Equipment costs escalate

Conventional wisdom tells us that farm equipment is a depreciating asset. As soon as you buy it, the value starts declining. These days, however, values are in many cases defying gravity.

Lots of people follow farm equipment values more closely than I do, but the point was brought home to me recently as a bid on a 1545 Batco conveyor at an on-line auction sale.

We use a 1545 to load the seed cart out in the field in the spring finding it faster and more convenient than the auger that came with the cart. Of course, when the conveyor is out in the field, it might be needed to move something in the yard and it would be handy to have a second one.

Before the auction, I examined the conveyor for sale. It was in good shape although at 10 years a bit older than mine. I checked the price of previous 1545 Batco conveyors that had been auctioned in recent years and thought I might be able to buy this one for $10 to $12,000. Wrong.

The last price I saw on it was $23,000, almost exactly the new price I paid for mine back in 2015. New conveyors are now so costly that the value of new ones has been pulled up dramatically.

Alberta Agriculture and Irrigation through its Statistics and Data Development Section, Intergovernmental and Trade Relations Branch has long published a monthly farm input price survey that includes a number of key pieces of new farm equipment.

Two years ago, according to the survey, you could have bought a new 4WD tractor between 325 and 375 horsepower for less than $450,000. The price now is well over $625,000.

For a round baler, the price in the survey two years ago was a little over $70,000. Now, it’s approaching $95,000.

To keep the survey meaningful, the same size of equipment has been surveyed for many years. On the combine that means a class 7 with 323 to 374 horsepower, a pretty small combine by today’s standards. Two years ago, the survey pegged a new combine of that size at just over $550,000. Now it’s $775,000.

It should be noted that used combines are a piece of equipment where depreciation is still substantial. As hours and years mount on a combine, the value plummets because potential buyers worry about the huge repair bills that inevitably loom. On the other hand, tractors hold their value really well even as engine hours mount.

Like the combine in the survey, the seeder is also on the small side. It’s described as a 40 to 42-foot air drill with packer wheels, 325-bushel tank with three compartments and no variable rate. New drills you can buy in this size range must be limited. Two years ago, the price was pegged at about $350,00. Now, it’s about $440,000.

On the seeder, it’s interesting to note that the peak price was in early 2023 at over $470,000. I suspect the easing of component supply shortages may be a reason the price has declined a bit from the peak.

For producers with used equipment, a couple of points are noteworthy. First, are your insured values up to date in the case of loss? Your equipment may be worth more than you think and maybe more than you paid for it.

Second, even though you may have avoided a bunch of depreciation on your equipment, the cost to upgrade is likely to be a large financial hit.