The honeymoon period of the US agricultural machinery market has ended

In the late summer of 1985, the agricultural crisis of the 1980s was at its peak. At the auction for the clearance of recycled agricultural machinery in Columbia, Missouri, rows of second-hand harvesters were scattered, and a total of 174 agricultural equipment were auctioned on that day.

Fast forward to now, a Bloomberg News report claims that used equipment, not new technology, is the star of this year's Agricultural Progress Show in the United States. This 

article emphasizes that BigIron Auctions, a second-hand agricultural machinery supplier and one of the exhibitors at the exhibition, has made the highest bid ever. Although this 

may be good news for auction companies, it could indicate that bad news is coming for the entire industry.

You may ask, how bad is it? When agricultural equipment manufacturers begin to lay off workers on union production lines, close factories, and relocate them to Mexico, there is 

a surplus of second-hand equipment in the hands of distributors, and the trend is rapidly changing.

Rising and falling trend:

Many people have observed the agricultural economic cycle. This time, despite a sharp increase in input costs, commodity prices remained in sync with it, and ultimately, 

agricultural net income reached 182 billion US dollars in 2022. However, those beautiful times have passed. By 2024, it is expected that net agricultural income will decrease to 

$140 billion.

American agricultural equipment manufacturers and machinery distributors set their best sales record in over a decade in 2021 and continued strong sales for most of 2023. 

Although sales of new small and medium-sized tractors peaked in 2021, sales of high-powered tractors and combine harvesters remained unchanged until the beginning of this 

year.

Carnival ends:

High inflation, high interest rates, and falling crop prices have dampened the recent high sugar effect in the agricultural equipment industry, signaling the end of the honeymoon 

period in the US agricultural machinery market. In the past four years, the average price of new machinery has increased by 30%. In 2020, the average price of a new tractor was 

363000 US dollars. In 2023, it soared to $491800. Since March 2022, the Federal Reserve has raised interest rates 11 times to curb inflation. Therefore, not only is the cost of 

the new machine at least 30% higher, but the loans used to purchase capital projects are also 161% higher. Now, with commodity prices falling faster than interest rates or 

equipment prices, this period of prosperity has come to an end.

Consequence radiation:

The Equipment Manufacturers Association of America stated that sales of the new two wheel drive tractor in June 2024 decreased by 16.3% compared to 2023. The sales of 

combine harvesters have decreased by 31%.

Dealers are trying to stay ahead of the trend. Compared to the previous economic recession from 2014 to 2015, dealers' response to this recession is vastly different. This time, 

dealers have been vigorously reducing inventory of large new smartphones. In the first 8 months of 2024, compared to 2014 and 2015, the original quantity of one to two-year 

equipment auctioned in the market increased by 450%.

The market force of online auctions was still in its infancy ten years ago. Mechanical auctions used to be local affairs, but now they are regionalized, perhaps nationalized. Even 

farmers aged 65 and above are bidding for tractors outside of 8 states.

The unprecedented number of large-scale new second-hand equipment transactions and the earlier the problem of excess inventory is resolved, the earlier the industry will 

return to a bright era. The speed at which this situation occurs will depend on many factors, so it may be wise to cautiously push the market in the right direction.

Desire for certainty:

At present, there are many things that can be done to bring more certainty to the market, and perhaps the following list can solve this problem.

Pass a new agricultural bill.

The depreciation incentive measures are permanent.

Suspend new EPA and climate change regulations.

Do not increase corporate or personal tax rates.

According to market analysts, the industry may be at the bottom of a roller coaster ride in the next year or so. The good news is that in the long run, all signs indicate that by the 

end of this decade, the agricultural manufacturing industry will be recovering very healthily.

With the increasing integration of robots, artificial intelligence, and information systems, the US agricultural machinery industry is expected to grow from $39.56 billion this year to 

$53.7 billion by 2029.

Author: Jing

Source: Agricultural Machinery Information Network