The flat, open land of the grain belt naturally sets a ceiling for most ag equipment used in corn, soybean and wheat geographies. Larger tractors, combines, and other grain equipment will typically bring higher values with a substantially higher volume sold. The graph below depicts the region average price difference of utility tractors (100 – 174 HP) sold in 2019 and 2020. This analysis utilized Iron Comp’s filtering options to arrive at two comparable data sets. Below are tractors with less than 5,000 hours, and sold at auction for more than $10,000 between January and August.
Utility Tractor Values by Region
What we see first are the value peaks representing the Midwest. All other regions’ were 14% lower than the Midwest in 2020 and 23% lower in 2021. This increased discrepancy is not surprising when you consider what is driving the demand in the Midwest. The 2020 and 2021 bullish grain market.
So how much have regional utility tractor rates increased from early 2020 to 2021? You could break out the calculator with the graph figures above, or you can let us do the math below.
Similar to the demand logic about the Midwest, other regions with high demand of utility tractors should also see higher year over year increases. The Northeast’s heavy use of utility tractors in dairy country are a good example. The New England region has a 38% year over year increase in value.
In this data set there were fewer comparables from the Rockies and Pacific states with the applied month and sale price filters. When this happens the average should receive less weight in your valuation model. A more direct look at comparables may be more beneficial. Iron Comps has recently added in a search by state function. Check out the Auction Results screenshot below. This allows for faster sorting and locating of the best comps.
If you are interested in learning more about how utility tractor values differ by region (and combine and row crop tractors too!), tune into the webinar tomorrow!
2021 has been a pretty good year for corn and soybean prices, and many farmers are looking to upgrade equipment. One of the highest value items on that list is the combine. But, at the end of the day, does it really make sense, or is it a high-dollar mistake waiting to happen?
John is one of our buddies, and like everybody else, he’s trying to figure out what to do. Is it a better idea to pick up a bigger, newer combine with lower hours, trade in for another one like he’s already got but with lower hours, hang on to what he’s got, or something different altogether?
So, over beers one night, we started talking through his options, and penciled some things out. If you’re in a similar position, maybe this will be helpful to you.
Here are a few key factors to consider when deciding what to do.
Current Market Value
He’s currently using a John Deere S670 with ~1800 separator hours. He’s farming about 1,800 acres with a 50/50 corn and soybean rotation.
One key factor to consider is how long you plan on owning your next combine. How many years is this thing going to live in your machine shed, and how many separator hours are you going to put on it per year? In John’s case, it’ll probably be about 5 years and ~215 separator hours per year.
Current Market Value
One of the biggest pain points for farmers is understanding the current value of their farm equipment. We looked at prices for over 825 John Deere S670s currently listed on MachineFinder.com and narrowed down the results to just those machines between 1700-1900 hours. This resulted in an average dealer list price of ~$142,000 for 72 machines.
For the sake of this argument, let’s assume trade in value of roughly 80% of list value for our John Deere S670. That puts the trade-in value of John’s combine at about $113,600.
Using the same basic data noted above to compare the following, let’s assume a purchase price of ~93% of List Price for each. Here’s the options he’s looking at.
Trade up to a John Deere S770 with 500-1000 hrs?
Trade up to one with less than 500 hours?
Or, trade in for another S670 with lower hours?
Or, keep the S670 we have now, knowing we’ll have high repair costs in the future?
John plans on applying the trade-in value of of his S670 to the purchase price of the combines listed above, resulting in our “Trade in Boot Value.” Let’s also assume that the “Trade in Boot” is going to be fully financed and that our current S670 is paid off.
For each combine above we will assume a payoff term of 5 years with an interest rate of 3.5%. As expected, the S770 with the lowest hours represents the highest interest expense as it has the highest purchase price.
Repairs are likely the hardest part of the equation – as it’s nearly impossible to predict. However, let’s agree that as the machine gets older and hours are added – the expected repair costs go up at an increasing rate.
To establish some kind of baseline, we used Iowa State University’s numbers for repair costs (AgDM A3-29). Your repair costs may vary.
For each combine we can figure the percent (%) from the table above by using the list price for each. Newer combines have a higher list price, and the argument is that parts will inevitably be more expensive, even if everything else is equal.
If we slot in John’s usage numbers from above and add ~1075 hours to each machine, we can project the estimated repair costs for each machine over the next 5 years. If he keeps his current machine, that’ll obviously result in the highest expected repair cost as that would put that machine close to 3,000 separator hours at the end of 5 years.
For each machine listed the expected hours used are the same. For the S770s we will also assume a 15% decrease in fuel usage due to efficiency gains with the newer machine. Another way of thinking about it is that the fuel cost for the S770’s will be 85% of the S670’s.
We will also use Fuel Required for Field Operations (PM 709) to project fuel costs for each machine. PM 709 assumes 1.0 gal/acre for soybeans and 1.45 gal/acre for corn. For John’s 1800 acre farm that is 50/50 corn & soybeans, that works out to about 2200 gallons of fuel each harvest. If fuel is $3.40/gal, this is how the fuel budget shakes out. (Obviously, we can’t rely on fuel prices to remain constant, so this number will definitely move around a little.)
S670’s 5 year Fuel Expense = $37,845
S770’s 5 year Fuel Expense = $31,862
Combine Depreciation (Actual Depreciation)
The final key variable is to project out the combine depreciation – the trade in value of the machine 5 years from now with additional separator hours. We will call this value “Actual Depreciation” because it’s what you will receive for the machine when it leaves the farm. I leveraged the same dataset from above and applied the same assumptions to project out the Resale or Trade-In Value.
The biggest depreciation comes from the newer, lower hour machines. This is to be expected – but farmers often overlook this, despite it being the largest ownership cost over 5 years!
Total Cost of Ownership
Finally, we can add each of the above to get to a total cost of ownership over 5 years – this also allows us to understand the Cost per Acre per Year for this decision for our 1,800 acre farm.
Different combines with different hours can make a massive difference in total cost of ownership!
The Bottom Line
When John considered all the costs noted above, this represents a pretty big decision for his farming operation. At the end of the day, it worked out to over $115K difference in Total Cost of Ownership if he bought the S770 with 300 separator hours!
For him, trading in his old combine for a lower-houred combine of the same model is likely the best choice economically. While it may not have been what he was wanting, he’s a practical guy and that’s what he’ll probably end up doing.
Bigger, newer machines theoretically mean newer/better technology and increased efficiency. It’s always tempting is move to a newer model and lower hour machine – and we get that. We made a lot of assumptions in John’s case. You’ll need to adjust some of these numbers to fit your operation, too. Repairs and down time are a huge cost to consider. Furthermore, fuel costs will likely go up. But at the end of the day, you’ve got to consider actual combine depreciation cost based on resale/trade-in value. It makes a huge difference!
Machinery is the second largest and growing part of the balance sheet, next to land. In profitable times, it becomes pretty important to know how to balance the line between keeping your fleet current and letting upgrade costs get over the top.
So, how do you make sure you don’t make a $115K mistake? Always do the math, and never leave out the combine depreciation value!
You can always tell when it’s getting close to planting, harvest, and the end of the year. That’s when there’s always a massive amount of auction inventory that hits Tractor Zoom. Along with that, you’ll usually find some interesting tractors showing up too!
Such has been the case the past couple of weeks, actually. Our auctioneers have had some terrific pre-harvest sales, and there’s more coming!
Let’s hit some interesting tractors and trucks crossing the auction block, and then we’ll get to those $60K loose ends.
I love rat-roddy stuff, and I always have. So, when Jared Sutton listed this one late last week, I kind of fell for it!
Collectors and hot rodders have been modifying antique tractors for years now. The process is relatively straightforward; basically, the front axle turns upside down and the rear drop boxes rotated 90º. After that, it’s a process of relocating stuff (tie rods, for instance), flipping the final drives and swapping them left/right so the brakes still work, and a lot of cosmetic stuff.
This one is nicely done, too. It’s been outfitted with elephant-ear fenders (which are from a WD, I believe) and the exhaust has been re-routed under the tractor. It’s been sprayed red, too – I wouldn’t swear to it, but it looks quite a bit like IH 2150 red. That would make sense, too. Jack Bader, the man who owned this tractor, was a red collector. This is the one and only Allis Chalmers on his estate sale.
What’s it worth? Honestly, I don’t know. These low-rider tractors don’t tend to change hands very often, and because of that, there aren’t a lot of comps. This one is a fairly standard build with not a lot of extra custom touches (there are a few of these out there that are pretty wild – custom exhaust manifolds, custom wheel and tire setups, crazy paint jobs, etc.). It’s well-built, and pretty well-known, too. Bidding currently sits at $2100, but I’d imagine it’ll go for at least double that.
I’d be lying if I said that I didn’t REALLY want to get in on the bidding for this one, but my lovely wife made it pretty clear that a single-seat low-rider tractor was about the LAST thing we need…
(That may rule this one out, but if I can find a two-seater…..) 😏
The LTL 9000 came out in the mid-70s when Ford decided they wanted to play in the long-haul game with Kenworth and Peterbilt. The trucks were well-built and pretty stout, but they didn’t come with the same kind of options for powertrains and drivelines. As a result, they didn’t sell nearly as well as the W900 or the Pete 359/379. They’re still pretty darn nice trucks, though, and the styling is a little different than what you typically see running up and down the road everyday.
This one is an ’87 model day cab that, for the time being, lives in Ashland, NE. The owner restored it in 2013. It’s powered by one of the best analog powerplants you can get, too – the venerable CAT 3406B. Granted, it’s not tuned up quite like a Michigan Special, but at 435 horse, it’ll do just fine with a hopper bottom on the back! It’ll do it with some style, too!
OK, quit drooling. Actually, go ahead. I drooled over it for a few minutes too.
This is another one of the tractors on Jared Sutton’s auction this coming Saturday up in Madison, SD.
I wrote a fairly lengthy article about 1468s back in January talking about why Harvester built a V8-powered tractor (spoiler alert…it was all Marketing’s fault). Honestly, they look cool and they sound great, but they really aren’t much for farm tractors. The DV550 that sits in these things is tremendously fragile, but it DOES make a cool noise.
This one is probably no different, except for one or two important details. First, the Coleman FWA axle is pretty neat. It is hydraulically controlled front drive axle that you could add at the dealership when you ordered your tractor, or as an aftermarket deal. In the field, they did help with traction, but they also added a LOT to the tractor’s turning radius. I sent this to my buddy Chris the other day and he shot me back a text saying, “Man, that thing probably sounds cool, but it’ll take 40 acres to turn around!”
He’s probably not wrong, either, to be honest! 😂
The second thing that makes this tractor a little unique is the stack configuration. I believe that the manifolds on these tractors are interchangeable from side to side, so if you wanted the exhaust closer to the operator, you could do it. Most farmers didn’t because it was extra work and they look good the way they were. But, if your tractor is like Jack’s and has a canopy, you can make that thing a LOT quieter if you put the stacks in the back. The stacks poke just above the roofline, which is likely a lot quieter. Good for long days on a tractor ride, I’d imagine!
At any rate, while the 68s weren’t real successful in the field, time HAS been very kind to them. They are prized by collectors, and the rare ones that still have functional FWA axles from Coleman or Elwood fetch REALLY big money. I watched one sell back in March at the Mecum Gone Farmin’ Auction and it sold for $63,000! They sold another in June for just over $47,000, too. I think you’ll need at least $40K to play in this game. These tractors continue to appreciate; I don’t think we’ve seen the peak values for them yet!
Here’s a big fella you don’t see very often! The A4T-1600 tractors were Minneapolis Moline’s first foray into the 4WD market in the late 60s. As other manufacturers began building 4WDs, Moline saw their sales of FWA tractors start to slip. So, they assigned the project to an up and coming engineer in his 20s named Mike Verhulst. Mike took Project Maverick from start to finish, and even won an award from the state of Minnesota for his efforts!
You’ll note that this tractor isn’t painted in the familiar Prairie Gold paint scheme that most Molines wore. With White Motors owning Moline, Oliver, and Cockshutt, there was a lot of badge engineering that happened around that time so that they could appeal to multiple markets. There are multiple versions of this tractor, and they’re all badged and painted just a little differently. Oliver had a green one (the 2655), Moline had yellow ones and red ones, and White had one called the Plainsman. All the same basic tractor, but badged and painted just a little differently. Sort of confusing, right? My friend Sherry Schaefer does a good job ironing it all out in an article in this month’s Heritage Iron! Well worth picking up a subscription, or just ordering that issue on its own!
This particular A4T-1600 is an LP gas tractor that was originally an open station tractor, one of just 115 built! To make this one a little more rare yet, it was one of only 76 ordered with 23.1×30 tires. I’m not sure what the serial number was, but it’s safe to say that this one is fairly uncommon. I doubt you’ll see another one sell this year.
What’s it worth? Again, it’s a crapshoot here. They don’t change hands very frequently. I checked our Iron Comps database and only found one of these big 4WDs in it. It sold for $12,000 about two years ago. I think that one was more original, though. Still, with $5 corn, you might find a couple of bidders that’ll drive this one into $10-13K territory. You never know! It’ll be fun to watch!
Last week, I wrote about Harold and his Empire 88 that he’d modified so that he and his wife Wilma could take her mobility scooter with them on tractor rides. It was a really neat piece; Harold was very thoughtful in the design process for the modifications, and they all came together really nicely.
Well, the hammer just dropped on that auction about an hour or so ago, and I’m happy to say that this little Empire sold for $3,193! That’s great money for an Empire – probably one of the highest sale prices ever seen for one of these little guys!
Did Harold end up coming out on top? If you asked him, he’d tell you that from the numbers perspective…no, he probably lost money on the tractor if you counted the value of his time in building and restoring it. But, from an overall perspective? I’ll bet he’s tickled to death with it. The modifications that he made to that tractor allowed he and his dear wife to do what they loved…together. What more could you ask for?
Boy oh boy, did this one ever generate some attention…
The auction wrapped up yesterday at about 11AM, and the final hammer price? A whopping $60,300!
When I posted something congratulating the seller, auctioneer, and the new buyer, I think I almost broke the internet. Man alive, people got bent outta shape about that price! They either thought that we were lying, or that the buyer had lost his mind, or some other ridiculous combination of things.
“SOMEBODY PAID SIXTY GRAND FOR THAT THING??? You’ve gotta be kidding!?!? That’s a $20K truck at most…what kinda drugs was the buyer taking?”
Yep, somebody actually wrote that.
You should see the stuff I had to delete from the thread on our Facebook page. I’m not gonna lie…there are some people with some real bad attitudes in this world, and they all seemed to find that post yesterday afternoon.
Here’s the thing that most people don’t understand about stuff like this:
New(ish) pickups can be collector’s items.
Clean, low-mileage examples of OBS Fords with the 7.3 Power Stroke are becoming collector’s items. This one is 24 years old. 25 years old allows it to be titled as a collector car, and you can put collector car insurance on it.
Collector cars attract a different market of buyers.
They buy stuff based on a different set of characteristics. For many of them, they’re looking at a truck like this as an investment. They’ll hold on to it for another ten years in a clean, climate controlled environment alongside six Mustangs, two Corvettes, and thirteen other old pickups that are just as nice. They won’t use it like a farm truck. They’ll take it out a few times a year just to keep it in good working order. The next time we’ll probably see it is when they decide they’re going to sell it at Barrett Jackson or Mecum…and when they do, some other collector is going to buy it for $100,000 and do the same thing with it!
Lastly, and most importantly…nobody got ripped off.
Lots of people claimed that this truck was a fake, or that sketchy stuff was going on behind the scenes with this auction. None of that is true. Phil Wieck, the auctioneer, did a terrific job of documenting and presenting this pickup. He provided tons of photos, videos, and all of the information needed for buyers to decide whether or not it was worth it. Nobody rolled any odometers, nobody slapped 500 pounds of Bondo on a clapped-out farm truck and painted it and tried to pass it off as minty-fresh. This was, and is, the real deal. It’s a survivor pickup, and collectors want those!
If it proves anything, it proves that presentation matters.
If you want to get top dollar for whatever you’re selling – whether it’s on AuctionTime, Craigslist, or anywhere else…presentation is important. Three photos, two of which are blurry…that ain’t gonna cut it. Drag it out of the barnyard, wash it and detail it, and take a ton of photos. Show the good, the bad, and the ugly. Be truthful in your descriptions, and show the documentation you have. Do yourself a favor and put the time and effort into presenting it nicely. I guarantee that it’ll help you get more for whatever you’re selling.
Some of you may take issue with me on this, and that’s fine. You’re welcome to your opinion. I get it; it’s tough to see a pickup that’s not quite “old” but definitely not “new” as anything more than a utilitarian piece of metal. A trusty pickup. Something to throw junk in the back of, and do truck stuff with.
Believe me, I get that. I drove past a Ford dealer every day on my way to high school back in Michigan, and I drooled over trucks just like this one too. To me, that doesn’t seem so long ago, but the numbers don’t lie. I graduated in 1996, so I’ve been out of high school for 25 years now. Those trucks still seem “new” (ish) to me, too.
Would I have thrown down $61K to own that pickup? No. But that’s the thing. I’m not a collector. I couldn’t justify a truck like that in my garage. But somebody did. To them, it was worth that much, and I chose to be happy for them because they got something that they really wanted! I don’t think they’re insane for paying that, either. They have a different perspective than I do, and that’s cool with me. I would hope that it’s cool with you, too…even if you think that it sold for too much money.
Somebody thought it was worth it. Be happy for them!
Are you looking to buy or price a used combine before the 2021 harvest? You and everyone else (and you better hurry)! The prices have jumped with the supply of all used equipment tightening, but not equally for all types of harvesters. This is where used combine values in 2021 have differed from used tractor values. In this Iron Comps Insights, the Tractor Zoom data for combine auction sales is broken down over the past four years to better understand the trend that is driving 2021 used combine costs.
If you prefer an in-depth guided tour of this set of Iron Comps data, the video below walks through how different auction markets are behaving for combine sales that have taken place between the months of January and August. This segmentation allows a comparison of 2021 sales with the prior years without the typical end of year spike in December throwing off the numbers.
The biggest takeaways from the video are directional. The values in the middle of the 2021 used combine market have shifted up. Harvesters with 1,000 – 2,000 separator hours are now worth considerably more than they were a year ago. In the following graphs, the past four years are averaged out for this same set of months. This provides a clearer picture of what is happening to harvesters in the ranges of 0-750, 1K-2K, and 2K-3K separator hours.
Used Combine Values With Less Than 750 Separator Hours
Considering all the hype that used equipment values have received this year, one would expect low-hour, late-model combines to be leading that surge. Not the case. They are up over last year, but not to the extent that newer tractor values have risen. We saw this in the video too. 2020 was a phenominal summer for combine sales, so the bar was set high. This year there just has not been the available volume of those premium machines, which may be driving farmers in need of a combine to look at ones with slightly higher hours.
Used Combine Values With 1,000 – 2,000 Separator Hours
2021 appears to be the year for mid-hour combine sales. With low availability at the lower hours combined with an extremely profitable crop in the field, farmers have justified bidding higher to make sure they are prepared for this fall.
This $11,000 jump in value over a year ago equates to almost a 14% rise in value. A significant driver of this increase is availability of combines. In our Tractor Zoom data, there have been 17% fewer combines sold in this range this year compared to last. This is despite the fact we’ve added 50% more auctioneers already this year, covering over 75% of the US auction market!
Part of this rise may also be level setting. You can see that values in 2018 and 2019 were a little closer to this year’s current average prices. A good reminder that valleys and peaks do not last forever.
Used Combine Values With 2,000 – 3,000 Separator Hours
In this final look, we increase the usage to include between 2,000 to 3,000 separator hours.
The year over year average combine value increases $6,000. Approximately the same annual rate, 16%, as the previous graph. Unlike the previous hour segment though, the supply for 2,000 – 3,000 sep hour combines is closer to what we saw in 2020.
What Are Combine Values Going This December?
This is the big crystal ball question, right? With a few variables out there, like actual verse USDA projected yields, it is impossible to tell for certain. Yet, we can look historically to see what has happened before. 2019 was a tough, but relatively consistent harvest season. In that year the average used auction price of combines between 1,000 – 2,000 sep hours increased 13% in December (over the January to August values shown above). In 2020, that rise was 23%! Remember that commodity prices started to take off in September, so it was anything but consistent. Whatever this fall brings, if you are looking to purchase, or find the the value of a combine, be sure to check Iron Comps. The most recent comparable sale in a turbulent market can be the difference between gaining or losing 5% of the value right out of the gate!
Used combine values are a big concern for many this year. This is especially true going into the high demand August market with a tight supply of farm equipment. Just last week we saw a significant sale with Sullivan’s AHW dealer auction on June 15th. The listing was heavy with harvesting combines, draper heads, plus a few late model tractors and sprayers. This auction provides a great look at the market’s direction when analyzed with our Iron Comps database.
With over 60 lots of AHW’s equipment sold, we chose just a few significant pieces to test against the current trendline. Used combine values may be the most intriguing for dealers to look at now so they can gauge what the market may look like in August during prime selling season. For those interested in tractors, headers, and self-propelled sprayers, I’ll be diving into those in some upcoming analysis. The good mix of both Hagie and Case make for a nice brand comparison of sprayers!
Harvester sales at this Sullivan auction ranged from $61,000 for a 15 year old Case-IH 2377, to a 2018 John Deere S780 2WD valued at $288,000. In addition to studying these bookends, a 2017 S680 4WD was analyzed. It has relatively low hours and some bells and whistles worth looking at.
The 15 year old Case 2377 may temper an overly bullish outlook on this market. With just over 2,000K separator hours, this would have justified $55,000 based on the Separator Hours vs Price graph which trends 2019 and 2020 values shown below.
If you caught our 5 Trends for Equipment Dealers webinar last month, you will recall that used combine values had not yet seen the post-pandemic bump that tractors have been experiencing. Some of this delay may be due to the void of late-model machines on the market. This theory was tested with a relatively young 2018 John Deere S780 at the AHW auction, which brought the top combine value of $288,000. We will dive into that next.
John Deere S780
The entire auctioneers description for this S780 is as follows:
2018 John Deere S780 2wd combine, ProDrive trans., ContourMaster feederhouse w/CommandTouch 5 spd. drive & hyd. fore/aft, 28.5′ unload auger, PowerFold bin extension, chopper, PowerCast tailboard, Active Yield, 650/85R38 drive tires and duals, 750/65R26 steer tires, LED lights, premium cab, 10″ display w/AutoTrac, Turn Automation, Data Sync, Implement Guidance, In-Field Data Sharing, Machine Sync, RowSense & Section Control activations, 899 eng./640 sep. hours, SN 1H0S780SJJ0801614
Our Tractor Zoom database has a significant number of these S780 for a quality comparison. In the bottom bar graph below you can see a slight year over year average price increase in the S780 values. Because of all the variables in play we need to look at closer comparables to truly judge market movement. In the top graph, the orange square represents where this AHW combine ranks in terms of separator hours and sale price.
Our AHW S780 is on the top end of expected values for its hours when compared to the past three years. High, but certainly not an outlier. Below we drill down even further into a look at two specific comparables. The first screenshot of Iron Comps Auction Results surfaces the most recent sale dates and closest hours. This view indicates that used combine values may have hit a ceiling.
However this does not indicate the market is reversing by any stretch of the imagination. Below the next image narrows down the search to the two closest sep hour comparables. Both sold in the combine flurry that was last August of 2020.
You can see how much values have risen in just a year. From $249,000 average last year to $288,000 for this auction. A 15% jump!
John Deere S680
We have explored the top and bottom of used combine values in this auction. Approximately a 15% to 10% increase is seen, respectively, over last year. Let’s open it up and see if a mid-hour combine falls somewhere in between. A 2017 John Deere S680 4WD sold for $186,000 with just over 1,000 separator hours. Below is the full auctioneers description:
2017 John Deere S680 4wd combine, ProDrive trans., ContourMaster feederhouse w/CommandTouch 5 spd. drive & hyd. fore/aft, 26′ unload auger, chopper, PowerCast tailboard, bin extension w/tip-ups, 520/Interactive Combine Adjust, ActiveYield, LED lights, premium cab, 1,445 eng./1,071 sep. hours, SN 1H0S680SPG0795113
Comparing our S680 with other 2021 sales, the value is in line with others in the TZ database. A great comparison, pictured below, sold in late March of 2021 at a consignment auction in Minnesota for $200,000.
While this comp does have a refrigerator, the other options are similar and reinforce the theory that 2021 values may have hit a top and stabilized for now.
Iron Comps has the ability to filter by hours and auction type. Using this we can slice data to consist of only S680’s between 900 – 1100 hours sold at dealer auctions. Contrasting these historic equipment values, this AHW combine’s sale price exceeds 2019 and 2020 values by about 30%.
Used Combine Values in 2021
Big movements in used equipment values tend to coincide directionally with significant commodity price changes. With the exception of wheat, current cooling of the corn and soybean markets may be tapping the brakes on the rising used equipment values we have been riding over the past eight months. Another major factor at play will be the necessary demand of combines prior to this fall. Will a tight new and late model supply force prices even higher? Will downward pressure of the grain markets have any effect? To answer these questions keep your Iron Comps app open and your eyes on the most recent sales!
An open mind, industry knowledge, and a commitment to excellence are driving innovation at Compeer Financial
Mike Morris, VP of Appraisal for Compeer Financial, is well-known in farm appraiser circles in the Midwest, and within the Farm Credit System. He was recently named to the IL Society of Professional Farm Managers & Rural Appraisers hall of fame and currently serves on the Real Estate Appraisal Administration and Disciplinary Board for the State of Illinois . He also spent 10 years on the board (serving one term as president) of the IL Coalition of Appraisal Professionals, too. At first glance, his accolades could make people think he’s an industry vet sitting at a big desk behind a sign saying “This is the way we’ve always done it.”
In fact, nothing could be further from the truth.
Will the real Mike Morris please stand up?
The real Mike Morris? He’s an industry innovator.
In 2017, 1st Farm Credit Services, AgStar Financial Services, and Badgerland Financial united as Compeer Financial. Mike was tasked to lead Compeer’s appraisal efforts. His mission? Develop innovative solutions to do better for their clients – American farmers.
“In Compeer’s pursuit to provide the best possible service to our farmers, we knew we had to be continually looking to improve and innovate. One of the first challenges that I had running the real estate and chattel appraisal groups was, ‘How do we tap into this massive source of data throughout the Midwest?’”
Through their own research, Compeer learned that their appraisers knew the local market well. However, it wasn’t efficient to go very far outside of their area to gather data. Furthermore, once they did get the data, it came from so many sources that it took a tremendous amount of time to standardize and analyze it all. At the end of the day, they needed a consistent, standardized data source that wasn’t specific to one auction. They needed a bigger picture – one that they didn’t need to develop themselves.
“We knew there was a lot of data out there. We just weren’t as comprehensive as we needed to be. [There are] several regional sources that are really good, but nobody was aggregating it.”
It was in this search for the solution that Mike’s deep industry knowledge was key. He understood that standardized data was the key to his team’s success, especially data that can be sorted by time and location.
“It was essential to have a single source that aggregated the data to use in our farm equipment evaluations. In the past, if someone went into a website on a Monday and got information for a specific tractor or combine, then someone went out a month later, that data might be completely different. Coming from a real estate background, my bias is toward having actual market data.”
Compeer put out a request to potential vendors asking them to aggregate all this massive amount of data, organize it, and bring it back in. It had to be robust, accurate, and transparent.
“Compeer didn’t really want a black box answer – i.e., push a button to get a value. We were already really good at [getting that value] ourselves. We needed a way to put the data in our own hands efficiently and then let our trained chattel appraisers make the determination of the final value using that data.”
Mike learned long ago that innovation is everywhere, not just in The Silicon Valley. To that end, he intentionally reaches out to progressive companies who push the boundaries of what is possible.
That’s where he met us.
“We met Mike through a mutual friend who was also in the Ag-Tech space who knew he was forward-thinking and always looking for better solutions to age-old problems,” stated Jeremy Hewitt VP of Sales at Tractor Zoom and Iron Comps.
Mike’s drive for innovation did not stop with finding a partner. He was very clear in his expectations of the scope of work. That set the bar not only for his internal team, but also for us, too. People who love their work will typically rise to meet a worthy challenge – and for us, this was definitely worthy.
“We really challenged the Iron Comp team to make enhancements along the way. Things that help us do our jobs better and to innovate in the future. Iron Comps has been very responsive to our requests. They work closely with our team to make changes and improvements. Some of them even happen in real time!”
Two of the biggest ongoing benefits of Mike’s approach are access to robust data and massive time-savings. “Our travel evaluators spent countless hours finding, analyzing, and putting data into spreadsheets to make it useful.I would say they probably spent as much as 40 or 50% of their time on that process! What Iron Comps has allowed us to do is push that process back to [Iron Comps]. Instead of following up on every individual auction, we can validate that data internally. We can confidently say, ‘Yes, the data you are getting matches what we see out in the country.’ Ultimately, Iron Comps has saved our team a ton of research time. Finally, my team can really focus on what they are very good at! Furthermore, they’ve got 40-50% more time to devote to it, too!”
“Iron Comps has also helped us standardize our data set compared to where we were before. An appraiser in Illinois might’ve used a different set of data than say someone in Minnesota or Wisconsin. Now they all have access to the same, larger set of data. It’s so much more robust and comprehensive compared to what we dealt with before.”
From where we’re sitting, an open mind to new partners, deep industry knowledge, and die-hard devotion to high standards made all the difference in the world to this project – both for us as well as the team at Compeer Financial. Furthermore, it allows them to focus on what they do best – continually doing better for their farmers! While this is reason enough to invest in Iron Comps and its capabilities, they’re just getting started. There’s lots more innovation on the horizon!
A year ago, we wrote about the seasonality of the baler market. The summer dip in values still exists, but that was a flat commodity market. The price of all machines since last harvest have been nuts! With commodity prices on this meteoric rise, does that make 2021 a unicorn year where you can turn a profit on older equipment?
Just last week we talked with a farmer who bought a farm down in Tennessee. With that farm came a relatively new Vermeer 504R round baler. The farm was needed. The extra baler…not so much. Iron Comps came in handy to show the farmer what he could expect from this yellow iron round roller if he sold it. That got us wondering, “Could farmers have invested in machines last year, and flip them now on the open market for a profit?” Land appreciates, but machine values almost always head downhill with time and usage.
The round baler market has responded to 2021 like all other machinery. The average price of all used balers was relatively flat from 2019 into 2020. The overall average price did increase 3%, but the 1st quarter average price dropped 12% (Q1 is typically the best time to score a deal on a baler). Either way you slice it though, 2021 has been making hay! Average round balers sold in the first quarter of 2021 are up 25% more than the same time in 2020! Even 10% higher than this time in 2019!
But our question needs to be based on more specifics than descriptive statistics can provide. With a few clicks in Iron Comps Insights, I pulled up dozens of sales of one of the most popular balers to ever roll off the Vermeer Mile in Pella; the 605 Super M. Two particular balers provided a great example of this contrast. The first sold at the beginning of this market rally in early September of 2020, and the second in the midst of this run in late January of 2021.
Although built 3 years apart, these 605 Super M’s both had the same high-end features and sold in the Midwest. The 2011 that sold in September went for $19,750 with 7,150 bales under its belt. The 2014 sold in January for $22,500 with slightly more than 11,800 bales counted. Despite the higher bale count, the more recent sale went for $2,750 more than the model sold last year! That is 14% more for a baler that has already produced 65% more bales.
While checking fields with my dad last summer, he pointed out some low strips in our neighbor’s corn field. They were equally spaced about every 100 feet. Apparently the neighbor was pulling one of his big planters (a 48-row) with a pretty big 4WD, and the weight caused compaction in those rows. This led to an interesting argument discussion about what the “perfect” planter was. We never did agree on one, but it was an entertaining discussion while riding in the side by side.
There are consequences to every choice and farm equipment is no different. It’s a matter of knowing the pros and cons for your operation. Since I was riding shotgun, I pulled up Iron Comps Insights on my phone to understand the value of 48- and 36-row planters. Some farmers got some seriously good deals on planters at auction, especially given the price of a new one! Case in point: late last year, a nice 36-row Kinze 3700 sold in WI for $22K!
Price aside, though, another key factor with implements this large is how you’re going pull it. Most manufacturers recommend at least 350 horses to pull a 48-row planter. That probably won’t come as a shock to most of you, but if you were planning on using the trusty John Deere 8400 for a 36-row or bigger, you’ll be in for a pretty rude awakening.
I was curious to know the difference in the horsepower of farmers’ tractors between those who own a large (36-rows+) planter compared to those with a more moderate 24-row, I dove into Iron Comps. Our Insights tool was essential for this because it lets me filter auctions by type. So, I set the filter to only include estate and retirement auctions narrows the results to individual farm fleets. Finally, I split those auctions in two groups. The first sold 24-row planters and the second sold 36-row planters (or more). Of those two, I looked at the data to see the percentage of tractors sold in different power ranges. You can see the results in the graphs below.
There is no doubt that big planters require a big tractor. What’s most surprising is that farms with a large planter had such a small number of sub-300 horse tractors.
A 24-row may only be half the width of a large planter, but it’s still a pretty big implement. For auctions that sold one, you find a lot more high-power tractors when compared with all tractors sold at retirement and estate sales.
As we approach planting season, know there are a good number of quality planters on the market. Just make sure your eyes aren’t bigger than what your operation can handle!
Not too long ago, my buddy Dustin and I were working on his S670, getting it ready for harvest. He’s a farmer in northern Iowa, and his combine is getting up there in years. He was debating over whether to continue to repair it, trade up to a different used model, or buy a brand new one. Dustin knows his equipment better than just about anybody I know, but I could see that his head was spinning. With so many options on the market right now, I’m sure he’s not the only one!
One of the unknowns he was wrestling with was about the transmission. Is a John Deere ProDrive (essentially an IVT system) the way to go, or is a conventional 3-speed the better idea? Try Googling that question sometime; you’ll find so many passionate opinions on the ag message boards that you’ll give yourself a monster of a headache! Eric in western New York says, “ProDrive is a must have!” Two lines later a guy in southern Illinois comments that he absolutely hated the one he’s got now and he can’t wait to get rid of it!
While the debate still goes on, the general consensus is that ProDrive transmissions make better use of torque from the motor. In turn, that makes it easier to maintain speed in the field (especially useful in hilly ground like Dustin’s). The trade-off for the increased efficiency is that the option itself is more money when they’re new, they’re slower on surface roads, and depending on who you listen to, they’re a lot bigger headache when they break.
So, to try and help Dustin, I told him I’d do some analysis on it using our Iron Comps data to see what effect ProDrive had on residual value. I couldn’t help him weigh all of his unique pros and cons. That said, I do have access to a huge database full of farm equipment auction results. I knew that I could help him with the numbers aspect.
I’ll admit, I was curious as to how it would shake out. I knew there would be a “ProDrive Premium”. But at some point, I figured there would be a point where that started tailing off. I also wondered if there was a point where the 3-speed became a better option.
I made a call to a local dealer and found that an S670 with ProDrive sold for about $428K in 2015 (ProDrive was a $7K option). So with that baseline number, I went into our Iron Comps database. It’s powered by Tractor Zoom’s auction data, and captures over 55% of the market, more than any other source. We’ve got close to 150 S670 sales just within the past two years in the database. It’s a numbers game and the bigger the data set, the more confident we can be in our results.
The table below breaks down the values even more into three scenarios of combines with 600, 1200, and 1800 hours. The first row shows the expected average value for ProDrive S670s. The second row is the expected value of a S670 with a 3-speed. The bottom ‘ProDrive Premium’ percentage is the amount that could be attributed to the ProDrive for that age of combine.
The results for the newer combine affirm what ProDrive advocates have been preaching. A ProDrive in our dataset with 600 separator hours should sell for about $185K at auction. Its 3-speed counterpart, just $163K! A difference of $22K (13% premium) is a lot bigger number than the $7K option when it was new! This indicates that there’s definitely a demand for these combines – especially those without a ton of hours!
As the combine ages, so does excitement for the ProDrive. So much that it is essentially negligible at 1800 hours. A likely explanation is the cost to repair a ProDrive, which older machines are more likely to need. Typical repair bills for out-of-warranty transmissions are fairly steep. Based on what I’ve heard, you could be looking at $25-30K to replace a shelled transmission. Not a small number. I can definitely understand why the premium starts to fall.
As one final check on this pro-ProDrive conclusion, I like to filter down by auction type. Retirement auctions tend to bring higher premiums. Consignment sales tend to be lower and represent the market value floor. The unexpected challenge I discovered was that few S670 3-speed combines hit the retirement market. Conversely, we haven’t seen a lot of ProDrives selling at consignment sales. I’m still working on determining why this happens.
I showed these numbers to Dustin the other day over a beer, and it pretty well confirmed what I think he needed to hear. When I left the shop, he was on his tablet browsing combines at Tractor Zoom, and I’m sure he’ll find a nice ProDrive S670 at a retirement sale somewhere.
A modified version of this article originally appeared on the Iron Comps blog a few weeks ago.
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