By TIM THORNBERRY
Kentucky Correspondent

MT. STERLING, Ky. — Farmers know better than anyone the importance of being thrifty with many using their high-dollar equipment for years on end. And when they purchase “new” equipment, it is often used as they work to keep input costs at a minimum.

Mike Phipps, an auctioneer in Montgomery County has seen the trend for more than 40 years. He said many farmers are able to find hard-to-find pieces of equipment at consignment auctions including items such as tractors, combines, hay equipment, silage equipment, construction and lawn and garden equipment just to name a few.

Phipps said typically 50 to 90 consignors are represented at such a sale and he is seeing more equipment being sold these days. That could be due to the decreasing number of farms not only here but across the country.
The USDA reports a somewhat steady decline in farm numbers since 1990 when 2,145,820 were counted. By 2007 that number had dropped by almost 100,000.
That is in stark contrast to 1935 when the number of farms in the United States peaked at 6.8 million as the population edged over 127 million citizens, according to the Environmental Protection Agency’s (EPA) Ag 101 program.
Phipps feels that the decline is one reason for increased equipment sales, as well as a way for farmers to get rid of unneeded pieces and created needed revenue.

“A lot of farmers have a few pieces they don’t actually need and they are turning it in to a cash flow,” he said.

Phipps oversees about five large consignment sales a year and said anywhere from 300 to 600 buyers will register looking for a wide variety of equipment from collectibles to ready-to-use farm equipment.

At one recent sale, he said one John Deere antique tractor went for $3,100 while a 1937 John Deere L cultivating tractor brought $2,650.

Phipps added that it is rare to see antiques like these at his sales since most go to sales more specific to antique equipment.

What he sees is older usable pieces farmers are looking to put in the fields. At this same sale Phipps said one small John Deere combine with a $2,000 reserve sold for $3,100 and an almost new Kubota tractor sold for $29,000. 

Larger combines in grain country can bring much higher prices such as $175,000 to $200,000 he added, but compared to $500,000 for a new one that could be a bargain.

But even with the advances new equipment has, Phipps said for the most part he is seeing older equipment at these sales selling at more economical prices for the small farmers.

He also said that it is common to see equipment used for decades explaining that in many cases the older equipment, if it has been taken care of, is just as dependable today as it was when it was new.

Phipps expects to have another large consignment sale in September in Mt. Sterling, but his buyers come from far and wide including Tennessee, Ohio, West Virginia and Indiana, as well as all over Kentucky. Phipps said he also has representatives from Missouri and the Carolinas proving that farmers will travel great distances to get a quality piece of equipment at a bargain price.

Frugal farmers

As farmers have to do more with less, it would be conceivable to think that many go into deep debt to keep their operations rolling, but that is not necessarily the case. In a report issued by the USDA’s Economic Research Service (ERS) it is noted that while “farm debt levels have risen sharply in recent years, the growth in asset values has outpaced the growth in debt and that fewer farms end the year with debt more outstanding than in the past. The debt is more concentrated in larger farms.”

While the report emphasized more of the farm debt is owed by larger operations, not all debt-free farms are small. In 2007, over 14 percent of farmers with annual sales between $1 million and $5 million reported owing no debt at the end that year.

While these are pre-recession figures, the latest numbers reflect a similar pattern. According to the ERS, the “farm sector balance sheet estimates for 2011 reflect higher cash receipts for both crops (14.1 percent) and livestock (3.0 percent), higher production expenses (7.0 percent), and higher returns to operators (20.8 percent) relative to 2010.”

The report went on to state that “farm business debt is expected to rise from $240.3 billion in 2010 to $241.6 billion in 2011, and farm equity from $1.88 trillion in 2010 to $2.01 trillion in 2011.”

The debt-to-asset and debt-to-equity ratios are expected to decline, indicating that the farm sector overall is more solvent than it was in 2010.”