Yields

Summer 2022

Northwest Farm Credit: Rural, Real Estate, Operating Loans; Farm Loans; Country Home Loans; Lot Loans; Equipment Financing; Young and Beginning Producers; Crop Insurance; Business Management Education; Property Appraisals

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Is now the time to replace your machinery? The decision to trade equipment can be made for several reasons. Sometimes it's advantageous to trade when machinery is out of warranty, other times trading may be necessary to keep current with technology or avoid costly breakdowns. While each of these reasons are justifiable, supply chain disruptions, rising equipment prices and strong demand for used equipment have complicated producer's replacement decisions and trade-in activity in recent months. Supply challenges Limited equipment availability has turned trading into a fine balancing act. Some producers are waiting on orders they placed last year, and without a serial number, it can be a challenge to line up financing. "Going into the year, all the major manufactures that I work with were completely sold out in 2022. Everything coming in was already spoken for," said Chad Goldsmith, AgDirect Territory Manager in Washington and Oregon. "In mid-May I was speaking with a dealer in central Washington. He shared if you were to order a Case IH Quadtrac right now, he's not sure you could even get it by fall of 2023." "Values and prices are up, and the demand is still there. In fact, demand is probably greater because the availability isn't there," he adds. Rising interest rates What used to be a three-to-six-month process for lining up a new equipment purchase now can take up to 12 to 18 months, making it tough to lock in rates. "We can lock in rates for 45 days, but we need to have a serial number and delivery date. Even as rates go up, we're still seeing competitive fixed and variable options," said Goldsmith. Replace or repair There's a decent amount of used equipment out there, but with new, everything depends on the order date. Goldsmith said, "Some manufacturers are backing off on production because they don't have the parts, like computer chips, to complete the orders, and I think you'll see that going forward. The estimated delivery date really depends on if they can get the parts to complete the order." As a result, the parts and service segments of the dealership world is thriving. "Many producers are doing repairs on their equipment to keep what they have versus trading in," says Goldsmith. "There's no end in sight to the supply and demand challenges in the near future, so go ahead and make repairs." Anticipating time of trade In the current environment, there are really two options: hold onto your equipment for another season or wait your turn knowing it may be worth more or less by the time of trade-in. Regardless of how or where machinery is acquired, Goldsmith advises producers to be patient when replacing equipment and anticipating time of trade. "When it comes to trade-ins, there's not much producers can do but be patient," said Goldsmith. "They may have to make do with what they have until the opportunity is there." No matter what you decide, AgDirect has tools and resources to help you make the best decision for your operation. Offered by Northwest FCS and powered by Farm Credit®, AgDirect financing is available at your equipment dealer, at auctions (traditional or online) and for private party equipment purchases. equipment buying trends summer 2022 12 Learn More

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