Supply chain shortage is driving up prices. Farmers are worried it could grow worse.

·6 min read

Joel Everett said he was astounded when a lightly used 2009 John Deere tractor sold at his last auction in Strawberry Point, Iowa, for tens of thousands of dollars more than it had cost fresh off the production line more than a decade ago.

Bought new for $109,000, the tractor sold for $143,000 at auction, he said. It's not an isolated incident, said Everett, who has run Joel’s Tractor and Auction since 1992. A lot of farm equipment, particularly used tractors, is selling for 30 percent to 50 percent more than it was two years ago at his auction house.

"It's been unreal," Everett said. "Our last sale was the biggest dollar sale we ever had, and we're fixing to have another in three to four weeks that's going to blow that one away."

Quality farm equipment is getting hard to find amid the supply chain shortage, many farmers and experts said, and its scarcity is driving up prices and raising questions about whether farmers' harvests and next year's planting season could be affected.

Some farmers are concerned that the shortage could grow worse after 10,000 John Deere workers went on strike last week. The company had reported record profits this year, and United Auto Workers union members walked off the job at 14 manufacturing plants when it refused to raise wages above 6 percent.

"It's got us worried for sure," said Eric Hopkins, the senior vice president of Hundley Farms, which boasts 20,000 acres of mostly vegetables in central Florida. "They're already low on inventory and parts right now. A strike is only going to exacerbate things, make it worse. If it lasts for a while, not only will they not have new tractors, but when you have a breakdown and there's no parts, your tractor is just going to sit there not being able to harvest or plant a crop."

Image: John Deere Workers Strike Over Contract (Scott Olson / Getty Images)
Image: John Deere Workers Strike Over Contract (Scott Olson / Getty Images)

Feelings among farmers about the John Deere strike are mixed. Many said that they supported the workers' desire for a better deal but that they are worried about the effect of a strike that lasts weeks or months.

A long strike could hamper the country's food supply chain, which has suffered shortages since the start of the coronavirus pandemic, which further delayed John Deere's ability to deliver products and parts in a timely manner. Farmers also worry that a delay could affect their increasingly thin margins.

It's uncertain how long the strike could last and to what degree John Deere will be further slowed. It said it had a continuity plan in place, bringing in salaried nonunion workers to maintain some level of production.

Crops can be damaged if they are planted or harvested late, and the insurance provided by the Agriculture Department requires that seeds are put in the ground and produce is pulled by a particular date to be fully insured.

That's one issue highlighted by David Misener, who travels the country from May to November as a custom farmer. He brings farm equipment and harvests other people's crops for them. His timelines are tight, but he's had to wait long periods for repairs and parts multiple times this season — an unusual occurrence.

Most recently, while he was working a field for a South Dakota farm this month, a bearing went out on a combine harvester, destroying one of its shafts. The only place the local dealer could find a replacement part was in Canada, and Misener had to sit on his hands for a week until it arrived.

"It is extremely crucial that we harvest on a timely schedule, because it can decide whether you have something to harvest or nothing," Misener said.

The threat to the bottom line is also scary because prices for equipment are growing, as well as for fertilizer, seed, grain and other common farm production resources.

Matt Ackley, the chief marketing officer of Ritchie Bros, which operates a global marketplace for insights, services and transaction solutions for commercial assets, including the sale of heavy equipment, said interest in and prices for farm equipment are growing considerably.

Image: David Misener works on a combine harvester with his sons. (Courtesy David Misener)
Image: David Misener works on a combine harvester with his sons. (Courtesy David Misener)

The price index for used tractors at Ritchie Bros. is up by 19 percent since last year, Ackley said. The company's website, where it hosts online auctions, has attracted more than 161 million visitors and 1.3 million bidders in 2021 — that’s up by 15 percent and 19 percent respectively from the same time a year ago.

Ackley shared an auction for a tractor that was struck by lightning this year. It was put up for auction by an insurance company as salvage. The tractor still got 393 bids Monday as prospective buyers fought for the opportunity to break it down for spare parts.

“As you get any type of disruption, especially from an [original equipment manufacturer] standpoint — like this strike — to an already stretched supply chain, you get quite a significant backlog,” said Ackley, whose team has been tracking the shortfalls in the supply chain since the pandemic started. “People are fighting vigorously for what’s left.”

The items that farmers can repair themselves are also becoming more sought-after and harder to find.

It’s an ongoing challenge. Farmers say that as agriculture equipment becomes more technical digitally, companies like John Deere have limited farmers' ability to repair their own tractors, combines and other field equipment.

Tim Riley, an organic farmer in western Kansas, said he and other farmers around him have had to get creative because of the parts shortages and the challenges of fixing their own equipment.

Wheat Rises As Corn Gain May Spur Demand From Livestock Farms (Daniel Acker / Bloomberg via Getty Images file)
Wheat Rises As Corn Gain May Spur Demand From Livestock Farms (Daniel Acker / Bloomberg via Getty Images file)

"Some of the electronic parts have been really hard lately to get for the guidance systems on some of these tractors," Riley said. "It's really hard to do anything with how highly computer-driven they are anymore, so that's a problem."

When the guidance system broke down on Riley's tractor, he had to call his neighbors to ask whether he could dismantle the GPS systems from their rigs to use on his. The local dealer did the same thing and called customers for help when the GPS on a tractor Riley had rented broke this year.

Riley is also worried because John Deere is already so behind in production that he's unable to buy a new tractor for planting season next year.

"Coming into our spring season, we really need a new tractor, but they told us that we won't be able to get it for a year to a year and a half," he said, adding that he has had to buy a used tractor for his farm for the next few years.

Everett, who operates the auction house in Iowa, said he knows multiple farmers who bought new John Deere combines more than eight months ago who still haven’t gotten them and bought different combines just to get through the season.

At times, he's been able to encourage farmers to buy two of the same tractor and cannibalize one for parts.

"I've been telling the guys who want to buy the new stuff at our auctions if you want one that's newer or really nice, this is all you're going to get," he said. "You used to be able to do that, but now our supply chain is just in shambles."

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