Got a used tractor? It's a good time to sell one

By John Michael McGrath - Published on June 28, 2016
an Ontario farmer plowing his field
Many Ontario farmers think equipment improvements aren't worth the additional price. (Mario Beauregard/CP)

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It’s not just the hot summer and lack of rain across much of Ontario that is worrying farmers. The machines that make a modern farm work are becoming another problem for the people who grow Ontario’s food.  Each year inflation drives prices up, but this year even used farm equipment costs more than it did before. What’s gone wrong? Blame the low loonie, for starters.

“We’re competing against the U.S. dollar. Equipment moves quite easily north and south, and these days it’s certainly moving south,” says Barry Senft, CEO of the Grain Farmers of Ontario.  The influx of American buyers seeking bargains north of the border means higher prices.

While the low dollar has made imported farm equipment more expensive, it’s not clear that farmers would be better off if Ontario made more tractors here: the same American dollars that are bidding up the cost of used equipment could just as easily drive up the cost of new ones.

“Farm machinery is very competitively priced, very technology-driven,” says Ken McEwan, professor of economics and agri-business at The University of Guelph. The emphasis on new technology is part of the treadmill farmers find themselves on: investing more in new equipment with complex electronics because it’s so efficient, even if it’s more expensive. “We’ve seen tremendous changes in technology. Auto-steer, GPS technology, the monitors are all really impressive,” McEwan says. “There’s a constant drive for efficiency and scale.”

For farmers who are looking to grow their operation, the trade-off of more expensive, increasingly automated equipment is worth it: the investment pays off with labour savings or increased production. There’s an additional reason some farmers insist on buying new: warranties.

“What keeps these guys buying new is keeping the tractor under warranty. At the end of three years, they’re looking to sell it,” says Michael Hahn, co-owner of Hahn Farms Ltd. The security of the warranty means a lot for a piece of equipment worth more than some homes in rural Ontario.

But not everyone is sold on the bleeding edge of tractor technology.

“Look at the average age of the farmers,” says Ken McGregor, who is secretary-treasurer of the Ontario Auctioneers Association and owns a farm near Strathroy. “Farmers who are in their 50s and 60s, quite frankly, we’re not in the computer age as heavily as the younger generation is.”

Farmers aren’t inherently opposed to the new technologies that are available, but for many the improvements aren’t worth the additional price.

“We’ve got along pretty well so far,” McEwan says.

There are pragmatic reasons to prefer some older models: repairs are often easier, with well-established networks of parts suppliers around the province. Certain older models are simply more reliable, though they command the highest prices. And while many farmers have the skills and tools to repair equipment in the field, specialized electronics can be more difficult to handle.

“Repairs for the newer models need specialized equipment; usually you have to go back to the dealer,” Senft says. “These electronics are getting to be quite an issue for farmers.” The difference between older models and newer can mean a key piece of machinery out of commission for a day, or a week, depending on how easily it can be repaired.

“Some of that old stuff, it’s like the Energizer bunny, it just keeps going and going,” Hahn says.

Both Hahn and McGregor emphasize that the price of used equipment is always volatile, and the prices farmers are seeing aren’t unprecedented or hard to explain. It’s just one part of a cycle farmers have experienced before, and will again.

“Good product always sells well,” Hahn says. “If it’s in-demand and in good shape, the price has come up. By the same token, if it’s something nobody wants, it’s tough to sell at any price.”

Used equipment is also seeing higher prices thanks to the run-up in commodity prices earlier in the decade. The higher prices for corn and wheat that drove farmland prices through the roof have tapered off, but while they were high, farmers plowed some of their income into new machines—which meant a glut of used ones on the market. That trend is now flipping: farmers aren’t selling their old tractors to buy new ones as frequently, leaving fewer to go around.

“It’s just supply and demand, there’s nothing right or wrong about it,” Hahn says.

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