1999, so just over 25 years now, and comparing that to the auction values. And I think, yeah, your echo there to 2017 is, you know, pretty good there. I think our data would, you know, concur with down the path you're going. I think, like you say, it wasn't like 2017, '18, we saw any magical huge rebound with, you know, auction values, but beginning to find some footing. I do completely agree with what you were saying about, you know, the dealer volume that was smashed out onto the auction market. I think late second half of '23 and '24 was kind of unprecedented from where I was sitting in terms of that amount of late model stuff that was hitting the auction market. And it did seem down the stretch, the late, late part of '24, November, December, the dealers were maybe beginning that pullback you're talking about. You know, those were some big losses and a lot of inventory that was auctioned. And so early part of the year, January, February is always a little slower on the auction front. So I don't, you know, we'll have to see in terms of dealer appetite to keep taking to auction, but the commodity prices strengthening a little bit helps. And yeah, I think what we saw back in '14, '15, '16, right in that area, was steep, steep depreciation level of drop in late model used values. And then again, it kind of flattened, and we just waited till what, end of '20, till corn and beans took off. So yeah, kind of similar pattern.
Yeah, and I think if you look back at that time frame, the one thing about it, the biggest difference between what we see now and what we see then is a lot of the stuff that we've got going on is that I call it the scarcity premium. Went through that, went through COVID, right? If you wanted it, it was worth whatever you could get. If you didn't want to pay that price, somebody else would have. And then you see that come in there, you see that erosion of about 30 to 40% of what that was to get stuff back down to normal price through that auction cycle we saw through 2020 through 2023, basically 2024. And as you watch that, those compressions happen as you come back on the backside of 2024 into 2025, people want to come back in and trade. They paid X dollar for it, and now they're showing up, and it's, you know, not only did it take off the 30 or 40% that that premium was there, but you had normal depreciation on top of that. So in some instances, you saw some 50% declines in the values from the time they bought it till they went back and traded it in, which that's always a shock to everybody. And the same thing we saw in 2017 was very similar. It wasn't quite 50%, it was more like 25 or 30%. But it feels like I kind of have this theory where you've got a three-year boom cycle, you've got about four to five year kind of rebound to get out from the boom cycle. You had to kind of clean up that, and then you start easing yourself back into that boom cycle again. And if you look at where we've been at, 2021, 2022, 2023, boom, right? And then now we're coming back out of that, and it feels like to me 2025 is where we're going to be similar to what you were talking about. I look at it kind of the inverse that you were talking about. I look at it from when retail value exceeds 120% of auction value, that's when people start getting pushed to the auction market. And as that gap widens, that accelerates the auction marketplace, not just in buyers but also in price decline, because you have more people showing up that are, you know, sitting on the sidelines, waiting to see what happens. And as you watch 2017, I remember going back and looking at those things, 2017 to 2018, we saw some that shot up to where it was anywhere between 115 all the way down as low as 107% of auction value. So things trimmed up nicely. Now we still got a long ways to go before anywhere near 120% auction value, but what that should tell you is the auction prices should start to come up a little bit as retail prices come together. So there should be a meet in the middle there. The auction value that you're looking at here, Greg, in that fourth quarter, did you notice any peak in some values that you saw that maybe at the first year were a little bit depressed?
Well, I think, yeah, I mean, I think the one thing that we really got focused on the second half of '24, Casey, was the volume of zero to three-year-old, you know, super, especially on the high horsepower side, and with combines and large planters, the volume of that stuff hitting auction in '24 was very, very high. And I think for farmers out there, you know, as we're judging against past cycles, of course, and ag, I think itself is like you described, Casey. I mean, it's boom-bust, right? That's just the history of farming. And God bless, you know, our farmers and our dealers for working through that, the ups and downs along the way. But one thing that I have seen is different this time, what is the volume the dealers put out at auction in '24 on the very late model stuff. So if you just talk combines, if I compare back to 2014, that first big year of drop, and we saw 120, let's, the exact number is 12.7% more, you know, brand new to three-year-old combines sold at auction last year. So I think, you know, that's facilitated by larger dealers versus 10 years ago. There are fewer, larger dealers. It's no less painful for them to take that stuff, combines or tractors or whatever, out to auction, but maybe a little, you know, well, not a little bit, they're just better capitalized. They're able to have the appetite. So if you're a farmer sitting there, in fact, I was asked this recently, Casey, last week, a farmer said, 'Hey, Pete, I just want to bounce something off you. I'm looking at a deal on an S780.' It was kind of out in the Midwest, our good friends at Heritage Tractor, one of their customers, they had a very attractive price, I thought. In fact, I told the farmer, I said, 'That looks to me like a good number.' The farmer's question was, 'Pete, what do you think for 2025 conditions for buying combines?' And my answer was, I think, you know, don't sit back too long, because what you described at the top, things firming up, it's sometimes when that you don't realize that's happening as it's happening, right? And I think the data, late '24, early '25, we've seen some pretty strong auction prices. Now, that might be the commodity prices up. I mean, just Saturday I was down in northeast North Carolina, we filmed an auction for Machinery Pete TV, nice farm retirement sale. Now, that guy's stuff was like the 10-year-old stuff, magically, of course, everybody wants that, right? Because it's such a gap between the cost of new. But he had a nice 9670 combine, 122k on that with 1,371 set hours. I know just recently our friends at Merit Auction, January 21st, Clarkson, Kentucky, so getting a little bit south, they had a nice 20 model New Holland CR8.90, 652 engine hours, that about 27,750, highest auction price ever on any New Holland combine in the US, or any New Holland combine without a head. So I think that's jiving with the point you're making that maybe the footing is sort of firming a bit.
Yeah, I also think the plus going into '25 is the amount of equipment that got ordered for '25 delivery. It was way down. All you can go look at any of the manufacturers out there, 25, 30% off. I mean, you go look at everybody's stuff out there, which goes well, I think, for the used equipment marketplace, right? So you're putting less equipment back on the marketplace. And not that anybody's going to go out and buy yachts this year with any of the commodity prices that are out there, but there's going to be a little more money towards the end of the year, in my opinion. So some of these guys, as they're looking at doing upgrades and tax buying and those kind of things, there's not going to be the, you know, the brand new something sitting on the dealer's lot. I mean, shortline stuff, sure, there's going to be, there's always that kind of stuff laying around. But you're looking at like tractors, combines, sprayers, those kind of things, they're just not going to be there. Their option is going to be that late model, low hour stuff, which I think is going to help kind of catapult into '26. Now, I think all this is going to take place late third quarter, you know, fourth quarter time frame, which obviously, you know as well as I do, that September through December time frame is a large buying period where they're buying at auction off the lot. But I think as you look at this, I feel like the first three and a half quarters of the year are going to be, not stagnant, it's not the right word, because I've had a lot of conversations with guys where things are better than they expected. But when you're counting on zero and you get two, you get surprised pretty quick. Yeah, yeah, what we're feeling right now.
Yeah, I've had similar conversations, Casey, with many dealer friends. You know, how was December? How was January? And, you know, not to overhype it, but like you say, the general consensus was a little bit better than we thought. So I think there's still some really strong balance sheets across farm country. And again, it's tough. I mean, but farmers are very savvy. I mean, they've done the ups and downs, they've tightened the belt. But I think underlying all this, and I've been starting to try to write about this, is this boom-bust that you identified, this cycle is what we're really setting up for. And now as manufacturers are even more strongly able to aggressively control production with, you know, it's difficult, obviously, plant closures and stuff like that, but they're pulling those levers. And when I compare back to a decade ago, end of '13, '14, '15, '16, that drop, what manufacturers are doing now is more aggressive. So I think, like you say, less sales of new coming into '25 works to help. And all of that, that 100, you know, 120, 150% jump that dealers took the zero to three-year-old stuff to auction last year, that's pointing me... I really am careful about being predictive, Casey, just because I report on stuff day by day. But I do think exactly like you said, I think the first nine months of '25, you know, if you're looking to upgrade into used equipment, I think it's a pretty good time, you know, to look to be aggressive to do that, whether that's at auction, you know, talk to your local dealer. But I think what you're setting up for is a tightening, and then whenever corn and beans go up, what's going to happen is everybody and their brother is going to go, 'Well, it's been two, three years, I need a new planter, I need a new combine.' Well, get in line, brother, because then you're, I mean, that's just the way it's setting up.
Yep. And also too, it'd be interesting to watch how upgrade kits play into this this year, where there's, you know, the new option maybe for 2026 deliveries is to obviously slow on the board. But if you're looking to do something, you know, how are those upgrade kits going to play into that? So it'll be interesting to watch how that plays out, because that's the new wrinkle in the used market. What's that look like and how's that going to play out? So good stuff, good stuff as usual. Well, G, it's probably a good place to stop. We've got Sean Hackett coming up here next, talk a little bit about what's going on in the commodity market, because you've got to know where the money's coming from so you can spend it. So he's going to give us a rundown on what's happened in the commodity market. So stay tuned.
I've got Sean Hackett back here with me on Moving Iron Podcast. Sean Hackett is with Hackett Financial, Boca Raton, Florida, and he's nice enough to come on and talk about what's happening in commodities. Man, Sean, how you doing? I'm doing pretty good here for a little while after a frenetic travel schedule in January, but 80 degrees yesterday, so feeling pretty good to be here after being in Fargo, North Dakota, not too long ago. So in Florida, when it's 80 degrees, do you guys wear jackets when it's wintertime, or is that just, you know, a jacket? A jacket, just a jacket. Okay, I'm actually going to get the experience of little North Florida. I'm going to Orlando this week, so I'll be there. And if last time I was there a couple weeks ago, it was whatever it was, 45 degrees at night, and I thought people were going to die, and I was walking around. Well, yesterday was much more nippy in Orlando, it was only 70 there, so just be careful. Yeah, I can only imagine the frost warnings that were put out there. So rough time, rough time to be in Florida right now. All right, Sean, let's talk a little bit about what's going on in the markets. Tons of stuff happening right now. We've got the anticipated Trump tariffs are on one day and off the next. We've got a lot of stuff happening. They've postponed the Canadian and Mexican tariff talks for 30 days so everybody can get together and go from there. China has done some retaliatory stuff that happens mid-March or so that kind of kicks back into place. So looking at the markets, you can see when the tariff talk starts and when it stops because the markets have a huge swing when that happens and stuff you've talked about in the past. So I guess, Sean, as you're looking at these tariffs, what are your thoughts and how are you managing this with your customers?
Well, we've talked about this on your show, that once President Trump was elected, that we were going to deal with huge headline risk for the foreseeable future, good and bad, you know, up and down. And the only way to manage it is if you're a seller, if you need to sell, physically sell grains, for example, and you get a big surge on a headline, be opportunistic. If you're a physical buyer and we get a big knockdown on a headline announcement of what's going on with trade and tariffs, you need to be opportunistic in looking to physically purchase, you know, in areas that have historically looked for pretty solid support and/or resistance. So to me, that's how you handle it. You can't predict the headline one day to the next. All you can do is react. If the markets give you an opportunity to physically buy or physically sell, ultimately we think commodity prices and grain prices are going to be working higher over the next couple of years, but it's not going to be a nice, steady, easy ride. It's going to be a lot of volatility. But in the framework of all of that, you know, we do think the trend is up. But like we just saw in Sunday night trade, where we got hit really hard, and then yesterday we had a big rebound, that's to be expected, and more of it is to come. The way Trump negotiates is to throw fantastical, abrupt action in front of people he's negotiating with, and then all of a sudden things calm down. And that's just the way it is, and markets will keep reacting that way over time. I think the reaction will moderate. It did last time he was president. But for right now, we're still on the shock and awe of what the next term of President Trump's going to be, and we need to get our bearings with what that looks like.
Yeah, one of the hardest hit things we saw here, like interim here last, you know, kind of going into the weekend and in the first part of the week here, was the cattle trade. And if you look where they're at with the threats of tariffs between, especially Mexico, with the amount of beef that gets shipped down to Mexico, us beef that get shipped to Mexico, as you see that, you saw a big selloff here the last couple of days. Looks like that's firming up a little bit. But I guess as you're looking at the cattle market, what are your thoughts there, Sean?
Well, we have a very, very tight cattle market right now. We import a lot of cattle from Mexico. Anything that would limit the flow of cattle coming in when we already have very tight supplies, obviously, is going to create a spike, trade higher. And we saw that, right? And then when they said, 'Well, not quite yet, we'll give 30 days and see if we can work something out,' then they took it right back off because they said, 'Okay, well, if the flow is not going to stop, then we don't, you know, we're not sure what's going to happen.' But at least the immediate potential supply shock crisis that could have been in place has been at least kicked down 30 days, and so we'll bring the market back down and give another look. But, you know, the cattle market cannot handle any supply restrictions whatsoever. We are starting to see more and more heifer retention in the United States, meaning the need or the trend towards herd rebuilding, which means those animal herd availability to the marketplace are going to get even tighter, especially in the second half of this year. And so we have to have the flow of Mexico and, to some extent, Canadian cattle coming in, or else, you know, the market will have to reprice to reflect that. And we saw that rope-a-dope real quick. And if there's some indication that we're not going to get an agreement, they will put that premium back on and maybe even more. So it's a dynamic workout. What we're telling our livestock producers is, you know, being that we can't predict all of this, and given that prices are really, really good, we would be suggesting using something like LRP, which is the government subsidized put program to lay a floor into the market that keeps your top side open while we wait to see what exactly can happen here. Because if we get an agreement and, you know, then the cattle market gets knocked down, you're protected. If we don't and it surges substantially higher, you're able to make a cash sale at a substantial higher level. I think it's the only way that a cattle producer can manage the risk on the farm given the inability to predict what the Trump and Mexican negotiations are going to look like.
Okay, all right. Let's talk a little bit about South American weather. You've seen about 30, 40% of the corn crop that didn't get planted on time, so it's behind the schedule. So obviously they're going to knock a little bit off that right now. They're looking at a 2 million metric ton reduction to 123 million metric tons. As you look at what's going on in Brazil, I know this is something you've followed quite a bit. Supposed to be one of the biggest crops we've seen in soybeans potentially ever come out of Brazil this year. I guess as you're looking at this, Sean, what are your thoughts on South American weather? And then as far as production goes, what are your thoughts there?
