Huge demand for machinery, sheds and infrastructure after big WA season

By Brooke Littlewood
March 28 2022 - 10:00pm
Hundreds of people have flocked to on-property clearing sales across WA since January, bidding top dollar on used machinery with some even going under the hammer for above new value.

A BUMPER harvest, red-hot machinery market and heady livestock prices have supercharged demand for onfarm infrastructure and equipment.

Over the past 18 months, Western Australian dealerships, builders and other businesses - which service agricultural regions - have been busy keeping up with the farm spending boom.

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Orders for some new equipment are taking more than 12 months to fill and prices for anything used have significantly increased, as shipping disruptions continue to hit the supply chain.

With the upcoming seeding season in their sights, farmers have even been urged to look beyond this year's crop and onto the next.

And they have done exactly that.

Hundreds of people have flocked to on-property clearing sales across WA since January, bidding top dollar on used machinery with some even going under the hammer for above new value.

For example, take a look at a sale on Paringa, between Gairdner and Bremer Bay, where an Earnshaw SS250 chaser bin sold for $52,000.

Buyers Ashley and Hannah Jacobs, PJ & MJ Tulloch, said they purchased an identical bin four years ago for almost half the price at $28,000.

"That shows you how farm machinery has gone up because you can't just walk in and buy it off the shelf," Mr Jacobs told Farm Weekly, after the sale.

Elders Corrigin representative Steele Hathway has auctioned six clearing sales in the north eastern Wheatbelt this selling season.

Elders Corrigin representative Steele Hathway.

He estimated the number of registered bidders at those sales to be up 20 per cent on last year.

Mr Hathway said the clearing sale season had been strong, particularly for grain tippers, tractors, spray rigs and even some sundries items.

"Clearances have been excellent, values have been up and I think overall it has been a strong year for machinery," Mr Hathway said.

"A number of items in recent sales have gone near - and even above - new value."

Mr Hathway said many buyers, who had purchased new machinery, hadn't traded in their older machinery as of yet.

He said usually older machinery would go to second-tier buyers and have a flow-on effect through the farming system.

"The flow-on effect hasn't been there for the past two years, so demand has been strong.

"2021 was another strong selling season, but even with that, this year is probably a touch better on some of the older tractors."

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Livestock and Land stock and station agent for Nutrien Ag Solutions, Rex Luers auctioned at Tammin, Merredin and Meckering clearing sales this year.

Rex Luers, Nutrien Ag Solutions.

All three clearing sales cleared big money with most items selling for 20pc - and some even 50pc - more than estimated.

The gross sales even left vendors stunned, as they pocketed 20pc-30pc more than expected.

"It has been a really good time to auction and a very strong market," Mr Luers said.

While registered bidder numbers remained much the same or slightly higher than 2021 levels, the sales were stronger than ever seen before.

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Those attending did not hesitate to dig deep for machinery with some hotly-contested bidding on tractors and even out-of-season headers.

"Any farm machinery has done well, there has been a much stronger demand than what we have seen in the past," Mr Luers said.

"Prices have been well above market, particularly on well-looked after, used farm machinery.

"It wasn't that long ago that chaser bins were roughly $1000 per tonne of capacity, so a 25t bin would make $25,000, maybe even $30,000.

"Now it is making double that at $2000t - it is just incredible."

Mr Luers said there were a number of factors driving the market, however the main reason was the wait time on new order machinery.

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"It is hard to get new gear at the moment, so second-hand gear has become higher in demand," he said.

"People need the equipment straight away and they can't otherwise get it in time for seeding, harvest or whatever else they have coming up.

"Also in WA we have a pretty strong market for everything in agriculture at the moment, which is certainly helping.

"And a smaller factor is people looking to purchase machinery to continue farming, following on from the recent bushfires."

Farm Machinery & Industry Association of WA executive officer John Henchy said lower February sales statistics reflected the supply challenges the industry had experienced over the past few months.

John Henchy.

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However, despite this he said members remained optimistic.

"Over the past 18 months, things have been very buoyant," Mr Henchy said.

"Demand for tractors has been strong across the horsepower ranges, and combine harvesters sales have been the strongest for many years - and it is pretty much across the range of products.

"Last year's positive statistics were due to a few reasons including government incentives, low interest rates and technology."

Mr Henchy said technology was improving year-by-year and farmers wanted to keep up-to-date.

And that is not just for the sake of keeping up, but to help the bottom line with efficiency and saving of costs.

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Supply and freight issues have significantly impacted machinery prices over the past two years, as has the availability of components.

"There isn't anything in particular, which has had a direct impact on pricing other than it is a collective," Mr Henchy said.

"Even on wholegoods, there is a significant increase in container costs because there is a worldwide container shortage.

"Obviously, roll-on roll-off shipping has also been an issue and has had an impact."

As a result of this, some farmers have been left in doubt as to whether or not certain equipment would arrive in time for seeding.

Others have placed orders further out than 12 months with 2023 deliveries even discussed as early as last August.

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This means some dealers are unable to quote prices because they are unsure what they could be that far out.

For Mr Henchy the message is simple - "farmers have to think a lot further out than what they would have in the past".

"That's not just for imported equipment either, it is also for locally produced equipment," he said.

"It is the way the world has changed and you just have to work with it.

"It has been like this for quite some time now and it doesn't seem to be changing quickly."

With the seeding season approaching, Mr Henchy hoped the industry would not find itself in a situation similar to last harvest.

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"On the eve of harvest last year we experienced a situation where Fremantle port industrial action necessitated millions of dollars' worth of farm equipment being diverted to Eastern States ports and subsequently transported back by road," he said.

"This meant many farmers had to wait longer for their harvesting equipment.

"We trust the WA Government is keeping an eye on port activity to ensure this isn't repeated in the upcoming seeding season."

McIntosh & Son northern group dealer principal Anthony Ryan has never seen demand for new onfarm machinery and equipment as high, or the market as tight.

Anthony Ryan.

And it's not only the case for Australia, but right across the globe.

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"Have we seen demand like this before?" Mr Ryan said.

"Maybe.

"But we haven't seen it coupled with supply and shipping constraints."

Mr Ryan attributed high demand for new machinery to last year's bumper season.

According to Rabobank's latest rural confidence survey released last week, 77pc of farmers plan to make further upgrades in the next 12 months, as delivery timeframes continue to extend.

While farmers have been compelled to splash some serious cash, a lack of labour in manufacturing - during COVID - has proven difficult in keeping a flow of equipment reaching dealerships.

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Mr Ryan said the hardest and most challenging part was the "unknown" in shipping times.

He said the wait time on equipment was line specific and could range anywhere from "in the yard now" to as far back as 2024.

"We were probably used to a customer coming into the dealership and saying, "I want this particular tractor" and we'd go and get it sorted," Mr Ryan said.

"Whereas now it is more like, 'Oh we don't have that, we have this instead" and it may be smaller or bigger than what they were looking for."

The shortage of new equipment means there is less used machinery on the market.

Supply, labour and shipping have created the perfect storm for a farm machinery price hike.

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But how do dealerships provide growers with a quote for equipment they aren't receiving for another 12 plus months?

Mr Ryan said ultimately it came down to the supplier giving a price - which he said most did.

"In a situation where we don't have a price, we aren't selling the machinery to growers," he said.

"The orders we are placing aren't just customer orders, they are stock orders also."

Mr Ryan said most growers were aware of the situation with supply issues, however were not dissuaded from making purchases.

He said all they could work on was "the product is being built and will be here as soon as it can be".

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"At the same time, we don't want anyone to think we don't have anything to sell because we do.

"Equipment is coming, it is just a challenging time, so we really encourage people to plan ahead.

"For example, if growers want a sprayer we can sell them one, but the situation has probably changed from 'I'd like one tomorrow' to 'I'd like one later this year or next year'.

"At the moment I would recommend placing orders a year in advance if you are in a position to do so to ensure timely supply."

AFGRI Equipment has experienced increased market activity over the past 18 months with customers ordering anything from small (30 horsepower tractors) to large agricultural tractors, combine harvesters, seeding and sprayers.

AFGRI group sales and marketing manager Jacques Coetzee said there were multiple drivers for demand including a good rainfall season, strong wheat/canola prices, government tax incentives and uncertainty of product availability.

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Jacques Coetzee.

He said unfortunately with that came price increases on most product lines.

"As supply constraints are prevalent in most industries, coupled with labour shortages and factory lockdowns due to COVID, it has impacted pricing," Mr Coetzee said.

"Inflation in most countries is on the rise, which has also had an impact on production cost."

How long it takes for a customer to receive new equipment from AFGRI Equipment depends on what they have ordered.

Mr Coetzee said wait times could range anywhere from six to 12 months on forward-ordered equipment.

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However, AFGRI Equipment has been working closely with factories to ensure forward sold equipment was preference to stock ordered equipment.

He said unfortunately because of product supply backlogs and pressure put on shipping companies due to COVID, there had been multiple delays from shipping companies.

"Costs haven't really seen an increase, however delays in shipping have impacted the industry," Mr Coetzee said.

"Additionally, our supply of trade-in for new stock is not as good as we would like.

"This makes it difficult to service the whole market if we are low on trade-ins.

"Many customers prefer to buy good quality used machines and this market is still very buoyant."

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Mr Coetzee added that longer lead times had an impact on the market, as supply of stock machines were under pressure.

As a result of this, he said customers had looked to buy used equipment - at the likes of clearing sale - to ensure they had necessary equipment on hand.

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