2022 Review- A Message from Scott Steffes
At this same time last year, I had the same feeling I have today. Wow! What a year! It's been several now where the "wow" factor has been positive, which we've all enjoyed. Our prediction of continued strength in all markets has certainly occurred, and any sort of lull was short-lived, if it existed at all. We're at new highs on farm machinery values, construction equipment values, and real estate as well. These last few years, starting even before COVID, have truly been remarkable any way you look at it. Prosperity abounds, profits have been made, and investments have been occurring, some would say, at too rapid of a pace. Maybe, but I can tell you appetites for purchasing are still aggressive with not much worry of anyone getting full. At least not yet.
In the real estate world, most winning bidders at farmland auctions have been operating farmers outbidding investors who would like nothing better than to park cash in farmland investments, but producers' appetites have been stronger. We'll likely see more investor purchases as we roll into the new year. We've also observed more family operations expanding to make room for young people and successors, creating greater opportunities. What a wonderful trend ensuring some long-term stability in agriculture. Sure, farmland is high. Pick a time in the past, any time really, where it hasn't been. I don't think that will ever change for such a valuable one-of-a-kind asset. The trick has always been figuring out a way to pay for it, even when it was $500 instead of $5,000 or $1,500 instead of $15,000! When farmland is $30,000 instead of $15,000, I suspect the conversation will be the same. I wonder when that will be? Heck, in some places, it already is!
While farmland values lead balance sheets and net worth, farm machinery is simply the modern-day shovel, hoe, rake, and scythe to make it all work. You must have machinery to farm, and I'm not sure what comes first, the appetite for larger and higher capacity machines or the appetite for more land to farm because of the appetite and capacity of new equipment needing more acres to spread the costs? Combines today can do more in an afternoon than an entire harvest season in the not-too-distant past, with one person sitting in the cab watching all the screens! Can you imagine what the man standing on top of a bundle rack next to a new threshing machine with a 3-tine pitchfork would say about today? Keep in mind that it's been less than a century ago! What a perspective! Now plug that progress/change in for the next century, and tell me what that looks like. Exciting times.
Construction is no different, where improved engineering and mechanization have always led to progress. When a job is available and a machine is needed, waiting 9-20 months for a new delivery isn't an option. Lately, auctions have been one of the few sources for any kind of machine, "right here, right now," and the price is a consequence of the need for acquisition. Today's contractors depend more than ever on tools to make people more efficient, as labor is unavailable in many instances. Our construction markets will continue to be strong for the foreseeable future as construction costs seem to stabilize as businesses and individuals waiting to dive into projects seem to be moving forward, as the wait has already been long.
As always, look for those leading indicators to forecast change. Right now, it's interest rates, although these moves have yet to affect demand in any of our three markets, even though the math will tell you otherwise. I suspect we might see some of that come spring unless demand overcomes the math, and by that, I mean continued strong commodity prices in ag and a full backlog of work in construction. One thing I will guarantee, however, if change occurs, you'll see it in our auctions first. That I'll promise you, so be sure to follow along, and we can experience it together and guide our businesses and decisions by what we see at auctions first. It's our own little secret crystal ball.