Agriculture Secretary Mike Johanns has scheduled more listening sessions on the 2007 farm bill. Like those sessions already held across the country, the meetings next week in Alabama and New Mexico are intended to help the Bush administration shape farm policy well ahead of the debate on Capitol Hill.
Whatever Johanns gleans from the sessions, this much is known: federal farm programs will be trimmed in the future. And that will affect income levels in the country.
For many farmers the cuts will influence purchasing decisions. And a growing number of producers are choosing USED farm equipment over new machinery. As Laurel Bower Burgmaier found last spring, that used farm machinery is bringing top dollar at auction.
Greg Peterson, Rochester, MN: "From November 2003 into earlier 2005, maybe a fifteen-month period, no question has been the strongest in terms of high auction prices in my 16 years."
Greg Peterson represents the fourth generation of his family involved in agricultural equipment sales. But, unlike his predecessors, he does not actually sell equipment. Instead, he operates an internet site called machinerypete.com, which provides prices and information on 75 categories of used equipment, nationwide.
Greg Peterson, Rochester, MN: "We put our website up in March of 2000 and previous to that, we had just been publishing our book which came out three times a year that has auction prices. I had the sense that there was a desire to get this information quicker."
Peterson collects data for machinerypete.com from a network of more than 600 auctioneers, plus 20 contacts who cover sales in person. Thousands of website members can find equipment available at upcoming auctions, as well as, pieces offered by dealers.
Todd Houghton, Red Wing, MN: "Greg has a great website. Yes, we do use it. We send him results, true values from the auctions. You can do appraisals on farm machinery. You've got true numbers, so it's a great tool."
Todd Houghton of Red Wing, Minnesota, has witnessed a lot of price trends working for his family's auctioneer business over the past 26 years.
Todd Houghton, Red Wing, MN: "I've seen a lot of ups and downs. Last year, used prices crept up to as much as new prices."
Greg Peterson, Rochester, MN: "We see things like 10 or 12 year-old tractors appreciating 15% in value last year, which is pretty significant when you normally see a depreciation rate. A tractor or a combine might lose four or five thousand dollars in value every year. And then all of a sudden last year, it's worth 15,000 more. It's been very interesting to watch."
While a lot of used equipment is bringing top dollar at many auctions and dealerships, it doesn't seem to be deterring buyers. Demand for quality second-hand machinery is strong.
Dave Klecker farms 3,500 acres with his family in southeastern Minnesota. He says 75 percent of their machinery comes from auctions.
Dave Klecker, Owatonna, MN: "I bid on this Kinze planter today. I got it luckily, well; I didn't plan on buying it. I paid $23,250. It was a deal --10 under what a dealer would ask. It was cheap."
So, why are farmers turning retro? There are several reasons. Increased crop production in the last two years, plus generally favorable prices much of last year have influenced the growing trend. And, high steel prices are driving up new equipment costs.
Some dealers claim manufacturers are choosing not to build excess inventory because of high raw material costs. And, dealers say this is changing how they run their operations.
Greg Peterson, Rochester, MN: "The smart dealer, I think, will realize that used equipment can be a growing profit center. If there is more demand on requiring good used equipment a sharp dealer will be on top of that and try to help this customers address their needs."
While dealers do keep a few new large ticket items on the lot, most of the machinery on assembly lines already has been spoken for by farmers. As farms continue to grow, the need for higher horsepower increases. Many farmers want to upgrade economically and don't want to wait for new equipment.
Competition for used equipment is growing as well. There are more people looking for used machinery, and fewer auctions to sell the equipment.
Dave Klecker, Minnesota: "People are already coming up to me and telling me if I don't want it, they'd buy it from me."
Regardless of the condition of the farm economy, Peterson thinks auctions will remain a viable place for people to buy and sell used machinery. He looks forward to continuing his business and to helping more farmers turn a profit.
Greg Peterson, Rochester, MN: "There is a guy down by Dubuque, Iowa, that has been a customer for years. And, he swears that we've saved him over $100,000 over the years because on every buy or sell situation before he pulls the trigger, he looks at our data. So, he knows that he's buying at a good price and he's selling at a place to make a profit. So, that is the cool thing."
For "Market to Market", I'm Laurel Bower Burgmaier.