Is there "tractor bubble" out there?

[sixdogs]

We have had the tech bubble, real estate bubble, the FNMA/FHLMC bubble, the oil bubble, the bank bubble and the stock bubble. I'm bubbled out.Now I hear talk of a "toy" bubble that might mean problems for those who loaned money for these consumer desires and now find the loan unable to be paid back.
I would presume this means snowmobiles, motocycles and that kind of thing. I mean, if you lose your discretionary income, anything can be a bubble if you can't pay it back and the value of the asset is below market value of the loan.
CUT tractor sales are slow, I have heard and new prices seem to be very soft. So I ask the question; is there a tractor bubble out there waiting to impact retail and resale prices or is this just loose talk from stuffed shirts?

 

[daTeacha]

The "bubbles" are formed when the suppliers presume there is a never ending source of new customers for their widget. I would say, with the real estate market being what it is, the number of folks moving to newly acquired pieces of ground large enough to justify purchasing a tractor is going to decrease, thus the market will get soft and soon you will be able to find the tractor of your dreams at a lower price than you might have imagined 2 years ago.

On the other hand, with prices of most all consumer goods, including food and fuel, fluctuating rapidly and the value of your income becoming somewhat of a guessing game in terms of purchasing power, having a tractor around to handle chores associated with independent living would be very useful and thus people might prioritize them, causing the cost as measured in terms of hours of your labor needed to pay for the tractor to go up.

All I know for sure is that I am very happy the house, cars, and tractor are paid for, the job is steady and pretty much immune to economic tragedy, and the wood stove has a good supply of wood all cured and ready for this winter.

It could get interesting before it gets to be fun. Or, it could just get to be real fun if all those cheap stocks got picked up by my various retirement plan investors.

In other words, your guess is as good as anyone elses.

 

[MessickFarmEqu]

with the amount of price increases that keep hitting our industry, don't expect that any economic slow down, or added desire for dealers to move inventory can possibly give you a lower price a few months or years from now that what you'll get today.

 

[Opti-Mist]

After the sales dive after 1979, I heard a dealer give these definitions of inventory control:
LIFO - Last In First Out
FIFO - First In First Out
FISH - First In Still Here

 

[Botabill]

In my opinion (everyone with a belly button has one) I predict we will see tractor prices drop drastically in the next 6 months to a year. Dealers will have a hard time moving the stock they have on site so bargains will be the norm. Manufacturers will lay off workers and wait for inventories to clear before stepping up production. I wouldn't dare try to predict what prices will be like in the year plus period. (Should be interesting to see if I was even close a year from now)

 

[ScottOkla]

I think we are nearing the bubble with true farm machinery, and we have passed the real estate bubble. Both of these will impact CUT sales and small attachment sales, but I can't see prices dropping much for new stuff.

 

[ultrarunner]

with the amount of price increases that keep hitting our industry, don't expect that any economic slow down, or added desire for dealers to move inventory can possibly give you a lower price a few months or years from now that what you'll get today.

I'm seeing a tremendous amount of used equipment become available where I am...

When I was Dozer shopping a few years ago the pickings were slim to none. The number of used Dozers for sale has dramatically increased.

I do think new equipment purchases will be skewed based on need more than desire for the immediate future.

Local Rental yards are also liquidating excess equipment... doesn't help the bottom line sitting on the lot.

 

[MessickFarmEqu]

When I was Dozer shopping a few years ago the pickings were slim to none. The number of used Dozers for sale has dramatically increased.

Construction equipment is very easy to come by, and cheap as well. The compact business is not there yet. We've had construction companies bringing in record amounts of equipment for consignment.

The AG business is very strong. Infact, there are many pieces of equipment that your having to wait several month to get. We've seen Case actually canceling some retail orders because they simply can not fill them. This is going to impact pretty much everything over 50Hp. The AG business is a large part of the compact tractor market, RTV market, and Diesel ZTRs.

Having just been at the Kubota dealer meeting, this is a regional thing. I'm in a pretty healthy area of the country. Our sales have nearly matched last year. Dealers in the south seem to have been harder hit. Its all where you live.

 

[sixdogs]

What I wonder about is not the "suggested retail price" or that kind of thing but the supply-demand issue and the availability of credit and desire to use it. For example, any bank that sat on foreclosed housing two years ago has again learned the first loss is the best loss and should have dumped the property way back then.
Now the loss is even greater and desire and credit less able to support a new buyer. They will get even less for a sale today and further depress comperable prices which further impacts the other property they are sitting on. The reason they got the house in the first place was the inability of the owner to pay for it and the need to sell assets to raise cash. Cash became king.
Now go to CUTS. Not the farm stuff right now, just the consumer discretionary purchase.
Should the item be on credit, or worse, financed with a home equity loan on a declining house market value, the need to raise cash or restrict credit could cause the forced sale of assets at a time when others are unwilling or unable to make the purchase. Hence, pockets of limited demand, somewhat regardless of price, unless someone has the cash and is willing to spend it for a discretionary purchase at that exact moment.
I have seen this before--- in the middle 1970's, again in the early 1980's and still again in the 1989 time frame.

 

[mrutkaus]

Good question, just generally speaking without going into the economics of it, I have certainly noticed many new CUTs, often apparently not used much, sitting around here in NW Va over perhaps the last ten years or even more.

Mike

 

[E_Sanborn]

My understanding of a "Bubble" is an economic environment that encourages rising prices due to speculation, or the perception of increasing demand past the time horizion.

Don't see this in my region (Central Texas) In fact, I purchased a gray-market Yanmar 6 months ago in large part because I simply could not find any good used (newish) iron in any acceptable condition, for any acceptable price. The number of used CUT and SCUTs seen was remarkably low, given a large farming and ranching community, and their condition was invariably poor. The pricing on those units, well, let's just say..surprising.

If hard economic times linger, then (used) pricing will drop somewhat, driven by supply and demand. But I don't see any pricing of new iron past MSRP; don't see any big discounts either.

 

[greggh]

I think it's too early to tell. Congress hasn't got their act together and even if they do, it's not understood if the markets are going to respond. It looks as if the people are disappointed in the financial institutions at this time. The trust has gone out of the banking sectors so how and when will the trust return, if ever.

 

[riptides]

The banking sector does not trust us, and we don't trust the banks. No money or credit moves between the two parties.

Pretty scary.

 

[Kyle_in_Tex]

It could happen. Here's what happens in some situations. I can't speak for all the different brands. If people cant' buy them, they sit on the lot. The dealers end up having to get a "floor" loan and finance them themselves as the manufacturers will only allow a "set" time period before it must be financed by the dealer. Usually 6 months. Prior to the end of the 6 months, the dealer gets antsy and lowers his profit margin to help sell it. If the situation is such that he can't sell it, he doesn't order any more from the factory and so the manufacturer has to start offering incentives to keep them moving. This could happen to tractors and if it does, it will happen to the brands that "stock" the most machines on a lot (provided they don't sell).

 

[BleedGreen]

The AG business is very strong. Infact, there are many pieces of equipment that your having to wait several month to get. We've seen Case actually canceling some retail orders because they simply can not fill them. This is going to impact pretty much everything over 50Hp. The AG business is a large part of the compact tractor market, RTV market, and Diesel ZTRs.

Having just been at the Kubota dealer meeting, this is a regional thing. I'm in a pretty healthy area of the country. Our sales have nearly matched last year. Dealers in the south seem to have been harder hit. Its all where you live.

Absolutely, Neil - the AG side for us is way up over last year. The early order program for 2009 JD combines sold out in several weeks - if we have a retail order for one right now, and cannot fill it from our stock orders it will end up being a 2010 product. As you said, most other true AG units are months out on a new retail order. Overall we are up over last year, thanks to AG, while CUTs are even from last year, (although slightly lower margins) unfortunately, premium lawn & garden is horrible - everyone is listening to the national news, and how crappy everything is - but it is not crappy everywhere. In truth, our area has been healthy; with low unemployment and a housing market that at worst, is flat - but not dropping. I have several contacts in the Phoenix AZ area - nothing is going well down there at all. I am glad to hear your aread is holding it's own, Neil.

 

[Gary Fowler]

I cant see any "tractor bubble" bursting. Prices have continued to climb albeit at a good slow rate. The bubbles form when prices escalate radically not due to material cost but mostly greed fueled by easy loan money from unscrupulous bankers. Tractors dont fit in that category at least in my area. The reason you will see a lot of used ones is because folks will buy them do a project and then sell them off for as much as they paid. I bought a greymarket tractor also, because I didnt want new and was planning on keeping it for a long time. All the used tractors I found (and I looked for months ) were priced nearly as high as new compact tractors. Many of them had over 6000 hours and paint was all gone, seats torn up, oil leaks everywhere and still wanting more than what they cost new 30 years ago. Many listing for nearly as much as new today. I dont think you will get any tractors cheaper than they are now, if anything, I think they may be headed for a upturn on the price as more and more folks return to the land. The baby boomers are all retiring now and many of them like myself no longer want to fight big city issues. Most of us are not rich but are not strapped for cash either so we have the money to lay down for these tractors and equipment. I think you will pay at least 4-5% more every year and possibly more if we dont get control of our national oil and stop depending on foreign oil.