Used equipment is a regular topic of conversation among dealers, but as our team has been planning the program for the 2020 Dealership Minds Summit on Profit-Turning Trades, it’s taken a front seat as I talk with dealers about what their challenges are. As farmer — and dealer — sentiment has been improving (in January a net 14% of dealers reported being more optimistic than the month before, just the second positive reading in Ag Equipment Intelligence’s Dealer Sentiment report’s Optimism Index in over 2 years), there’s been an expectation that farm equipment sales will start to improve.

A number of dealers have expressed their concern that once sales start picking up, that the industry might forget the lessons we learned a few years ago and find ourselves with a used equipment inventory problem once again.

In February, Ag Equipment Intelligence reported that over-saturation of used combine inventory might become a concern heading into 2020, according to a recent episode of the Used Equipment Remarketing Roadmaps podcast. Host, Casey Seymour of Moving Iron LLC and the vice president of sales for 21st Century Equipment spoke to an analyst who estimated the number of used combines in the U.S. at 300,000 and explains how even a conservative estimate could still be exceeding demand.

A more realistic number comes from comparing total U.S. farmed acres to the average of acres a combine can cut per hour. Seymour estimates there are 55,000 operational combines in the U.S. When accounting for combines not in operation, the number is estimated to be 67,000. Broken down further by new and used inventory, Seymour estimates 75% of combines are used, 25% are new and that about 12,000-15,000 new combines are produced each year across all mainline manufacturers. Even without the 300,000 figure, Seymour points out that an oversupply of used combines may be on its way.

According to the latest Dealer Sentiments report, a net 22% of dealers report that their used combine inventory is too high in January, down slightly from a net 26% who reported inventories were too high in December. One dealer in the Mountain/Pacific region commented, “Our combine inventory is too high but we are low on row-crop tractors. Late model used harvesting equipment has become a concern. We can’t seem to price it low enough to sell.”

During a webinar in late 2019, Trent Hummel, former dealer and now trainer and consultant with the Western Equipment Dealers Assn., cited a recent OEM study that found there’s currently 4.2 times more farm machinery capacity than is needed in North America. In his webinar, he cited a survey Farm Equipment conducted on inventory volumes, that found 65% of North American dealers said their used combine inventory was at least 25% too high. Hummel has been tracking the number of used combines by country, brand and age and will be presenting the results of his study at the Dealership Minds Summit in Omaha Aug. 4-5.

Ensuring the industry doesn’t repeat the sins of the past (pricing used incorrectly, and not accounting for who the used buyer will be), is going to require dealers to stay diligent in their valuation and trade-in processes that were put in place over the last few years as the industry worked to get a handle on the used equipment inventory. One tip Hummel has suggested is holding monthly “honesty meetings.” During these meetings, the staff should review in-stock units for fair market value and fair wholesale value. He says if your costs and pricing are off, the department needs to adjust values to the market. “Units priced wrong do not garner your salespeople’s interest or energy.”

Come join us in Omaha as we work to tackle the challenge together. Learn more and register for the Summit at DealershipMindsSummit.com.

Related Content:
Estimated 67,000 Combines in U.S.; Used Combines See Lowered Demand
[Webinar] Are Your Combine & 4WD Tractor Inventory Levels Healthy?
[Podcast] Is the Combine Market Over Saturated