Used tractor sales bad for Deere as farmers pinch pennies

Deep in the heart of the U.S. grain belt, farm-equipment auctions are attracting bidders from as far away as South Africa as the agriculture rout makes used machinery more attractive. As farmers move away from buying new tractors and combines, it could mean more pain for Deere & Co., the world’s biggest agricultural equipment manufacturer, which is already struggling through an industrywide glut. To understand why, look no further than Matt Maring, owner of an eponymous Kenyon, Minn.-based auction operation. Buyers are driving more than 400 miles to attend his auctions, and online simulcasts are drawing participants from around the globe, boosting the bidding field, said Maring, who’s been an auctioneer for 36 years. Farmers are spending $50,000 on replacement tractors that would otherwise cost more than $100,000 new from Deere, he said. As a global grain glut is poised to reduce U.S. farmer incomes for a third straight year, growers are tightening their pocket books and increasingly turning to used machinery to trim spending. Adding to the picture, credit conditions have eroded and made it tougher to get a loan for new equipment. For Moline, Ill.-based Deere, farmers turning away from its dealerships could further pressure profits and underscores why Moody’s Investors Service downgraded this week its outlook on the company’s credit rating to negative from stable.