Scott Steffes Shares Thoughts on Ag Economy, Equipment Market
An auction is sort of like a crystal ball offering a glimpse into the future ag economy. A few years ago, Scott Steffes, president of Steffes Group, Inc., which liquidates and manages ag-related assets, predicted almost exactly what the farm equipment market would look like today.
“I guess it’s a good idea to be an observer – taking in as much information as possible, then forming an opinion based on what you see,” Scott explains. “Also, living in the auction world, we have a secret advantage most people don’t have. Auctions will always be first up and first down, so all we have to do is pay attention because what happens at auctions usually takes some time before it becomes news.”
The main economic indicators he watches that affect the auction world are:
- Commodity prices
- Crop production
- Interest rates
- Government payments
So it’s the same factors spurring on the ag economy that will likely lead to its eventual drop.
“Right now interest rates are changing but crop production is very good overall with bushels in the bin,” Scott notes, adding, “Those bushels are certainly a lot more valuable than historical averages.”
Throughout his 42 years in the auction business, Scott has never seen a time when there’s been more cash and liquidity in producers’ pockets.
“We see lots of expansion and growth, especially for the well-positioned families that now have the opportunity to make room for sons and daughters who wish to be farmers,” Scott notes. “The previous generation didn’t have that opportunity. So many of them wanted to stay on the farm, but there just wasn’t enough to go around. Kids are going to college and coming home to farm instead of going to college and hoping to find a job off the farm. It’s a good thing.”
There are three characteristics Scott says successful operators have in common. They are always:
- Optimistic
- Looking for a better way
- Paying attention to cash flows and profit
“Farmers in general have to be optimistic because there are so many variables that will always be out of their control, and no one makes bigger bets,” Scott remarks. “These last few years it’s been little easier to have the right answers, and of course the rewards have been historical. I hope we keep it up.”
Tips for Handling Supply Issues – and the Next Downturn
While Scott expects the rapid rise in interest rates to change the strong demand – and prices paid – for farmland and equipment, so far the effect has been minimal because commodity prices are high, crop production has been mostly good, and producers still have an abundance of cash.
To deal with the tight supply of new and used farm equipment, Scott recommends producers plan well in advance for future capital purchases.
“Don’t be afraid to buy in the off season, then sell right ahead of the season,” Scott advises. “The market advantages for shrewd buyers will far outweigh any carry costs, especially in a rising market. We see quite a bit of impulsive or ‘I need it right now’ buying, which is not a good position to be in during a scarce market.”
To prepare for the next downturn, Scott cautions that the purpose of machinery isn’t to build net worth. Instead, he recommends buying as much land as you can, and once you own it, don’t sell.
About Steffes Group, Inc.
Steffes Group, founded in 1960, is a nationally recognized leader in the auction industry, selling farm, construction and transportation equipment, as well as land and real estate. Steffes Group and its contributing divisions primarily focus on liquidating and managing ag- and construction-related assets, inventory reductions, land brokerage and real estate sales, equipment appraisals, and farm management. With 125 employees and locations in North Dakota, South Dakota, Minnesota and Iowa, Steffes Group offers live on-site and timed online auction options.