If you're just joining us or are eager to dive into the world of tractor values, don't miss our analysis on compact tractors and our first piece in this series about combine auction values.

The spotlight now turns to the realm of large row crop tractors, with a particularly swift surge in supply, especially among John Deere's 8R models. But before we leap into the details, let's set the stage. Row crop tractors hold a distinct place; they differ from combines in their demand patterns, lacking the seasonality seen in the latter. This equates to a lower risk for long-term holding costs. Plus, these tractors are emerging from historically low inventory levels, so any substantial annual percentage growth should be considered against this backdrop. Yet, parallels between the two categories do exist and should be noted. Both are in the upper echelons of balance sheet values and demand is strongly influenced by farmer profitability, a factor poised for a downturn given the projected dip in on-farm income for 2023.

So what is the data telling us? The top graphic below normalizes a 30 day running average supply of large row crop tractors by units that Tractor Zoom is seeing per dealership location. The blue line is incoming units, green is outgoing, with yellow being the remaining supply on dealerships’ lots. 

Under the supply graphic is the corresponding average monthly row crop tractor values at dealerships (blue) and auctions (gray). To control for the extremely high-value of practically new models, the lower values graphic is filtered to include 300 - 425 HP row crop tractors between 500 - 4,000 machine hours. 

We have started to see a few large auctions of these row crop tractors, which may be contributing to the run-up in sold units and the slight leveling off of dealer supply in recently in late July and early August. I wouldn’t expect to see a more aggressive unloading of these on the market like we just saw in combines considering their lower holding cost risk and suppressed farm profitability. This should put a floor under the supply levels we are seeing in yellow. 

Similar to combines, the auction market was in a bit of a buying frenzy this past November to February, causing last winter's peak in auction values. That appears to have cooled for these tractors (and most other categories I’m looking at). Unlike combines though, the auction values, while down from December highs, are very comparable to this time last year (red line). Dealer values for this subset of data is modestly up an annual 6%. Perhaps we’ve found our new normal in values? 

Even if we have found a footing for values, there still remains the issue of rising supply. As we did with combines, you now have the power to peel back the layers in Market Trends even further. Below is a histogram of these row crop tractors as a proportion of their supply this year in light blue compared to last year in dark blue. There is little question where most of the growing supply is happening. Those tractors with less than 1,000 hours comprised 24% of the supply last year. Now this group makes up 36% of available tractors. 

These late-model, low hour large row crop tractors represent a significant carrying cost for dealerships if they don’t move and can be a silent killer of profitability. It may be worth increasing the frequency you are reviewing this inventory. For lenders, this may be an opportunity to update your farmer’s equipment list values before meeting this fall to help them determine if now is a good time to trade up to a newer machine.