Row Crop Tractors: Is the Rising Supply a Cause for Concern?

Supply of large row crop tractors increased for the 5th straight month, causing the months of supply metric to more than double over June of 2022. 

Tracking the number of listed MFWD tractors greater than 300 HP within Tractor Zoom Pro Market Trends feature shows that supply continues to pile up as sales slow down. Higher values and interest rates are main culprits, according to the recent farm capital investment survey completed by Purdue University. Add to that the turbulent grain markets, hot extreme weather patterns, and the 20% reduction of 179 bonus depreciation this year, and you quickly understand why row crop tractors are pulling a heavy load up a steep hill. 

Supply on dealers’ lots this June burgeoned to over 78% more than the same month last year while auction supply grew by about 40% over the same period. Users of our Inventory platform have likely also seen a rise in the days on lot averages of these machines in their platform. 

Granted, when we compare to last year, any kind of supply is going to dwarf those empty lots. Yet, the discovery doesn’t stop here. While this supply has been steadily increasing since this time last year, most of those machines were immediately soaked up by an unprecedented pent up demand. You can see the rise in 2022 sales in the first half of the graph below. 

Synchronized rising of last year’s supply and demand masked apparent warning signs of mounting supply and the carrying costs that will follow. Those farmer purchases that absorbed the returning 2022 supply have dried up so far in 2023. So much so that we’ve measured a 17% year-over-year decrease in the sales rate of these tractors per dealership location. 

Dividing monthly supply by the sales volume provides a months of supply metric that I have been tracking for major equipment categories. It is this inverse of the turns metric and one that we started to see shoot up for Class 8 combines early last fall. Well, now we are noticing a similar pattern with larger row crops. 

Part of this increase in inventory is a welcome and necessary aspect of selling equipment. You need supply to facilitate trades, yet the lesson, “Everything is moderation, nothing in excess,” comes to mind here. Certain models, but not all, of these tractors are trending towards excess.  

With a market as high value and volatile as this, monitoring and adaptation are key. There are plenty of regional and global factors yet in play that can change the direction we are heading. So keeping a pulse on the market is important, yet most of the partners we work with are required to wear many hats, and don't necessarily have the time to monitor daily market shifts. That is where embracing technology is essential. It can not only help monitor market shifts, but also alert you when adaptation is necessary. 

We were on a call last week with a dealer partner who is using our Inventory tool within Tractor Zoom Pro and the new Time on Lot predictive tool to help optimize their inventory and moderate holding costs. These tools proactively notify them of changes in the market based on their specific lots and identifies potential changes to help move their inventory faster. Because this dealership was leveraging the new Time on Lot technology, they were automatically notified of equipment that was at higher risk of aging and why it was at risk. This suggestive alert helped them adapt and strategize around the lower demand for these large tractors and other slow moving equipment. 

Wherever your market is, be sure to watch the data and adjust for any supply and demand imbalances. With extreme weather and the global geopolitical environment impacting the markets on a daily basis, partner with an adaptive  technology that updates as frequently as your market does. If you would like to see how other dealerships are using our Inventory platform and the predictive Time on Lot tool is suggesting, we would be happy to walk you through it.