2023 Year in Review
December 2023
When 2022 finished, it seemed like 2023 was going to be a year of correction, considering the large advances in the equipment and real estate markets of the previous years. As we finish 2023, from our perspective, the year was more of a “run out” of the same. You could make an argument there was a slower rate of rise in most markets and possibly a bit of correction on the bottom side of the demand products. That always occurs first when any markets change. Right now, markets are mostly steady, and appetite seems to be matching supply in the geographies and markets we operate in but a bit of weakening as we turn to the new year. When January 1 rolls around, it’s always a reset to what is in front of us compared to using past results. Understand, however, if the way the year is finishing is any indication, I’d say 2024 has an overall positive outlook with a bit of headwind as the math of these current interest rates gets recognized in the market. As long as we don’t see any upsetting external events (there is a lot going on in our world today) that would shift our trajectory, you have to continue the conversation of healthy markets with a clear indication the short-term tops occurred in the fall of 2022 and spring of 2023.
What’s been different this year? On the real estate side, I’d say we've seen more investor buyers of farmland outbidding local operators, as they continue to search for safe cash alternatives. They seem to be holding the markets up with the exception of high-quality farmland in tightly held areas where investors don’t stand a chance of outbidding the well-heeled neighbors. We thought this would occur in our comments last year, and it certainly did. We also pointed out the healthy trend of young operators choosing to stay on or join family farm operations, which positively needs to occur for long-term health and prosperity in agriculture. Our aging farm population needs these young entrepreneurs who bring their perspective, ambitions, and talents to production agriculture. Let’s hope this continues.
Construction equipment markets were steady all year, with a good balance of supply meeting demand. We didn’t see the wacky results on scarce items that occurred in the past. I’d say we’re in a “return to normal,” which again is positive in the long term. Sentiment is good, and “balance” would be a word to describe what’s ahead in our view. Watch for seasonal fluctuations in high-dollar equipment and a rock-solid base for everyday use items like dozers, loaders, and support equipment. We still think the used market supply chain will be a little tough, with prices holding because new has gone up so much. Also, operators seem to be holding on to equipment a little longer rather than a normal turn to newer. There are more sellers who have high expectations of value, but it doesn’t match where the market is right now. If work in the spring doesn’t match expectations, it will be hard not to see a change in seller expectations. We think this might loosen supply, but so far, there isn’t enough to change ask prices on used machinery, and whatever we have at auction has good demand and sold for good value, albeit not at new highs.
The fall of 2023 saw more dealer selling activity at auction than we’ve seen in the last 4 years combined! Fortunately, the market has absorbed this late-model inventory nicely with consistent pricing and good demand. Buyers finally see the opportunity for choices when they’re shopping, so we think 2024 will have a settled market where the only disappointments will be from sellers of a high-hour or lesser-quality items where you’ll see a correct separation in values compared to the clean, low hour models. You’ll also see a more distinct price and demand equation for seasonal items so get ready to sell your planters right away this spring and get ready to shop for high horsepower tractors this summer. Everywhere you look, you see record-high prices for these older tractors as long as the quality and condition are there this year. The market for 20-year-old and older machines has easily doubled in the last 4 years. It’s related to our rule of 50% of new. In other words, if a new, say 175 HP tractor costs $175,000, there is a robust market for a tractor of the same utility at $85,000. Especially if that machine doesn’t have emissions, or a plug-in to hook it to a computer so it can tell you what’s wrong with it. It’s all about its utility or the job it can do, no matter the vintage. This is the reason $35,000 tractors of 2018 are selling for $80,000 today. Affordable horsepower is the underlying reason.
Here at the Steffes Group, we’re excited about 2024 and expect another successful year! As always, look for change, look for some new looks to our website with improved searchability we’ve been working on for some time now. I think we finally have it right and hope to launch before our spring selling season. We’re also incredibly humbled by the support and trust you buyers and sellers have placed in our company. It does not go unnoticed, and it will be followed by the promise we’ll always be guided by our Brand Promises and Core Values we openly display. I hope you look for them on our website and hold us accountable to them. Happy Holidays! Wishing each of you great happiness and prosperity in the new year!
Scott Steffes
President, Steffes Group
