MEAD, Colo.—Warren McDonald stood in the Platinum Lounge at Ritchie Bros. Auctioneers on Friday and shrugged as he watched the Caterpillar road grader he brought sell for $162,500.
“For the day, I don’t think it’s bad, but for the year, it’s horrible,” said McDonald, wearing a white cowboy hat and a Carhartt jacket. He raises cattle on 28,000 acres near Trinidad and supplements his income by leasing some of his land to oil and gas companies and doing contracting work for them.
McDonald has come to Ritchie Bros. auctions for years and was there Friday to sell road graders, excavators and bulldozers.
“This equipment has dropped, in my perspective, 25 to 30 percent in three months,” he said. “I could’ve sold these ‘dozers for over $400,000. I had a chance to, but I didn’t.”
Seventy-five percent of Ritchie Bros.’ income comes from straight commission on each item auctioned, according to Steve Simpson, senior vice president for the company’s western U.S. group, which includes Colorado. The other 25 percent comes from clients like McDonald: They turn their items for sale over to Ritchie Bros., which then guarantees the client a minimum price on the items.
That baseline guarantee was $1.4 million for McDonald, he said, adding that a few months ago, the minimum would have been $2 million.
“The reason I’m selling is I don’t think it’s going to get any better in four to six months,” McDonald said. “It could easily be worse.”
Friday’s was the company’s eighth auction at its Mead facility, to which it moved in 2005. It drew the second-largest crowd that Ritchie Bros. has seen: 1,890 bidders and 537 buyers, behind only the company’s grand opening crowd of 3,000, according to Steve Merich, regional manager for Ritchie Bros.
“It’s the end of the year, so I think a lot of people got some cash and they’d rather buy something than give it to Uncle Sam,” Simpson said.
However, while the crowds were bigger than usual, the closing bids weren’t. The auction brought in a total of $13 million for 1,214 lots, Merich said. The company auctioned off about 1,800 lots during a June auction in Mead for more than $20 million.
Even during a recession, the buying and selling of heavy industrial equipment never stops, Simpson said. But the economy’s downturn has changed things for both buyers and sellers, he said.
“The prices have come down, but they’ve come down to where they’re realistic,” Simpson said. “Before, when the economy was going crazy, the prices were just insane. They weren’t sustainable.”
For McDonald, selling was a way to clear some debt off his books. The unstable stock market has pounded the oil and gas industry recently, he said. And his cattle operations have taken a beating, too.
“Cattle has lost a third of its value in the last three months,” McDonald said. “A calf used to sell for $1.24 (a pound). Now they’re going for 87, 88 cents.”
Those are prices he hasn’t seen since the mid-1980s, he said.
David Menegattis, a rancher who owns property south of Walsenburg, was at the auction for the opposite reason.
“It’s a buyer’s market, not a seller’s,” he said. “People are here looking for the deal.”
