Combine Months of Supply Metric Increases

Tractor Zoom data shows combine supply has steadily risen over last year while turns slow down, resulting in an especially concerning increase of class 8 combines. While inventory of multiple models from different manufacturers of class 8s are piling up, the John Deere S780 seems to be stacking up the fastest. With the prime combine selling season on the opposite side of the calendar, this time is presenting dealerships with an opportunity to formulate marketing and incentive strategies before the arrival of mid-summer sales. 

Months of supply, calculated by the number of advertised combines available per month divided by the number sold that month, will fluctuate given the season. Typically declining towards the end of summer, with a final dip in December. Then, whatever inventory remains in January is reluctant to move until the mid to late summer buying season resumes. With the tight supply over the past couple of years, excess inventory has not been an issue. Oftentimes combines on trade were spoken for well before they ever arrived on the market. 

Segmenting all combines by classes shows that these class 8s are rising in supply the fastest, with the larger 9/10 class not far behind. This could be a result of the segment of farmers looking for those late model, low hour combines slowing their purchase. Casey Seymour, of Moving Iron Podcast, does a nice job of explaining this buyer segment in a recent post here. 

As more and more signs are pointing to a return to a more normal market, carrying costs concerns are creeping back on the radar of used equipment managers, especially regarding these combines. One of these signs is a more normal distribution of used equipment by usage in the market. Typically you will see a bell curve shaped distribution with a long-houred tail. Last year we saw anything but a smooth distribution, but more on that later.

New combine sales and deliveries have been increasing for some time. Just this past February, new combine sales in North America jumped 247% over last year as reported by AEM. This influx of new supply is facing resistance with used buyers further down the washout cycle as concern mounts regarding uncertainty in the futures markets and higher interest rates. With the increase of lease programs for new buyers, the interest rate increases have not had an equal effect on their new combine upgrades. This scenario would create an increase in late model, low hour 1-2 year old combines, likely with 250 - 500 sep hours (roughly 500 - 1,000 machine hours). This is exactly where we have seen an increase in relative supply at dealerships when compared with this time last year. This is depicted in the Tractor Zoom Pro Market Trends graph below. 

For those not familiar with Tractor Zoom Pro Market Trends, the light blue bars are the current % supply in the dealer market. The navy blue represents the percentage of supply in the market from April of 2022. The arrows are my own doing to show the growth we’ve seen in this low hour segment. Currently we are proportionally 12.5% higher supply in these class 8 low hour (under 1,500 machine hour) combines than last year. 

This change is not all bad. The supply curve shape from last year (navy blue) was anything but smooth. That creates issues when trying to move trade-ins down to the next segment of buyers. The current shape is smoother and more typical, as long as the buyers on the farm settle into more typical buying patterns. In order for this to happen, dealerships have time to develop their marketing and sales plans this off-season to move more of these class 8s.