Heading in a Different Direction

Row Crop Headers at auction in 2024 have been sparse yet those sales that have taken place indicate a 5-8% drop below 2023 auction market values. This is coming on the heels of a year of over-supply and a late-year proactive effort by many dealerships to move these headers off their lots (and books) ahead of a precarious 2024 farm economy. 

The slowdown in 2023 header sales was not surprising considering the challenging growing season and significant price increases from manufacturers. The simultaneous downturn of the markets after such a significant price increase has no exact precedent, but there are lessons to be learned from looking through historic data. When looking at all row crop headers produced in 2010 - 2012, they depreciate in a typical fashion. In this aggregated case, losing approximately half their value in the first four years, but then only half of their remaining value in the next four. There are two points that jump out at me on this graph. Working from recent memory, you see the 1-2 punch that supply scarcity and strong farm economy created from 2021 into 2023. Those effects will be evident in some graphs below. The more important analogy is what happened in 2013 and 2014. Glorious commodity values in 2013 created that table top formation that turned out to be a cliff.  Values in 2014 recorrected significantly, bringing the depreciation back into line.  This style of ‘correction’ may be closer to what we witnessed this year for those late-model headers currently on the market. 

Most dealers I’ve spoken with this year talk about the headwinds late in 2023 trying to move more expensive headers into softer demand. Their sales efforts were successful and inventory position of these headers did improve in the second half of 2023, yet a lot of this came at the expense of squeezed margins. 

Now to figure out what kind of expectations these auction sales might tell us about the first half of 2024. For that, we’ll first look at how supply is positioned now compared to last year, then cut deeper into two specific common models. The older John Deere 612C and its next generation late-model 712C.

In the graph below you can see that supply has dropped almost 50% from its peak last July. 

When just comparing this current month over the same month last year, it is evident that the sales efforts had the intended effect. Overall supply is down 18% despite a slightly slower sales rate. The brightest lining may be the significantly lower influx of inventory as compared to last year, keeping the battle on just one front for now. 

Of course all inventory is not the same, and this is especially true for many categories of equipment that were produced in surplus during the early 2010’s. If you are curious as to what the distribution of any aged inventory is out there, you can always find the following chart in our  Market Trends solution.

For this analysis I wanted to choose a header that was produced around 2010, and compare that to a similar late-model header. Thus the John Deere 612C vs. 712C. 

The 612C has three to four times the availability on the current dealer market and twenty times the records in our auction database, making assessments of this model much more clear than its descendant.  By analyzing the Tractor Zoom auction results I was able to graph these headers that were sold since 2021. On the horizontal axis you have the number of harvests that these machines have been through, with the corresponding price on the vertical axis.  The best fit depreciation line is colored below based on the past three years of 612C’s auction sales. Each individual sale can still be seen for context.

The upward trend from 2021 (red)  into 2022 (yellow) is all too familiar, as is the slight pullback in the second half of 2023 (green).  The lower blue line represents all historic sales for these headers. The two black dots represent the couple of early sales of 612C’s whose age could be verified. (There were a couple auctions this past weekend featuring these headers which I’ll add to the graph as the results stream in). 

We tend not to see a lot of fluctuation on decent quality older models that have moved so far down the curve, yet both of these sales are below the 2023 trendline by approximately 5-8%.

When looking at newer 712C’s, we can see at a quick glance in Tractor Zoom Pro that the average list price has been pressed down all of 2023, as have the auction values. This is expected and more evident here because we are higher on the depreciation curve where each accumulated year exacts a bigger cut in equipment value. 

For a similar look at the depreciation, an early January auction of the 712C also brought about 5% below the 2023 trendline.

While one point doesn’t make a trend, it is an early indication that we’ll be tracking these next couple of weeks to further hone in on likely depreciation rates of these headers as well as other types of equipment. By leaning on Tractor Zoom Pro Market Trends, we can keep an eye on equipment values and changing direction to help you prepare for market volatility.