The Meter Produced By: Andy Vering, ASA - With Input From: John Seymour, ASA - Taylor & Martin
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The Meter
Transportation (Trucking) Update (9-1-2021)
Produced By: Andy Vering, ASA
With Input From:
John Seymour, ASA
The supply and demand scenario is still out of whack. The service industry has improved throughout the year,
We have seen signs of when to expect a more balanced but the Delta variant has begun to slow that down in
typical ratio, and then we hit another roadblock. The parts of the world. With so much manufacturing done
Delta variant has started to become a bigger concern overseas we rely heavily on other country’s COVID
across the world causing slowdowns in production and statuses. Two of China’s main ports were running at 60%
distribution. due to the pandemic last week.
We are just getting in the peak of the shipping season as Inflation is next on the potential list that could cause
stores across the country order, plan and prep for the major disruptions in the economy. It could cause
holidays. These delays are going to put a crunch on uncertainty in the overall demand for goods which could
availability of some consumer goods and I am assuming lead to lower consumer spending. This over time and
some higher spot rates for truckers in Q4. with builds being completed next year could speed up
the return to more normalized used truck values
It’s hard to see much of a change coming before the end sometime in 2022.
of 2021. Deliveries on new trucks and trailers are being
pushed into next year which will hinder much of a We are still dealing with a driver/worker shortage as we
slowdown in the used truck and trailer market. all know. We can blame the government assistance
program, COVID, and the generation itself, but all
I have added a new page that I found very telling in the together it seems like everyone is looking to hire. It’s a
availability of used trucks since the pandemic. Check out good problem showing growth and recovery but when
page 8 concerning used truck inventory. will we see the workers needed to fill the void?
Class 8 tractor orders have fallen but have been steady Most everything I have touched on already involves lack
Introduction in the mid 20,000 range. This was expected. The backlog
and delivery dates can be seen as far as 12 months out.
Mid summer is usually a slow time for orders and with
delays in manufacturers putting in 2022 costs, orders are
of supply (trucks, trailers, drivers), high demand for
goods and supply chain issues. Most of these will be
settled over time. The problem is that we keep hitting
roadblocks that seem to compound the problem.
still strong for this time of year.
The auction values continue to skyrocket - you will see in
Many of the dealers I have spoken with don’t expect to some of the upcoming slides. We have started to see a
have any inventory on their lots at all in 2022. slight decrease in the late model low mile trucks and
Everything that will be on their yards will be spoken for. late model vans and reefers. With the values they have
That will continue to hold up used truck values. If you been bringing most consignors are stating they wish that
haven’t put in an order for a new truck yet it will be they had 1,000 more to sell. The fact is, most have taken
tough to get one from a lot next year. advantage of the market and simply have nothing more
they can sell and continue to take advantage of the high
Contributing to the used truck demand is the lack of rates. The demand is still there and it could start driving
parts for service. Many guys that have been purchasing all the rest of the used equipment up as well.
at auctions have been just trying to replace trucks that
have been down for a couple weeks waiting for parts to Now to the charts. Some of these give a very clear
come in. The risk of losing a contract is worth paying depiction of the market we are currently in. Comparing
20%-30% more for a truck to continue working as soon these charts month over month should show us the
as possible. early signs that the market is shifting. Over the last few
months, they have remained steady and strong.
The ports are all still behind with tons of inventory to
move. The demand for goods remains and will only
strengthen into the holiday season. Containers and
chassis also have been strong. The distribution of goods
industry is going to be at an increased level through
years end.
USA Class "8" Sales (Counts Sourced from "The Truck Paper",
US Monthl y Prod
30,000 48 Mo Roll ing Ave
Li near (US Monthly Prod)
WardsAuto.com)
25,000
20,000
15,000
Volume
10,000
5,000
0
11 20 0
/2 00
2 1
2 1
12 20 2
/2 02
/2 03
2 4
2 4
11/20 5
/2 05
2 6
2 6
12/20 7
/2 07
/2 08
2 9
2 9
11 20 0
/2 10
2 1
2 1
12 20 2
/2 12
/2 13
2 4
2 4
11/20 5
/2 15
2 6
2 6
12/20 7
/2 17
/2 18
2 9
2 9
11 20 0
/2 20
21
2 0
10 20 2
2 3
2 5
10 20 7
2 8
2 0
10 20 2
2 3
2 5
10 20 7
2 8
20 0
6/ 00
9/ 00
2/ 00
7/ 00
8/ 00
1/ 00
6 00
9/ 00
2/ 00
7 00
8/ 00
1/ 00
6/ 01
9/ 01
2/ 01
7/ 01
8/ 01
1/ 01
6 01
9/ 01
2/ 01
7 01
8/ 01
1/ 01
6/ 02
4/ 00
5/ 00
3/ 00
4/ 00
5/ 00
3/ 00
4/ 01
5/ 01
3/ 01
4/ 01
5/ 01
3/ 01
4/ 02
2
1/
Historical By Month
The chart above shows historical trends that tend to repeat themselves. (Disclaimer: past activity does not necessarily indicate future activity.)
What are the data points and trends telling us now? (Some of my comments are repetitive, 4: Actual Class 8 purchases have been down since the year end. Dec 2019 of 23,119 to
and may be found in previous newsletters, but again repeating a notable point makes it more averaging 15,271 for the year in 2020 with the low at 9,165 in May. We are currently at 19,312
likely to be remembered.) for 48MMR and as production increases sales will follow until we reach the trucking industries
demands.
1: Trucking typically runs in a 7 to 8-year cycle [peak to peak OR trough to trough]. As long as
the new sales volume is above the 48MRA, the trend suggests we would see higher builds and 5: Since the drawdown (~20%-30%) from July 2015 to July 2017, tractor prices had improved
values should erode more slowly. We have finally exceeded the 48MRA. History would suggest significantly, up until 2019. 2019 was a tough year at the auction level of trade. 2020 showed
that we should hold north of the 48MRA. The 48MRA is at 19,389 it has been above 19,000 for marked improvement, and 2021 so far has continued to trend strong. Lack of production has
the last 4 months. We have not seen a 19,000+ average since 2000. sent buyers to look for used to fill the void until production catches back up with demand.
2: Historical needs have grown from slightly lower than 15,000 Class 8 tractors per month (in 6: The class 8 truck orders have been on the rise since June of 2020. Since June the numbers
the 2000’s) to about 17,500-18,000 Class 8 tractors per month now. Since the pandemic low of have been up Y/Y by 50%. Orders should remain steady over the next few months. With
9,165 in May of 2020 the 48MRA has been on the rise averaging 17,859 ever since. Only thing production being pushed so deep into 2022 overall orders should be held in check.
holding higher sales back is the long wait times for delivery.
7: The historical trends have been thrown out of trend due to COVID. Recovery times and
3: U.S. Sales ONLY: The 48MRA is the rolling average of all tractors 48 months old or newer. production have significantly hampered normalization. Expect delays to persist well into 2022.
The 48MRA bottomed in 2/2011 (7-year low) with the 48MRA at 9,712. The previous 48MRA
high was recorded in 5/2007 at an average of 18,678 (we are now above the high in 2007),
which was six months after the actual monthly sales peaked in 12/2006, when 26,462 units
were sold. We marked a peak for monthly sales in 6/2015 with 25,369 units sold and now
again in 9/2019 with 28,258 units sold. This 48MRA Cycle high: (12/2019) 18,923, which is a
new all-time high. As expected with the pandemic we have dipped in total sales down to
(5/2020) 9,165. Lowest it has been since 10/2010.This chart shows the average sale price of 2016 Cascadias. They are all sleepers with average miles
between 500,000 and 700,000. The 2021 sales are still the 2016 model year so technically a year
older, but the auction values have continued to rise despite the increase in age. Volumes are down
from last year but still a large enough sample size to get a proven value. Over the last 5+ years the
Cascadia has been the most popular fleet truck by sheer volume and should be one of the first
models to show initial signs of a slowing used market due to the amount of Cascadias expected to hit
the market as new trucks are released. I will leave this chart in until we start to see a larger consistent
change in values. It should be a good indicator as to when demand begins to fall.
2016's F/L's Sold at T&M Auction (2020 vs. 2021)
$60,000
$50,000 $44,981
$43,920
$40,000 $40,060 $48,768 $47,100
$40,000
$39,048 $42,643
$37,333 $34,195
$30,000 $32,455 $33,031
$29,994 $32,022
$28,544 $30,114 $28,228
$20,000 $25,195 $23,797 $25,222
2021
$10,000
2020
$-
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecTrue Value Guide Quantities of 2017 model year trucks.
Here are total actual sales of the Freightliner Cascadia (Fleet) and the O/O Spec’d Petes and KWs. Total quantities are down from last year.
The need for tractors has limited the number for potential sale. Values are so high some have just allowed their fleet age to grow to take
advantage of the market. O/O trucks generally don’t hit the market as often as fleet trucks. With volumes down you can see prices are up.
We do not expect to see a large volume increase until production catches up and trades are release into the market.
$90,000 F/L F LD120, C120 , CL1 20, CA1 25' s Pe te 3 79/38 9 & KW W900 L
$80,000
Lin ear F
( /L FLD12 0, C12 0, CL120 , CA125 s' ) Lin ear P
( ete 379 3/ 89 & KW W90 0L)
2 11 2
$70,000 9
7 5
17
$60,000
84 11
37 135 8 48
$50,000 40
9 12
179 158
$40,000 30 165
86 50 25 178
33
58 876
$30,000 81
108 127
146 53 147 127 279
$20,000 270
12 13
67 160
116 174 100 34 83 89
$10,000 T&M Sales: Quantities of 4 Year Old Slpr Tractors
e.g. 2021 Sales: 2017 Model Year
$0
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21ytd$90,000 FL
' IN ER CA1 25 (Fle et) KW W9 00 L & P ete 3 7 9/3 89
$80,000 $78,000
Line ar (F ' LINER CA1 25 (F leet)) Line ar (K W W9 0 0L & P ete 37 9/3 89 ) $72,000 $73,136
$70,000 $64,694
$61,500
$59,868
$60,000
$52,237 $62,864 $61,100
$50,375 $57,813 $52,793
$50,000 $45,009
$43,589
$47,494
$37,840 $38,004 $38,150 $41,930
$40,000 $48,135 $36,224
$29,995
$33,844 $40,946
$37,562 $42,258 $39,420
$27,880
$30,000 $26,136 $32,925 $32,116
$24,146 $24,488
$21,949 $23,015 $22,780 $29,721
$18,868 $25,635 $27,658
$20,000 $23,815 $22,263
$17,932 $22,191 $17,930
$17,228
$10,000
T&M Sales: Prices of 4 Year Old Slpr Tractors
$0 e.g. 2021 Sales: 2017 Model Year
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21ytd
Above are T&M Sales by average annual prices. [As usual, I have combined the Peterbilt 379/389 and Kenworth W900L tractors since both generally considered to be
spec’d as Owner-Operator (O/O) tractors.]
Not a lot of O/O moving their equipment at auction so far this year. In general O/O are not rotating trucks on a 5-6 years cycle as larger fleets do. Fleet truck values
continue to remain high. Parts availability on down trucks have started to increase demand to fill the void. The continuous rise in fleet values has been remarkable at
auction. We should be nearing a plateau but have not seen any leveling off on values so far this year.
The trends (red and purple lines) over time have been higher, but the price declines (green & blue lines) are clearly evident (2001-2003 & 2008-2011 & 2015-2017 &
2019). Remember, RCN is up (from material costs, EPA requirements, technology and safety/comfort improvements); additionally, inflation is included in the sale
prices, thus the upward trend line. Both averages are well above the trend line and should remain there for the duration of 2021.What is available to the marketplace today? (May 20, 2021) See chart below. [Sleeper Tractors] This chart is showing the number of listings on Truck Paper for these models as of Aug 20,2021.
The total number of tractor currently offered on Truck Paper is down to 5,499. I will get into the drastic decline in trucks for sale on the next slide.
500
450
400
350
300 FL E vo/ CA125/126 SLP Inte rnational LT /ProS tar
250
Ke nworth T 680/660 Pe te rbilt 386/579
200
Volv o VNL64T760/670
150
100
50
0
2022 2021 2020 2019 2018 2017 2016 2015 2014 2013
20-Aug-21 Sleeper Tractors For Sale On TruckPaper.com: Aug 20, 2021
Ave. Age 2016.06
2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 Total
Make % of Total % of Prev
FL Evo/ CA125/126 SLP 24 5 98 369 376 470 378 252 142 88
2,202 40.044% 107%
International LT/ProStar 37 6 19 225 260 147 125 140 84 30
1,073 19.513% 97%
Kenworth T680/660 43 2 64 225 175 232 112 93 38 42
1,026 18.658% 80%
Peterbilt 386/579 14 3 30 74 155 137 148 72 50 119
802 14.584% 80%
Volvo VNL64T760/670 18 0 30 51 48 56 70 59 27 37
396 7.201% 84%
Year 136 16 241 944 1,014 1,042 833 616 341 316
5,499 100.000% 92.90%The top chart is from May 2020 and shows a total of 25,206 tractor ads on Truck Paper. Currently there are 5,499. We only
have a little over 21% of the number of trucks being advertised than we did in May of 2020. It shows how strong the demand
has been in the last 15 months. With the demand still strong it makes sense with how high truck prices have risen. Side note:
A lot of the 2022 ads that are there are just ads offering potential orders or availability in 2022.
22-May-20 Sleeper Tractors For Sale On TruckPaper.com: May 22, 2020 Ave. Age 2016.03
Make 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 Total
FL Evo/ CA125/126 SLP 200 620 87 529 1,012 3,149 2,805 1,596 774 389 11,161
International LT/ProStar 40 411 226 171 248 966 956 598 120 101 3,837
Kenworth T680/660 81 533 57 177 541 1147 614 279 143 103 3,675
Peterbilt 386/579 39 557 65 89 426 795 522 249 106 91 2,939
Volvo VNL64T760/670 258 740 86 71 167 526 745 549 325 127 3,594
Year 618 2,861 521 1,037 2,394 6,583 5,642 3,271 1,468 811 25,206
20-Aug-21 Sleeper Tractors For Sale On TruckPaper.com: Aug 20, 2021
Ave. Age 2016.06
2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 Total
Make
FL Evo/ CA125/126 SLP 24 5 98 369 376 470 378 252 142 88
2,202
International LT/ProStar 37 6 19 225 260 147 125 140 84 30
1,073
Kenworth T680/660 43 2 64 225 175 232 112 93 38 42
1,026
Peterbilt 386/579 14 3 30 74 155 137 148 72 50 119
802
Volvo VNL64T760/670 18 0 30 51 48 56 70 59 27 37
396
Year 136 16 241 944 1,014 1,042 833 616 341 316
5,4992020-2021 Class 8 Orders:
I kept this chart in to show how much demand has remained for new tractors in 2021. In 2019 we averaged 14,900 per month.
The Class 8 orders are slowing mainly due to the wait times but still are above replacement numbers. The orders have started to level
out not unexpectantly. As stated before, with the extremely long lead times on orders and many placing them early,
the orders have seemed to plateau. Still well over the 2019 average, but it will keep adding to the backlog and
lengthening the time to get back into a supply/demand balance.
Class 8 Orders
60000
51900 50900
50000
43800
42200
40000 40100
40000
33500
32042
30000
25700 25800
2020
22900
2021
19901 20500
20000 17531
15626
14243
10000 7211 6735
4105
0
Jan Feb Mar April May June July Aug Sept Oct Nov Dec
2020Additional Factors Retail “For Sale” counts (total: 5,499). Lowest advertised total we have seen since we started keeping track in late 2015. It shows the strength of the overall trucking market and more clarification on how much demand is out there. Once more orders are filled and trades accepted the for-sale totals will begin to rise, and it will be an early indicator of when this market will ease. Additional factors to consider for a bias (positive or negative) The Crude Oil Industry is improving slowly. Currently we are at WTI at $68. Most are assuming at least a short- term bump in values due to hurricane Ida disruptions. Thoughts on the rise in Q4 has been dampened a bit due to the rise of the Delta variant impact on travel. Building Activity (Home, Office, etc.): Housing market is still strong. Supply constraints has hampered production, but demand is still strong. Long term effects on the very high home values will be an issue for some in the long term. Still with low interest rates has created desire to take advantage. Drivers: Shortage! Raising pay rates have helped but the demand for drivers is still extremely high. Ports: Still playing catch up. Imports continue to inundate the ports and help feed the trucking industry. Expect above average activity especially inbound at US ports. COVID related labor issues are still a concern going forward worldwide. Construction activity is slowly increasing. The lack and price of supply (Lumber, Steel, Workers) is still a major issue. Slow construction results is another factor in the slow transition back to a more stable market. Politics: The bill opposing FET tax is ongoing. If passed it will produce an increase of new truck and trailer demand and lesson the pressure on late model equipment. All is inconsequential until we can get production caught up to demand a little. Inflation: It was at 5.4% in July. Still at 13-year highs. Some analysts think it will remain manageable without major rate changes and will steady itself back to the sub 3% range but the end of 2022. It has remained higher that predicted each month. This is something worth keeping an eye on.
• Production issues continue to • Heavy Haul Trailers: Demand is
drive up used prices. Vans and steady. Have not had much for
reefers are still bringing ridiculous increasing values. Late model and
values at auction. Don’t expect a well-maintained units still bring a
change until manufacturers can premium.
catch up with demand. • Dry Vans and Reefers: High
• Ag Trailers: Demand is slowly demand. Late to mid age trailers
increasing with the harvest nearing that are above average condition
in the Midwest. Values should trailers are bringing above new cost
strengthen through September as at auctions.
they typically do before slowing for • Sales and orders remain high.
the winter months. The 8-12 month wait for new is
• Chemical Tank Trailers: Stable spurring the increase in values in
Pricing - good used equipment in the van and reefer sector.
the secondary market is in very
Trailers
• Overall, the trailer market is still
limited supply. Lesser quality looking good. The demand for
trailers (out of test) are readily goods nationwide continues to
available. drive the trucking industry and not
• Pneumatic Trailers: Steady showing any signs of slowing down
demand for large capacity trailers. yet. We are now in the peak
1040s still struggling. Large demand season for trucking. I don’t
numbers of the small cubes on the see how it will pick up much more,
secondary market are holding but it will add to the backlog
values down. helping maintain the higher than
• Flatbeds and Drop Decks: Flats usual values.
and drop values have slowly begun
to pick up steam. Not a lot of
volume has been moving at
auction. Manufacturing and
production are beginning to rise
which has led to strong load rates
and a rise in demand. Should
maintain normal to less than
normal depreciation going forward.T&M Auction Results:
Tracking 5, 10 & 15 Year Old A/R Dry Vans
5, 10 & 15 Year old Dry Vans sales (Taylor & Martin Auctions) are charted below:
This chart is an interesting reflection on the used van market. The van market is just crazy. It is almost uncomfortable to trust a chart that looks like this,
but we have sold more 5 year old vans this year than last and we have had that kind of increase.
10 & 15 year old vans are both close to the last years quantities and are both showing this kind of strength.
T&M Auction Results: Tracking 5, 10 & 15 Year Old A/R Dry Vans
$40,000 5 Yea r Pr ices 10 Y ear P rices 15 Y ear P rices
$37,150
Linear (5 Ye ar Pr ices ) Linear (10 Year P rices ) Linear (15 Year P rices )
$35,000
$30,000
$25,000
$20,250
Ave Price
$20,000 $18,250 $17,700
$16,669
$19,453
$12,617 $18,153 $17,562
$15,000
$12,509 $13,033 $15,694
$11,609 $11,841
$10,460 $10,630 $9,961 $9,459
$9,052 $13,742
$13,075 $11,037
$10,000 $8,491 $7,699 $7,973
$6,280 $5,240 $6,823 $5,350 $6,939
$5,120 $8,537 $5,728 $5,015 $8,758
$4,200 $4,483 $8,061 $4,595 $6,992
$5,000 $3,857 $3,363 $3,162 $3,718 $3,947
$2,927 $3,385
$4,333
$3,788 $4,863 $4,178 $4,172 $5,445
$3,250 $2,923$2,838 $3,327 $3,748
$0 $2,971 $2,700 $1,708$1,703
2001 02 03 04 05 06 07 08 09 2010 11 12 13 14 15 16 17 18 19 2020 21ytd5 & 10 Year Old Refrigerated Trailer sales (Taylor & Martin Auctions) are charted below:
Reefers: Both 5 & 10 year old (2010). Same story here. The reefers have been following the same trend as the dry vans. Late model trailers have been bringing
insane values at our auctions. Once again this is not just a couple of sales, we have had decent volume bringing consistently high values.
All 53 Ft Reefers
5 Yr Ree fer Sa les ( 2015 ) 10 Y r Re efer Sales (201 0) Linear (5 Yr Re efer Sales (201 5)) Linear (10 Yr R eefer Sales (20 10))
$45,000
$40,000
$38,743
$35,000
$30,000 $27,336
$25,811
$22,776
$21,292
$25,000 $22,371 $19,889
Ave Price
$20,675
$19,748
$20,000 $24,778 $25,835
$21,845 $19,508$12,571 $12,959 $21,837 $17,089
$15,000 $19,131 $11,411
$9,471 $10,317
$7,713$17,660 $8,673
$10,000
$11,532
$5,000 $9,007 $9,480 $9,231 $8,798
$6,731
$5,689
$0 $5,893
2006 07 08 09 2010 11 12 13 14 15 16 17 18 19 20 21ytd5 & 10 Year Old Composite Flatbed Sales (Taylor & Martin Auctions) are charted below:
Combo Flatbeds (Alum/Steel Composite) have continued to show significant weakness, when compared to 2018. To date, limited 5 or 10 year old combo flats have been sold by T&M in 2020. The below chart was not updated for
the 5 year old flatbeds, due to the lack of material data. I did have to use some 2009’s and adjust for my 10 year numbers.
The flatbed market has recovered from the 2015-2017 pullback. Actual sales numbers (2019) were very low. Considering previously mentioned cautions, and the current number of flatbeds offered in the retail market, this
segment is showing significant stress as well. Load rates have improved and started a small growth in the flatbed market, but it still has a long way to go.
The flatbed values have slowly begun to rise. The below graph is hampered by lack of sales in these particular model years. Looking at sales of different age values would be below trendline and holding steady. Limited sales data
so far this year but in speaking to dealers the demand has started to show signs of increasing. Volumes have been down all summer and limited number of 5 & 10 year old trailers but overall, they have slowly been showing some
signs of increasing values.
Composite (Alum/Steel) 48 Ft Flatbeds
$20,000
$18,167
$17,570
$18,000
$16,600 $15,917
$15,950
$16,000
$16,492 $15,680
$17,433
$16,166
$14,000
$12,500 $11,917 $12,393
$11,900
$12,000 $12,146
$10,750 $10,250
$11,687
Ave Price
$9,764
$10,000 $11,000
$9,850 $8,650 $8,750
$8,000
$8,650 $8,875 $8,750 $8,500 $7,526
$7,781
$6,000 $7,239
$4,492
5 Y ea r P ric es
$4,000 $5,183 1 0 Y ea rP ri ce s
Li n ea r (5 Y ea r Pri ce s)
$2,000
Li n ea r (10 Ye ar P ri ce s)
$0
2006 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21ytdJohn Seymour’s thoughts on
Agricultural equipment,
“filling the Ag Hopper” in The Meter!
Summer hit the heartland and Americans are venturing out and about. The markets are moving too and the weather is more to norm….
constantly changing. The intense heat took its toll in most of the U.S. and as the nation’s corn crop matures the road to mending the
supply chain continues as new production lumbers along.
As the nation celebrated its independence this year, and in distancing itself from initial COVID-19 issues, Eastern and Western U.S.
coastal areas are still feeling the effects of unusually high temperatures. Midwest rains gave some relief to the Corn Belt states heat
hampered crops adding optimism and anticipation for even more debt servicing opportunities prior to any looming economic changes
on the horizon. Historically, some of the best commodity prices in the past two decades came when Feb-June excessive heat had
moved across the U.S. during early cropping seasons and with the late June rallies this year appears to be no exception.
As I stated in the last quarterly newsletter, Ag firms continue their appetite for acquisitions and the search for additional labor. CNH is
acquiring Raven Industries who just purchased Jaybridge Robotics, Valmont Industries is acquiring Prospera (Israeli-based AI firm) and
PivoTrac of Texas. Other Ag firms are increasing capacity with new locations and staff like Doosan Bobcat (telescopic handler R-Series)
hoping to double U.S. sales, AGCO Power launching its new engine series and New Holland is introducing its NA T-6 Methanepowered
Ag Tractor in 2022 while other suppliers like Sandhills Global create web-based partnerships in the CNH Industrial markets to bolster
construction sales by bettering access to inventory between dealerships.
Increased market saturation without over-production is the focus as dealer combine inventories slow and floor plans are down with
good year-over-year new sales and 5-Year rolling average growth, some advisors even feel that the combine market is ready to surge
again. Similarly, the recovery seen in 4WD tractor sales helps the year-over-year and 5-Year rolling average growth. Still, dealers remain
conservative in stocking inventories of 4WD and large horsepower units much beyond filling current demand from COVID-19 shortages.
Used units are still good yet age is increasing. Expect some dealers to bump service margins and possibly used equipment margins over
remaining 2021 with their tech, labor costs and the recent good commodity prices. Cashflow and good farm incomes remain key in
continuing this growth move as markets help bolster 2021 farm incomes and an equipment buying appetite. When the farmers make
money, they buy equipment!
Most economists see the recent optimism, harsh early heat and buying demand leading to ‘good Economic stability and growth ahead’
as reflected in the Creighton University Rural Mainstreet Index which has tracked survey date from various banking CEOs to develop a
growth neutral measurement between 0 - 100. “Strong growth in grain prices, the Federal Reserve’s record –low interest rates, and
growing exports have underpinned the Rural Mainstreet Economy. Even so, current rural economic activity remains below pre-pandemic
levels,” said Ernie Goss, PhD, Jack A. MacAllister Chair in Regional Economics at Creighton University's Heider College of Business. For a
seventh straight month, the farmland price index advanced above growth neutral. April climbed to 78.6, the highest rating since 2012
and the June rating of 70 is the 1st time a seven month climb above growth neutral has been recorded! Bankers remarking that 9% of
last six-month real estate sales have gone to nonfarmer investors helping hit a record nine straight months farmland prices are above
growth neutral. A similar index for new farm equipment sales rose to 71.6 for June, its highest level since 2012.
Most classes of ag equipment are selling well when inventory is available. Keep watch for the add-on steel taxes/fees on most orders
like fees imposed for steel not included in the unit cost as seen in other sectors. Most sector’s costs are increasing, and agriculture is no
different. The demand shift has begun from the Stimulus dollars to the manufacturing expenses still coming. Many experts believe
these costs will transition down after peak demand wains but are not ready to define this movement as inflation rather preferring a
more unique label of ‘transitional inflation’ expected to be more temporary in nature.
Look for a hot August-September soybean market, available employment positions exceeding qualified workers, continued over-listing
priced home buying and more talk on taxes. The Ag economy is heating up.You can also read
