About This Episode
Brent Judisch tells Chris Barron there is a large oversupply of used combines heading into 2023 harvest, especially Class 8 machines. He counts about 1,400 in the John Deere line that are three years old or less and about 730 four-year-old or less on the Case side. Dealers have to place next year's orders by harvest, so they are motivated to move inventory now, which means deals, interest-free offers and waivers for anyone shopping.
The picture is uneven across the fleet. Tractors from new to three years old are plentiful, roughly 700 Deere units in the 300 to 400 horsepower range, while 5 to 10 year old tractors stay tight and overinflated. Tillage and planters are short because short-line manufacturers cannot get steel or labor, so those stay a seller's market at 7 to 8% market rates. Used sprayers have grown as buyers chase ExactApply and See and Spray.
Judisch also explains why leasing has gained ground: Iowa and then federal rules changed how trade-in value and depreciation recapture work, so a trade can show up as capital gain. A lease makes exiting after one to three years cleaner, and at roughly $40,000 for a tractor and $70,000 for a combine it preserves cash for inputs when an operation adds acres. He points to sprayer technology as the fastest payback, three to four years on chemical savings.
“It's a buyer's market right now if you're looking for a combine.”
— Brent Judisch
Key Takeaways
About 1,400 Deere Class 8 combines three years old or less and about 730 Case machines four years old or less were sitting on lots ahead of harvest.
Used combine programs included interest waivers and rates of 2.9% to 3.9%; new machines were largely sold out a year ahead, so new-side programs were thin.
Chris notes new equipment prices rose about 31% across the board over two and a half years, with increases now leveling off as farm interest rates tripled.
Class 6 and 7 combines and 5 to 10 year old tractors stayed tight; roughly 700 Deere tractors in the 300 to 400 horsepower range were three years old or less.
Tillage tools and planters remained a seller's market on short-line steel and labor shortages, financed at 7 to 8%.
Leasing gained after Iowa and then federal rules made trade-in value show up as capital gain; Judisch cites about $40,000 for a tractor and $70,000 for a combine.
Full Transcript
Narrator: We are grateful that you are joining us for another episode of the Ag View Pitch, as we know that your time is very valuable. Our team at Ag View Solutions is always here for you for any questions or comments that you may have. Please feel free to reach out to us at cbarron@agviewsolutions.com. And now here is your host, Chris Barron.
Chris
Barron: Welcome everybody to another episode of the Ag View Pitch. We are here today to talk machinery and equipment with Brent Judisch Mr.— I'll call you Mr. John Deere. How's that sound?
Brent
Judisch: That sounds awesome.
Chris
Barron: That's good, that's good. So Brent, you've been on here numerous other times talking about machinery and equipment values, what to think about going into harvest, what to think about going into planting, and all that kind of stuff. And you and I had a conversation, and I'm like, hey, we need to record this because, uh, you had some interesting information on combines, which is where we're going to start the conversation, and then we're going to go into a few other little topics on equipment values and kind of what's going on with machinery and equipment inventory. But let's start with combines, which is the conversation we had offline about what guys and people that are looking at machines, thinking about trading, what they're looking at for combines. Go ahead and give us your two cents.
Brent
Judisch: Well, if you're in an area where you got a pretty good crop coming, probably maybe you run your combine an extra couple years and you're thinking about updating there is a large oversupply of used combines right now, especially Class 8s. In the Deere line, there's 1,400 3 years old or less. On the Case line, there's 730 4-year-old or less. That's just a lot of combines to be sold between now and harvest. So if you're looking for a combine, there's a lot of deals, there's cheap financing, there's interest-free, there's waivers. It's a buyer's market right now if you're looking for a combine.
Chris
Barron: So what, what about on the new side? And we'll come back to the used, but you know, one thing that we've been telling our people and, and that we've noticed over the last 2.5 years, we saw about a 31% price increase on new machinery and equipment across the board. I don't know if that ties exactly to combines, but just on new equipment fleets. And so with that said, I mean, are, are the inflationary impacts starting to level off to where the price increases are kind of done for a little bit here now. If there's that much inventory on the used side, is that going to slow down price increases on new stuff?
Brent
Judisch: Well, the new is, you know, they always watch inventories used. So it will affect the price, will affect availability. But yeah, the price increases have really leveled off. You know, when COVID came in, supply got tight. It was kind of tough to get stuff, but now availability's getting better. Price increases have leveled off, But part of that's interest rates, you know, interest rates have tripled on the farm side. So you can't keep raising the prices of stuff and interest rates because then the cost of ownership goes up drastically. So the two are kind of hand in hand, you know, interest rates went up, used availability's gotten excess. So it's, it's forced us to, you know, really watch what's going on on the new side and kind of level everything off.
Chris
Barron: So on the As far as like the combines that you're talking about, all of that 1,400 and, and, you know, and there's all other brands or whatever, what, 700 and some or something I think you said that, yeah, you saw on there for other brands besides Deere. So if, if you look at the, those used combines that are on there, you're just basically saying this is a buyer's market. Um, talk a little bit about that. I mean, are there specifics in, in that that people need to be looking for or paying attention to or or what?
Brent
Judisch: Well, the combine market's kind of gravitated to the Class 8 combine, 12-row head, 16-row head. That's kind of dominates the market anyway. If you're looking for a Class 6 or Class 7, there's a few around, but the deals won't be as well because there's not as many of them. And you know, we're gonna— we're already starting to order for next year after season. So from the dealer side, we have to get our orders in by harvest for next year. So If we have too much inventory this year, it's gonna kind of limit how many you're gonna put on the lot for next year. So we want to get as many moved off the lot now 'cause we'll have the guys that trade every year start to look at next year's rolls.
Chris
Barron: So those deals on the combines, I mean, and speaking from a dealer perspective, is that those are ready to roll? You write the check, they're ready to roll, ready to go to the field?
Brent
Judisch: Right, yeah. Any more used combines are kind of sold like new ones. Most of 'em are gone through. Most of 'em have a warranty. If they're less than 5 years old, they have extended warranty. Warranty anyway, so that rolls over to the new owner.
Chris
Barron: Okay, so talk about the other pieces of equipment that, that kind of gets the message out there that if you are looking for a combine, pay attention. Inventory is super high. The— it's a buyer's market, um, on the combines. Talk a little bit about tractors. What do you, what do you see in there?
Brent
Judisch: Um, tractors, there's a pretty good supply of 3-year-old or less. I don't care if you're talking 3-year-old or older, you mean 3— no, 3-year-old or less. Okay, so new. Yeah, yeah, new to 3-year-old, there's a large supply of tractors, especially in the larger horsepowers, the 340 to 400 horse, all colors pretty available. If you're looking for something 5 to 10 years old, that market is still really tight and really overinflated in value.
Chris
Barron: So what's the inventory look like?
Brent
Judisch: So there's just a lot of those sitting around, or a lot of them for sale, or Yeah, you know, the fleets that get new ones every year or two, there's a lot of them. I think on the Deere side, there's about 700 tractors that are 3-year-old or less in the 300 to 400 horsepower range.
Chris
Barron: So let's talk interest rate on the tractors and maybe even backing up on the combines too. But do the lower interest rates that should be coming if the manufacturers want to move stuff, a lot of times that's what happens, right? They start lowering to 3% or 0% or whatever. Are you seeing that on new, used combines, tractors? Talk a little bit about what you're seeing on interest rate.
Brent
Judisch: The programs are mainly right now on used and on combines. Tractors, there's some programs out there, but we don't have an oversupply, so we don't need to. On the tractors, there's some waivers going on. I've seen as much as a 2-year waiver on some things, some interest rates, 2.9%, 3.9%. But those programs are all on the used side right now with new being sold out for another year. There's not a lot of programs special on the new ones.
Chris
Barron: What about tillage, planting, that kind of stuff?
Brent
Judisch: Um, tillage has been very hard to get. A lot of that comes from what I'm gonna call the short-line manufacturers, and they're struggling with availability of steel, availability of labor. So the tillage stuff is really short-used. It's been a really a seller's market there, and the planter's been the same way. If you have a good-use planter on the market and it's priced right, it's it's going to sell right away.
Chris
Barron: Interesting. What about interest rates on all that stuff? Then you're going to be at market rates.
Brent
Judisch: You're going to be at market rates, 7-8% on the short line stuff or on the non-major stuff.
Chris
Barron: Yeah. Um, I want to hit one other thing too. A lot of times I get questions from people, or they'll say, okay, here's the possibility of buying this new piece of equipment or whatever, and we can do a lease or we can do a purchase. Talk about what you're seeing for lease opportunities versus purchase opportunities and why would one look at one versus the other?
Brent
Judisch: Well, generally speaking, everybody's always been on the purchase side. That's just the way it's always been. I want my ownership, I want my equity, I wanna retain that. But about 4 years ago, the state of Iowa changed their laws on trade-in values and on how you recoup your depreciation. And now the federal's jumped into the same boat now. So if I trade a piece of machinery in, they're gonna take the trade-in value and show that as capital gain if I haven't depreciated out. So that's really forced a lot of guys to look at leasing as opposed to ownership. You can still build equity in a lease, but to get out of the machine after 1 or 2 or 3 years is easier on a lease because you're not going to recoup that value of depreciation that you gave up when you bought it.
Chris
Barron: It seemed like, you know, I've been through enough of these egg cycles, um, that it seems like the manufacturers will push the leases a little bit more when the economy isn't as good. The ag economy is pretty good still yet and probably will be for a while. It takes people a while to run out of money after you, you get— you pile it up and then take a year or two to get rid of it when the commodity prices are crappy. But, you know, do you see that, or is that something that we would be watching for, is that all of a sudden maybe they'll encourage more leases because they throw out better deals sometimes in order to keep machinery and equipment moving, right?
Brent
Judisch: Well, the lease is a little more prevalent when you have more supply of new and a little bit less buyers. But it hasn't been that way the last few years because everything that Deere, Case, or Fendt builds is pre-sold, right? But as farm consolidations happening and Farmer A adds 800 acres and needs another tractor, another combine, want to go out and spend $1 million to add, that's a lot of capital. If I can go lease it for $40,000 for the tractor and $70,000 for the combine, that's a good way to acquire more machinery. I can save my extra cash for input capital and makes life easier.
Chris
Barron: So, um, my— as we get towards wrapping up here, another question. Um, we're recording this mid-summer 2023. Um, what, what do farmers, or what should they be paying attention to From a big picture perspective on machinery and equipment, we talked about combines of being an okay deal. What I've seen is that producers got behind on machinery and equipment fleet management for a while. We've had a couple of good years, that fleet's gotten in better shape, things are a little bit newer. There's always some things that we need to be trading. There's probably something a person should be trading a little bit every year just to stay current. What would you want to leave people with to pay attention to as we head towards harvest in 2023?
Brent
Judisch: I would say going forward, the whole ag industry right now is looking at technology. ExactApply on sprayers, ExactShot on planters with fertilizer on them. Now we have See and Spray. I think a lot of the technology things are some of the fastest paybacks that we're looking at now, especially on the sprayer side. You can pay for a sprayer in 3 or 4 years with what you're saving on some of these chemicals and stuff.
Narrator: Yeah.
Chris
Barron: So what do you think as far as the sprayers? I guess that'll be my last, last question because I didn't ask about that. What's the inventory of used sprayers look like? Is it a buyer's market, neither used or new, or is it something that kind of depends on the area you're in on the sprayer side?
Brent
Judisch: The sprayers has been pretty low on inventory used the last 4 or 5 years. Um, like I just mentioned, with all the technology out, everybody wants to see and spray. A lot of guys are buying ExactApply, so that's giving us a large inventory of 2 to 5-year-old sprayers just because everybody wants the technology now and it's available. So they're really looking at buying it, investing in it.
Chris
Barron: Cool. All right, I think— did I ask you everything?
Brent
Judisch: I think we're good.
Chris
Barron: Okay, that sounds good. Well, we'll have you back, I think, right before, uh, corn harvest. I know there's a lot of guys running on wheat now as we record this, and getting, getting her done there. But as we get closer to corn and soybean harvest, maybe we'll get you back on and we'll talk about some of the principles of things we need to do going into that.
Brent
Judisch: Okay, well, thanks for having me on.
Chris
Barron: Yep, thanks, Brent. Again, Brent Judisch, Mr. John Deere, I'll call you. And with that said, hope everybody's having a great summer, being safe. And with that said, we'll catch you next time on the Ag View Pitch.