What led to the machine shortage of 2021 and what to expect in 2022

“It was the perfect storm,” said Curt Blades of the Association of Equipment Manufacturers (AEM), describing the conditions that produced the most severe machine shortage of our lives. “A series of events that no one could have predicted has slammed the entire industry over the past 18 months, leaving farmers, dealers and manufacturers to scramble.

Will 2022 be better?

In fact, the current iron famine has been going on for years, with the scarcity stage already set in 2013.

The demand for new machines then collapsed due to falling commodity prices. In response, manufacturers reduced the production of machines.

At the same time, dealers began to suffer from an abundance of second-hand machines of recent models that had been marketed with sustained sales over the previous five years. Companies have worked aggressively to get rid of this used surplus by arming dealers with purchase incentive programs that have reduced asking prices, offered interest-free or low-interest loans, and extended coverage. warranty through attractive certified used programs.

Carrots Worked: Buyers consumed the glut of spent iron. This distracted buyers from new iron, further eroding already sluggish sales. Industry settled in and kept its facilities at idle, producing new machines as demand dictated. This drop in sales of new machines further threatened the future supply of used equipment.


Then COVID stopped it all

So it was until COVID-19 hit.

The production of the plant for the manufacture of not only machinery, but also many components necessary for the construction of this equipment, almost slowed down.

Then, as commodity prices soared last year, so did demand for new equipment. Farmers, low in machinery debt and eager to meet a justified pent-up demand for new technology, began ordering iron en masse.

Sales of large tractors and harvesting equipment surged, and demand for anything that tilled the soil or planted increased by more than 25%.

At the same time, the demand for a large number of consumer products has also increased, easily consuming an increasingly limited supply of steel, tires, computer chips and parts.

Other black swan events like last winter’s freeze in Texas conspired to starve supplies further. In this case, weather conditions shut down petrochemical plants that were not used to operating in freezing temperatures. These factories feed the supply of raw materials to manufacture plastic components. The exacerbated conditions were the challenge of finding or retaining labor for manufacturing and shipping entire supplies and products.

29016_ equipment values

New iron production stalls

All in all, these and other events created one of the “worst supply chains I’ve seen in my career,” observes Scott Wine, director of CNH (Case New Holland) Industrial.

Conditions slowed down new iron production. Dealers, who have been eager to start selling new machines again since 2013, have had to tell customers that they have to wait, sometimes up to 12 months, to get a new tractor, cultivator or seeder.

Farmers immediately turned to later model machines to meet their needs, but they quickly began to disappear.

And 2022?

The good news is that more iron stores will be coming back. “Manufacturers are using all the tools at their disposal and even creating new tools to meet demand. They got very creative in finding supplies, ”says AEM Blades. “We are cautiously optimistic that the industry will be able to meet all demands in the near future. ”

Manufacturers and dealers, deprived of sales since 2013, are eager to meet demand. Already an increasing amount of new iron is appearing at dealerships.

At the time of going to press, combine sales had increased 14% since the first of the year, to over 100 hp. tractors 27% and four-wheel drive (4WD) tractors have skyrocketed to almost 40%.

“It’s true, our lots are usually full at this time of year,” observes Neil Messick of Messick’s Equipment in Pennsylvania. “We have things in stock like big New Holland tractors. But other equipment such as small tractors, planters, loader attachments and UTVs are still in short supply. ”

“Although equipment availability is limited, you have a good chance of meeting new machine needs by next spring if you pre-order the equipment now,” advises Gary Vahrenberg of Vahrenberg Implement in Higginsville, Missouri. “Many manufacturers like AGCO [Vahrenberg Implement sells Massey Ferguson tractors] prioritize purchase orders over dealer inventory [floor plan] orders.”

Buyers can claim a tax deduction for 2021 if they prepay for the equipment this year. They may have to pay extra that covers the increased cost of steel, plastic parts, or computer chips. Used as a method to avoid increasing the wholesale cost of a machine, these surcharges will disappear as the supply chain reduces input costs.


Shortage of used iron

Used machines, especially newer models and large equipment, will continue to be scarce and command high prices through 2022. “I don’t see this situation changing much until more machines are available. marketed, ”says Tim Meyer of Steffes Group. . “What drives this trend is the lack of equipment in good condition with low hours. Then again, such machines always come at a premium.

The challenge with recent models of low-hour machines is that often this equipment, which comes onto the market, is already sold before it reaches the dealer. “Great stuff doesn’t stay on our land very long,” observes Jeremy Knuth of Heritage Tractor, a John Deere dealer network in Kansas and Missouri.

Knuth’s advice is to go on the internet and start looking.

“That’s a big advantage you have today: being able to search the country,” he adds. “Dealers are certainly ready to help you with your research and arrange to have equipment shipped. ”


Hottest iron in the market

The largest tractors, combines and planters experience the largest second-hand supply problem and the resulting price hikes. Notice how the prices increase while the volume decreases. If your farm needs this type of equipment, you should check out sites like Tractor Zoom daily. Reasonable prices for some gemstones occur, but not as often as in the past.

In contrast, compact and utility sprayers and tractors have seen their prices rise significantly. Yet, they are in relatively abundant quantity. Beware of expanding on a frantic shopping spree for these exceptions.

With smaller tractors, manufacturers’ production lines are nimble and should be able to fill that void faster. Don’t be surprised if manufacturers are overproducing now and creating a glut of small tractors to be auctioned off over the next decade.

Sprayers will be especially interesting to watch out for in December. In Tractor Zoom data, towed sprayers over 1,000 gallons and with booms over 80 feet were one of the few categories to experience an average annual price drop of 15%, while equipment auction increased by 50%. If self-propelled sprayer values ​​continue to rise, when will farmers switch back to rear wheel drive?

If you think a lot of things will end up showing up, keep in mind that there is a supply issue that hasn’t received much media attention. How many retreats or liquidation auctions have you seen in your area in the past year?

Probably not as much as the year before. It can also influence the offer. Tractor Zoom can filter auctions by type: The number of takedown and liquidation auctions, as a percentage of all auctions we track, is down 12% from a year ago.

The supply of the material is no longer a guarantee. Current grain stocks-to-use ratios are among the lowest since the early 1970s, which should support healthy and prolonged commodity prices.

As a result, demand for equipment is likely to remain high and the scarcity of tractors and combines will continue.

A repair right toolkit and manual may be your best bet in the short term until supply chains react and prices stabilize. If your operation is in need of larger equipment and you can afford the long term payments, I suggest you look at TractorZoom.com so you can find the rough diamond before it is gone.

Auction iron conditions

By Andy Campbell, IronComps.com

Tractor Zoom has seen a frantic search volume this year, akin to a gold rush, driving the values ​​of hard-to-find equipment up. Yet the same force that drives row crop tractor values ​​higher is not necessarily the same leverage behind self-propelled sprayer prices. At the start of the last month of the year, be careful not to overextend your long-term machine spending by treating all purchasing decisions the same.

Since it started collecting data in 2017, Tractor Zoom has helped farmers find more than a quarter of a million equipment sales from 500 auctioneers – and now also dealer lists. All of this data allows a real-time view of trends. Sales values, offer, hours, horsepower, size… you name it. It is with this data that we have compiled one of our most robust analyzes to date.

Commodity prices, higher demand and tight supply chain issues are driving up equipment prices. However, these factors do not weigh in the same way in all categories of machines.

The chart below compares Tractor Zoom price and volume data from January to August 2020 compared to the same time period in 2021.

The blue bar graph for each category is the average price change for each category. The light blue bar is the percentage change in the number of sales for each category in the Tractor Zoom database. This analysis only includes machines that were produced in the past 20 years and sold for more than $ 10,000.


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