July 17, 2008 / 12:38 AM / 9 years ago

Farmers scour auctions for harvest equipment

MACKINAW, Illinois (Reuters) - The price was higher than Bill Boyd wanted to pay and still rising, but it didn’t really matter. He needed a combine harvester.

<p>A farmer inspects a soybean head before the John Kuhfuss farm equipment auction in Mackinaw, Illinois June 28, 2008. High crop prices have meant a boom not just in sales of new farm equipment like tractors and combine harvesters, but also in prices for second-hand farm equipment, often sold at auction when farmers retire. REUTERS/Mark Weinraub</p>

He lost most of his farm equipment to fire when lightning struck his shed earlier this year, leaving him no way to harvest his part of what could be the most valuable crop in U.S. history.

So Boyd, who grows corn, soybeans and wheat on 1,000 acres in Rushville, Illinois, joined about 150 others in this small town in central Illinois to bid on the used equipment of retiring farmer John Kuhfuss. And the prices were high.

Even with grain prices at record levels, farmers frequently favor used equipment, especially when, like Boyd, they need it in a hurry.

New tractors, combines and planters take months to acquire because manufacturers build them to order. High metals prices make it too expensive to keep them in stock.

“It is probably the best year on record,” said Eldred Nehmelman, the auctioneer who sold off Kuhfuss’ equipment. “The average combine would bring $10,000 more (than it did a year ago).”

The used equipment also is in great demand because the number of farm auctions are down this year, leaving few opportunities for farmers to replace their worn out equipment.

Nehmelman, who has been running farm auctions for 30 years, said that some older farmers were putting off retirement for a year or two so they could take advantage of the strong cash prices for grain.

Rising demand from countries such as China and India and a growing biofuel sector have provided new outlets for U.S. farmers to sell their crops and supported prices for the past two years.

This year, slow planting due to a cold and wet spring and flooding that left millions of acres of Corn Belt farmland underwater fueled a rally that sent both corn and soybean prices to record levels.

The prices are a boon to farmers who are seeing rising costs for key inputs such as fuel and fertilizer eat into their profits.

Demand for new equipment is up too, according to John Deere, the world’s largest maker of tractors and combines, and others. But high commodity prices are a double-edged sword for Deere, which has said steel costs were eating into profits.

KICKING TIRES

At the Kuhfuss sale, some farmers were looking for large equipment such as a planter or a tractor to expand their operations and capitalize on high grain prices. Others just need some small tools like a saw or a shovel.

Potential buyers arrived early in the morning to inspect the merchandise, climbing into the cab of a tractor, kicking the tires of a planter, before deciding if they wanted to make a bid.

The auction started promptly at 10 a.m.

Bidders gathered around three flatbed trailers filled with items ranging from horse collars to wrench sets to fire extinguishers to buckets of WD-40. Personal items such as a picnic basket and an electric train set also were up for sale.

An assistant held up each item as Nehmelman, sitting in a small hut built on the back of a pickup truck, called out prices over a public address system.

The small items moved fast -- two wagon wheels sold in 25 seconds -- and some of them went for as little as $1. Items that attracted no interest were often combined with another item to try to drum up bidders.

Scrap metal and iron fence posts were popular due to the high price of metals. Some bidders were at the auction solely to buy metal to sell to dealers.

It took about two hours to auction off the smaller items before a driver pulled the auctioneer’s truck to the areas of Kuhfuss’ yard where the large equipment was parked.

Marshall Newhouse bought a John Deere planter, which was specifically set up for “no till” operations that are easier on the environment, for $42,250, $250 more than he had planned. He had driven 165 miles from his farm in Capron, Illinois, just to bid on the planter, which was coveted by two other bidders.

A farmer in Wisconsin put a $40,000 bid on Kuhfuss’ tractor over the telephone, without ever seeing it. The tractor eventually sold for $47,600.

“People are reinvesting in their businesses,” Kuhfuss said. “The equipment is at a premium.”

But not everyone was there to buy.

Some farmers, like 57-year-old Jim Lynch, had an eye toward retirement and wanted to get a ballpark figure of what they could expect their equipment to bring in the next few years.

“I‘m looking to see what the value of the machinery is,” said Lynch, who farms 1,500 corn and soybean acres. “Your view completely changes after you reach age 50.”

Finally, it was time to sell the combine, a 1999 Case IH with a yield monitor and global positioning system that would be key to Boyd’s harvest.

The bidding started at $35,000, well below the $165,000 a similar combine would cost if it were new. The price quickly rose and Boyd found himself locked in a bidding war with John Davis, a used farm equipment dealer from Mattoon, Illinois.

Davis, who had estimated before the auction that the combine, would sell for $60,000, runs a business that has been in his family for more than 60 years.

“Business is good,” said Davis, noting that prices for his equipment were up 10 percent this year.

But the market for Kuhfuss’ combine outstripped even Davis’ bullish expectations, soaring to more than $65,000 before Davis and Boyd began slowing down the amount by which they would raise their bid.

The crowd quieted down as onlookers watched the two men carefully consider their next move. The auctioneer’s assistants gave both Davis and Boyd plenty of time to make a decision on whether to push the price higher.

The price topped out at $67,750 before Nehmelman brought the hammer down to close the sale.

“I bought too high,” Boyd said. But he had a smile on his face.

Reporting by Mark Weinraub; Editing by Eddie Evans

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