THE strong £ is still the most notable factor in depressing second-hand machinery prices this spring. The effect of sterling linked with ever-increasing pressure on farm incomes is taking its toll as potential buyers (both farmers and dealers) look hard at expenditure within their businesses.
In addition, a simple case of supply and demand is at work. There has already been a large number of sales with a lot of good quality equipment on offer this year. Making a sale stand out in this environment is difficult and smaller ones can suffer as a result.
The increasing trend toward contract farming, either whole farm or just a few operations, plus substantial restructuring of farming businesses continues to create a surplus of machinery. When disposing of kit the auction is still the only true test of the open market and is by far the most efficient way of selling.
While there can be no replacement for the traditional on-farm dispersal sale, the opportunity to hold a joint farm sale can provide a new route of disposal for those with a small amount of good quality machinery to sell.
The alternative for many would be to enter machinery in to a collective sale which is often viewed with suspicion as there is rarely openness with regard to those entering equipment. The possibility of purchasing equipment which may have a hidden problem is amplified in this arena. In contrast, the joint farm sale should offer an opportunity to talk with the previous owner which can often allay those fears.
To this end, the joint farm sale should, as far as possible, include machinery from local farmers whose main intention is to sell rather than simply to test the market. Vendors must also be willing to stand by their machine and talk to prospective buyers. This approach will hopefully maintain the premiums normally achieved only at a genuine dispersal.
But there are pros and cons. Vendors must contend with transport costs while auctioneers have the tricky job of finding a suitable location. The sale will still, to a degree, be viewed with suspicion depending on how open the vendors are willing to be. In addition, all parties have to work closely together to ensure its smooth running.
By joining with other vendors costs are spread making the occasion more economical and increasing the budget for marketing the sale itself. In addition, the quality and not just quantity of machinery on offer will help attract buyers from all areas at a time when sales are prevalent and there is real competition for buyers. If things are properly structured, vendors will be encouraged to sell rather than just test the market which is of further benefit to buyers.
The big question is how much will it cost? One option is to level a flat-rate commission and a share of the costs (split in relation to the amount sold) or a simple flat-rate commission with a second tier for reserved machines remaining unsold. These methods are designed to encourage the vendor to be as realistic as possible when selling, either to reduce liability to costs or avoid being charged commission for lots unsold.
The joint farm sale principle is not a new idea, but a reinvention of the collective approach. However, for it to work vendors must be open and realistic in their approach to reap the benefits of strong prices and reduced costs.
It is not to say that the collective sale does not still thrive, but to effectively sell quality machinery at a premium, the joint farm sale principle works. *
Richard Bannister advocates joint farm sales to dispose of quality machinery.