Get ready for more change. That seems likely as we head into the election, a busy fall/winter auction season, and the anticipation for the spring of 2025. It’s easy to predict change but predicting to what extent, how much, and for how long would be a very valuable talent. There is no question we don’t have that talent, but what we do have is the auction method of marketing where true price discovery and firsthand, real-time information might give a bit of an advantage and certainly the change news first.
We always go back to our three basic indicators when it comes to Ag, both equipment and real estate. Remember what they are? Commodity prices, crop production, and interest rates. Since 2020, we’ve softly added a fourth, and that’s government (remember the Trump Bump?), as the “stroke of a pen” can greatly change the equation.
Farm Equipment
On the equipment side, we’re still very much in the cycle of dealers aggressively using auctions to manage and downsize their inventories, especially on the John Deere side. That isn’t fresh news as it started in the fall of 2023, and we’ll say it’s going to continue through the spring of 2025. Current model used equipment auction prices don’t align with the actual depreciation of its utility or the hours/use of the asset compared to new. Here is where your best buys are if you’re a buyer, and here is where the greatest hits are being taken if you’re a seller. Also, those second, third, and even fourth generation equipment buyers of the COVID era who had to pay way too much when there wasn’t any used iron available are seeing their purchases take a hit. Unfortunately for them, we’d argue today’s values are more in line with their true depreciation and close to the values of pre-COVID. If you have older tractors, especially those 15 years and older, with quality conditions and a good life left, you’re in the best shape in today’s market. There isn’t much downside.
On the equipment side, we’re still very much in the cycle of dealers aggressively using auctions to manage and downsize their inventories, especially on the John Deere side. That isn’t fresh news as it started in the fall of 2023, and we’ll say it’s going to continue through the spring of 2025. Current model used equipment auction prices don’t align with the actual depreciation of its utility or the hours/use of the asset compared to new. Here is where your best buys are if you’re a buyer, and here is where the greatest hits are being taken if you’re a seller. Also, those second, third, and even fourth generation equipment buyers of the COVID era who had to pay way too much when there wasn’t any used iron available are seeing their purchases take a hit. Unfortunately for them, we’d argue today’s values are more in line with their true depreciation and close to the values of pre-COVID. If you have older tractors, especially those 15 years and older, with quality conditions and a good life left, you’re in the best shape in today’s market. There isn’t much downside.
Overall, we’ll say this fall and winter market is going to be steadier than many are predicting but look for more headwinds once the election is settled, especially into the spring of 2025 unless we get some higher commodity prices headed our way, which will be the biggest market mover. With the crop that’s out there, that doesn’t seem likely. Interest rate changes might provide a bit of relief, and those with bushels in the bin will certainly be better off.
As always, if you’re a seller, expose individual pieces right ahead of the season of use, and if you’re a buyer, look for off-season items and bargains. That’s just common sense advice. If you’re contemplating a life change and thinking of an exit or even a downsizing, follow what my dad always told everyone for his 60 years in the business: “Have an auction! Do it when you’re ready…… fall or spring!”
Real Estate
Now, on to real estate and, specifically farmland. It’s old news land values are off from the highs, but the big surprise is how very little in many of the markets we operate. The demand is there, and farmers are still the biggest buyers. We’ve written about it elsewhere, and we don’t see much price pressure, again through the rest of the year, especially on highly productive land. There must be some downward pressure that just has to get larger as we turn the page into the next season. Double the interest rates and half the price of corn from 2 years ago make the math super hard to understand yet cash buyers are relatively abundant, considering. Right now, especially in Iowa, sellers just aren’t there (maybe half of the activity of a year ago), so what does come to market has a big audience, making it the biggest explanation of where we’re at. We think we’ll see more land available in the coming months, so when you see a piece coming for sale across the road, get ready to buy it, and for likely a little less than a few months ago.
Now, on to real estate and, specifically farmland. It’s old news land values are off from the highs, but the big surprise is how very little in many of the markets we operate. The demand is there, and farmers are still the biggest buyers. We’ve written about it elsewhere, and we don’t see much price pressure, again through the rest of the year, especially on highly productive land. There must be some downward pressure that just has to get larger as we turn the page into the next season. Double the interest rates and half the price of corn from 2 years ago make the math super hard to understand yet cash buyers are relatively abundant, considering. Right now, especially in Iowa, sellers just aren’t there (maybe half of the activity of a year ago), so what does come to market has a big audience, making it the biggest explanation of where we’re at. We think we’ll see more land available in the coming months, so when you see a piece coming for sale across the road, get ready to buy it, and for likely a little less than a few months ago.
Construction
For us at Steffes, the construction market has shown the steadiest path, market-wise, except for the elephant in the room, and that is the truck market we’ll lump in with construction. Trucks have been dismal, especially on the over-the-road side, with pricing down as much as 40% or more since a year ago. It’s a combination of no drivers, humungous supplies, and an argument of previously unexplainable high re-sale values that needed correction. Trucks have always been a more fluctuating and volatile market, so maybe we should be looking for the bottom being close or here as we head for a healthier environment in the spring.
For us at Steffes, the construction market has shown the steadiest path, market-wise, except for the elephant in the room, and that is the truck market we’ll lump in with construction. Trucks have been dismal, especially on the over-the-road side, with pricing down as much as 40% or more since a year ago. It’s a combination of no drivers, humungous supplies, and an argument of previously unexplainable high re-sale values that needed correction. Trucks have always been a more fluctuating and volatile market, so maybe we should be looking for the bottom being close or here as we head for a healthier environment in the spring.
Work seems to be abundant for our contractor customers in several segments. That’s a good thing, as there are hundreds of reports and commentaries available on housing, energy, and infrastructure that are staying positive. Our biggest obstacle in construction auctions is finding assets to sell. If you’ve been shopping, I think you’ll agree, and our calendar isn’t loaded up by any means. If you were to ask about 2025 and what changes we’d see, it would be that demand will stay strong but perhaps, (at least on new) the appetite might dwindle as affordability comes into question. If you align, then our prediction of used construction values being consistent and predictable is a good bet. If the pipeline of work suddenly changes, then so will values, but that seems unlikely for now, especially with the lowering interest rate we are seeing.
As always, our albeit biased recommendation is to follow and participate in the auction process. Accumulate as much information as possible to make good decisions, and for gosh sake, if you’re a buyer, do your inspections before you “push the button” or be content with the risk.
Scott Steffes
President | Steffes Group, Inc.
