Will large agricultural equipment (>100 HP tractor) used pricing indices decline more than 10% from February 2026 levels by August 2026?

Q1 FY2026 earnings materially changed the setup. Used equipment is now described as clearing at an 'accelerated pace,' and the trade ladder is 'freeing up' — language that implies active absorption rather than continued price depression. The early order program finishing 'better than the industry' signals stronger-than-expected new equipment demand, which reduces trade-in volume through dealer channels and supports used pricing. New inventory still at 17-year lows means the structural supply constraint persists. A 10% decline from February 2026 levels by August 2026 would require a sharp reversal of these clearing trends without any identified new catalyst. The $12B Farmer Bridge Assistance Program adds further farmer liquidity support. Previous probability of 0.22 reflected continued negative momentum that Q1 data explicitly contradicts. Revising down to 0.14.

The C&F order bank up 50% — highest since May 2024 — is a pivotal data point. This subcategory directly correlates with large ag equipment demand and its order bank recovery signals that dealer restocking is beginning. When dealers begin restocking, used inventory absorption accelerates because dealers trade aggressively to capture new sales. SAT guidance raised 5 percentage points in a single quarter is also significant — it implies the segment is performing meaningfully better than DE's own prior expectations, which itself was based on bearish used pricing assumptions. The combination of: (1) faster used clearing, (2) rising order banks, (3) farm liquidity support, and (4) pool fund programs continuing makes a 10% additional decline from February levels implausible without a severe exogenous shock. Probability 0.12 — primarily residual risk from tariff escalation or severe crop failure.

CEO reaffirming '2026 marks the bottom' is consistent with stabilization, but self-serving language. The more credible signals are operational: tractor order books extending into Q4 (implying demand visibility into late 2026) and the EOP program beating industry. These are observable leading indicators rather than forward guidance. The auction data path to YES resolution remains non-trivial — Ritchie Bros data can be more volatile than index averages, and a weak spring demand season or tariff escalation could produce auction-specific price dislocations. South America softening does not directly affect US used pricing but signals global demand weakness that could eventually feed into US commodity price expectations. Keeping slightly higher than Opus 2 to reflect residual tail risks. The prior 0.22 overstated the downside; the post-Q1 setup is clearly more stabilized.

The Q1 FY2026 update fundamentally changes the trajectory assessment. Previously, the negative case rested on -4% sequential momentum continuing and potentially accelerating. Q1 data directly contradicts this: used equipment is clearing faster, not slower. The trade ladder 'freeing up' means used inventory is being absorbed into end users, removing the supply overhang that was driving price pressure. For a 10% decline to occur from February 2026 levels, you would now need: (1) the accelerated clearing trend to reverse, (2) a new demand shock, and (3) farm liquidity to deteriorate despite the $12B Bridge Assistance Program. That's three simultaneous condition reversals with no identified catalyst. The most likely scenario is prices stabilize or show modest improvement through the spring buying season. Probability 0.13.

The February 2026 baseline is itself a critical anchor. If used equipment was already clearing at accelerated pace by February and order books were extending, then February 2026 prices likely already reflect stabilization or slight improvement from November 2025 lows. The August 2026 resolution date falls in mid-summer after spring planting — historically the strongest demand period. For prices to be 10% below February by August, they would need to fall through the entire spring demand season. The resolved sibling market (precision ag adoption — YES) confirms that DE's technology adoption narrative is holding, which supports equipment value maintenance. The only credible path to YES is a catastrophic demand event (severe drought, commodity price collapse, or tariff escalation to trade war). None of these appear imminent in current macro data. Probability 0.11.

Balancing the strong Q1 improvements against residual structural risks. The 100-174hp subcategory was already down 20% from peak as of Q4 FY2025 — a further 10% from February would put it at ~28% below peak, approaching levels that stress farmers who purchased at peak values. However, the EOP beating industry performance suggests this subcategory is also being absorbed. Pool fund programs continuing means DE is actively subsidizing used price support. The prior 0.22 assumed the -4% quarterly momentum would persist; Q1 data suggests that momentum is dissipating. Remaining uncertainty is primarily around tariff trajectory and whether spring demand meets current elevated order bank expectations. If C&F order bank up 50% converts to actual deliveries, used absorption accelerates further. Probability 0.14 — residual tail for exogenous shock scenarios.

Q1 FY2026 data is clearly supportive of price stabilization. Used equipment clearing accelerating, trade ladder freeing up, EOP better than industry, order books extending into Q4. The $12B Farmer Bridge Assistance Program directly supports farmer liquidity. A 10% additional decline from February levels is a high bar that was already unlikely pre-Q1; post-Q1 it is even less likely. Residual risk is exogenous shock (tariff escalation, crop failure). Base case is stabilization.

Order banks up 50% for C&F, highest since May 2024. Tractor order books extending into Q4. SAT guidance raised 5pts. These are not narratives — they are observable demand indicators. A 10% used price decline requires demand deterioration; current data shows demand improving. Pool funds continuing further backstops any residual used price softness. Probability 0.12 — primarily tail risk.

Slightly higher than haiku peers to reflect that South America softening and remaining tariff uncertainty are not zero-probability risks. US used pricing is primarily a domestic market function, but global ag demand weakness does affect commodity prices which in turn affect farmer purchasing capacity. The resolution criteria includes auction data which can be volatile. However, these factors are secondary to the dominant Q1 signal: used equipment is clearing faster, not slower, and the supply-demand balance is improving. Prior 0.22 overstated downside; 0.15 captures the residual tail risk without overcorrecting.