2025 Machinery Outlook

No doubt, 2024 was a wild year. Everything seemed to fly in the face of producers and equipment dealers alike. Low commodity prices, high interest rates, high machinery costs, and a bitter presidential race had people on the fence, trying to decide what was the right time to make a move. Used equipment was auctioned steadily, with the usual suspects leading the way. By the end of 2024, the used equipment market felt like a soft bottom had been established, and the used tractor inventory shot up.

Inventory Rising

The number of used tractors in dealer inventory started to spike in late 2023 and has never stopped. There was a brief time in Q3 of 2024 when it seemed there was a moratorium on inventory growth. But many new machines were delivered at the tail end of Q3 that shot inventory up.

To put this into perspective, in January 2024, used tractor inventories sat at 11,607, and increased to 14,150 by the end of Q1. Q2 started with 14,150; it ended with 14,276. And Q3 started with 14,276 and ended with 16,244, an overall increase in the supply of 40% in the first three quarters of the year and making used tractor inventory the same as it was in 2020.

Unlike the rest of the large ag segments, used tractors are the only segment that has seen an increase in inventory since the beginning of the year and from Q3 to Q4. Combines, sprayers, and planters are flat to down quarter-over-quarter and suggest a downward trend in inventory.

Lack of New Orders

The bright spot for most large ag equipment is the lack of new orders for 2025 delivery. The lack of “fresh trades” coming to dealer lots will impact the current available inventory and continue to remove late-model low-hour equipment while increasing the supply of older equipment with a lower price point. This shift will force dealers to adjust their strategies to stay competitive, potentially offering more aggressive pricing and financing options to move the older units. This could create more opportunities for buyers looking for bargains, but it also means that the high-value, low-hour tractors that dealers typically use to balance their inventories will become scarcer.

New tractors continued to be delivered, and tractors didn’t have a preseason order writing period. Dealers will order some new tractors for stock and have equipment on order. Dealerships will gamble on tractors for market share long before any other machine segment. Tractors have a shorter shelf life and are often seen as more essential by producers, making them a safer bet for dealers looking to secure sales in a tight market. I don’t see a 2025 where used tractors aren’t the focus of auction sale bills.

Ripple Effects

But that’s not all. The dynamics driving the used tractor market are not isolated. The ripple effects of an increase in tractor inventory will stretch across multiple sectors. For example, dealers that focus on servicing large ag equipment, especially tractors, will feel the pressure. With a more substantial supply of used tractors flooding the market, service and parts departments could see increased demand for maintenance on older machines. More frequent breakdowns and repairs will drive up service business volumes.

It’s also important to consider the relationship between used tractors and technology adoption in farming. With older tractors becoming more common on the market, farmers may invest more in retrofitting equipment with the latest technology such as GPS and automated systems. While this may delay the complete transition to newer equipment, it provides a Band-Aid solution to keep older machines operational and competitive in productivity.

The fundamentals work the same for tractors as they do for anything else: The number of used tractors has to meet up with the number of used buyers. When this doesn’t happen, then equipment needs to be liquidated. The equation is simple — there are too many machines, not enough demand, and prices drop. Dealers will need to adjust by holding on to stock longer, lowering prices, or, in some cases, selling equipment at auction in bulk to offload inventory. It’s a constant balancing act that will continue to shift as the year progresses.

Looking ahead, 2025 will bring its own set of challenges and opportunities. The potential for increased demand for used equipment exists, but hinges on a delicate balance of economic conditions, technological advancements, and shifting market dynamics. Dealers that stay nimble and are ready to adapt to these changes will likely come out on top. As for the rest of the industry, it will be a year of observation and recalibration. However, one thing is certain: Used tractors will continue to play a pivotal role in shaping the future of the ag equipment market.

For more about used equipment, tune in to the “Moving Iron” podcast, where I track the economic drivers of the farm equipment business. And check out movingironllc.com for everything
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