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Delays in Manufacturing of New Equipment Increases Demand for Used

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Delays in Manufacturing of New Equipment Increases Demand for Used

July 2021

According to the Association of Equipment Manufacturers report, 166,512 new tractors were sold from January through June 2021, a 16.7% increase from the same months last year. Sales of new combines increased 11% to 2,276 over the same period. The heightened interest in new agricultural equipment has placed added strain on a supply chain that is currently dealing with other challenges. The high demand for farm equipment and issues in the supply chain have made it hard for dealers across the nation to keep their lots stocked. Orders for new equipment from several companies are taking months to fill, causing the demand for used equipment to drastically increase. Due to this increase in demand, we continue to find new highs in low-houred, well-maintained equipment sold at auction.

Manufacturers are seeing shortages of key elements

Manufacturers are scrambling to keep up with the increase in demand due to disruptions along their supply chains that have left them with shortages of everything from steel to plastics, tires, semiconductors, labor, and transportation.

Almost every piece of new farm equipment has become increasingly computerized in recent years, so semiconductors have become an essential part of their systems. The shortage of semiconductors may impact all aspects of agriculture for the next two years and beyond. This shortage is forcing farmers to plan ahead, as new equipment orders are taking months to fill.

To increase the production of farm equipment to adequately meet demand, equipment companies also need a sufficient supply of workers. Companies across the country are struggling to find skilled and unskilled labor including mechanics, diesel mechanics, welders, and some factory line workers, adding to the delay in the manufacturing of requested machines. The final struggle that equipment companies currently face is transportation. Not only of materials to the factories, but transportation of completed machines to dealerships. But transportation, whether by ocean freight, air freight, or trucking, is something equipment companies have to compete for within the industry and outside of it. When combined with the enhanced demand, these issues create a complex situation where equipment manufacturers struggle to get enough implements to dealerships to sell to the increased number of buyers, forcing buyers to look at the alternative – purchasing used equipment.

Used equipment finds new highs

After years of less than favorable commodity prices beginning in the fall of 2014, and corresponding high inventories of farm equipment on dealers’ lots, commodity prices took off in the fall of 2020 and haven’t stopped. Combined with low interest rates, farmers across the United States are flush with cash with the help of the Coronavirus Food Assistance Program (CFAP) and are searching for farm machinery in preparation for this year’s harvest. However, the supply and demand of well-maintained used equipment is beginning to reflect the new equipment business, making farmers turn to auctions to fill their equipment needs. On one recent Steffes Auction, a 2013 Case-IH Steiger 600 Quadtrac sold for an incredible $307,000, the highest price seen in over eight years.

The effects of the manufacturing delays extend beyond the agriculture market. From trucks to trailers, construction equipment, and vehicles, month to year-long waits are not uncommon. In late May, a 2020 Ford F250 with 28,171 miles sold for $66,500 on a Steffes Auction, simply because they are nearly impossible to find sitting on dealership lots.

These shortages are predicted to last a minimum of 18 to 24 months. If you want to take advantage of the increased demand we are seeing for used equipment, contact any of our sales representatives to discuss your options of selling with Steffes today.