The Online Market is Changing How Farmers Buy and Sell Machinery

Online shopping makes getting the things you want and need easy. Looking for a new pair of boots? Two clicks and they’re on the way. Wondering if something is in stock before making a 50-mile trip to town? Check inventory from your phone.

Selling is easy too. No more classified ads or setting up a garage sale. Now you can reach potential buyers both in your township and across the country by listing online.

When it comes to farming, buying and selling equipment has become as easy as shopping for groceries online. Accelerated by COVID-era supply challenges and the boom in online auctions, the market for tractors, combines, and other large machinery has never been easier to access — which can mean real benefits to your bottom line.

“At least in North Dakota, even in the ’80s, people would bring their wives to a sale, pack a lunch, buy a tractor, and then drive it 400 miles home to the farm,” says Scott Steffes, President of Steffes Group, a full-service auction company based in West Fargo, North Dakota. “But now we call it the ‘death of distance.’ As machinery becomes larger and less available, the economics of transporting equipment compared to the purchase price has become more attractive proportionately.”

For example, he says, it’s hard to justify a $10,000 tractor purchase when shipping is $2,000, but it’s easier when it’s a $200,000 piece of equipment and shipping is $2,000. 

The search for supply

Supply chain issues during the pandemic accelerated the need to be more creative when shopping for equipment, both for farmers and for the dealers who serve them.

“In the last two years, there were cases where we were buying equipment from across the country to augment our own used inventory, in order to have things to offer,” says Neil Messick, co-owner of Messick Equipment, located in south-central Pennsylvania. “As we’re seeing inventory levels coming back a little more, there isn’t the need to go outside the area like there had been, but our customers have definitely been introduced to a new way of buying.”

Scott Cook, owner of Cook Auction Co. in Clinton, Missouri, says that while purchasing equipment from a distance is nothing new, the supply, or lack thereof, is.

“People have always been willing to transport equipment, but what’s changed in the last two or three years is supply,” Cook says. “There’s been a lot of equipment exported, and then the supply issues everyone knows about from the pandemic have caused a shortage of equipment. And also, people are more comfortable buying off a screen, whether at auction or just from a few pictures.”

Machinery on the move

Steffes says 85% of auctions his company conducts are online only, and they are in the minority of large auction houses still offering in-person sales. He says more than 80% of equipment sold at his auctions today is trucked somewhere, whether it’s 50 miles down the road or all the way to a port to go on a container overseas.  

“When my dad started in the auction business, 50% of equipment sold at most farm retirement or estate auctions was sold to dealers for resale because the farmers didn’t know the market and didn’t have time to research because they were busy farming,” says Steffes. “Today, everybody knows everything, and so there’s no reason to be hesitant to purchase a piece of machinery they require for their operation if it happens to be 500 miles away.”

Cook has seen a similar trend in his business. He estimates 90% of equipment he sells is shipped somewhere, and 80% of that travels 350 miles or more.

The logistics of transporting equipment is something to consider, but most large sellers have resources to help with those arrangements.

“We hired someone who’s been in the farm equipment trucking business for years, and he hauls all of our own stuff and works with our customers,” Cook says. “He looks at a report from us multiple times a day and coordinates with our buyers to set up delivery. It makes the process pretty seamless.”

Other companies offer recommendations of trusted transporters on their websites, and arranging private transport is always a viable option as well.

Financing options

With high-dollar purchases, financing is often a key component. Having a conversation with your preferred lender in advance can save time when it comes to closing the deal. 

“There are several different ways auctions approach financing,” says Joe Springer, Compeer Financial’s managing director of ag lending and insurance. “Some require letters of credit to register for bidding, which is usually a simple process. Others have preferred financing partners where you can apply online for financing on the spot.”

He also reminds farmers to keep financing options in mind when deciding where to purchase equipment. 

“In the equipment world, it’s always a good idea to make sure you’re keeping track of rates, especially from dealers,” Springer says. “Sometimes dealers can offer lower interest rates to promote the sale of certain pieces of equipment, whereas other lenders typically don’t do that.”

Local relationships are still vital

Regardless of where your equipment comes from, having a local connection for inevitable parts and service is key. Messick advises buyers to maintain a good relationship with their dealers to help mitigate potential issues.

“I hope that the customers feel comfortable enough to come to us and say, ‘Even though we’re not buying this from you, what can you tell me to look for? What questions should I be asking?’ because the model number only reveals so much about a machine,” he says. “Knowing the rest of the details or at least the right questions to ask are pretty important, especially with high-dollar investments like these.”

Wider markets for sellers

Farmers today have more options than ever when it’s time to sell equipment. The ability to reach potential buyers from nearly anywhere means auctions are an excellent way to judge true market value, according to Steffes. “If you have an asset that you don’t know the value of, sell it at auction because it’s true price discovery,” he says. “You attract all bidders until only one remains, the one who’s going to give you the highest price. What could be better?”

Equipment used to come up for sale upon a farmer’s retirement or death, but that’s not always the case anymore. Many farmers today regard equipment as another asset to manage that should be bought and sold when the business dictates.

“Today’s market is about asset management, and the reason to buy and sell isn’t because Dad passed away or you’re ready to retire,” Steffes says. “It’s because it makes good business sense to run a viable farm operation. In our world, 50% of the machinery we sell is to strong, viable operators who are using their tools to grow their business.”

Steffes encourages farmers to become educated in the marketplace as a whole, not just what’s happening in their area. “What you see locally may not reflect the overall market,” he says. “That’s a mistake I think a lot of farmers make. They have a dry year and decide to sell a tractor, but they think it’s not going to bring very much because all of their neighbors are having a dry year too. But 500 miles away, they’re having a bumper crop and people are starving for tractors and willing to pay a premium price.”

Things to think about

Be sure you’re dealing with reputable sellers. Check their websites and past auction information to get a feel for how detailed their descriptions and pictures are.

Have a plan for transportation. Steffes says many farmers prefer to arrange transportation on their own, but most auction companies have a list of reputable shippers on their websites as a reference.

When buying from other parts of the country, make sure the equipment is set up for your operation. “If someone buys a combine from the Midwest, it may not be equipped for what we would do in our area,” says Messick. “You could end up with substandard performance because it wasn’t equipped properly for your geography, and it takes a certain level of sophistication to know those things.”

Use resources available to help make an informed decision. “Programs like John Deere’s Green Light can provide a standardized inspection report, so you can be more comfortable with an item’s history,” Steffes says.

Be prepared for the unexpected. Sometimes even the best descriptions miss something. “It is 100% normal to get surprises,” Messick says. “Factor that possibility into your purchase price.”

If you need financing, check to see what the seller requires before purchasing. “Some places require a letter of credit, while others have preferred financing partners to work with,” says Joe Springer of Compeer Financial.

EDITOR’S TAKE:

Interesting take on the current state of the ag machinery market. As the article points out, purchasing equipment and transporting it is not new. What is new, however, purchase price-to-transport cost ratio. With much higher purchase prices today, farmers/ranchers often shop for products over a much larger geographic area. The issue of availability for used equipment has also given rise to more expansive geographic markets. With a lot of used equipment being exported overseas, there can often be a shortage in many local markets. In addition, as stated in the article, all machinery is not set up or used the same in various parts of the country. A combine from one part of the country may be used much more extensively than in another region. But overall, farmers and ranchers are willing to shop around if they need or want a particular piece of used equipment.

New equipment is a different matter. Most OEM’s have a bonus program for sales inside the dealer’s trade territory or a penalty for selling outside their boundary. Not all, but most OEM’s hold dealers pretty tightly to their assigned area. Dealer consolidation and mergers, similar to the auto industry, have found a way to have more flexibility in fulfilling orders.

CAD members have the perfect answer to farmers’/ranchers’ demands for trucks – it’s called AgTruckTrader.com, which is directed specifically to the farmer/rancher. This platform is a perfect place to show off your inventory. Plus, very soon you will have another financing option designed specifically for farmers’/ranchers’ cash flow needs – CADFI. Be on the watch for it!