Ag equipment auction value spread reaches historic high

Mounting used inventory continued to pose challenges to agriculture equipment dealers in August, with auction values still sliding. 

The gap between auction and asking values for some equipment has surpassed the record highs seen in 2015, reflecting dealers’ delayed response to market conditions, Sandhills Global Equipment Lease and Finance Manager Jim Ryan told Equipment Finance News. 

“The dealers and the retail sales are typically three to four months late to react to what’s happening in the market,” he said. “That’s why I usually say auction values and auction trends are really a true sense of what’s going on currently in the market. Dealers, their lots are loaded right now, and they’re not quick to drop those prices on the asking side.” 

Nearly every category of used agriculture equipment felt the strain of high inventory as prices continued to fall in August, according to Sandhills Global’s monthly report on heavy-equipment trends: 

Used tractors, 100 horsepower or more 

• Inventory rose 37.1% year over year and 2.9% month over month; 
• The high-horsepower tractors category saw the largest YoY jump at 62.5%; 
• Asking values fell 2.6% YoY and 1.3% MoM; and  
• Auction values dropped 13.1% YoY and 1.8% MoM. 

Used planters 

• Inventory increased 8.2% YoY and 4.1% MoM; 
• Asking values fell 6.8% YoY but rose 4.9% MoM; 
• Auction values declined 22% YoY and 6% MoM; and 
• EVI spread, the percentage difference between asking and auction values, stood at 68%, down from a peak of 78% in May but still near record highs of 2015.  

 Used combines 

• Inventory rose 10.4% YoY but fell 2.6% MoM; 
• Asking values climbed 3.8% YoY, but dropped 0.6% MoM; 
• Auction values were down 4.8% YoY and 2% MoM; and 
• EVI spread was 57%, exceeding historic highs of 2015. 

Used compact and utility tractors 

• Inventory fell 11.5% YoY and 1% MoM, decreasing for the third month in a row; 
• Asking values dropped 4.5% YoY but rose 0.4% MoM; and 
• Auction values dropped 6.9% YoY, but increased 0.7% MoM. 

Lease returns compound challenges 

Lease returns have exacerbated challenges facing dealers as many are taking losses on aging equipment, Ryan said. 

“You might have a farmer that bought new and they’re returning now. That second buyer is really where we’re seeing the drastic drop off,” Ryan said. “Let’s say a farmer bought a combine for $800,000 and turned it back in, and the second is paying $300,000 now. Who’s eating that gap? So, I think that’s something that’s kind of going unnoticed.”