Sleepwalking into the Abyss

From the “if I knew nothing else” department...

Over the past month I’ve been kicking tires on AGCO (AGCO), which makes farm implements and equipment... most of it sold outside of the U.S.

It’s big, it’s boring but what’s going on is nothing short of intriguing....

From Boom to Bust

The setup: Like its peers Deere (DE) and CNH Industrial (DE), AGCO’s earnings took off after Covid, only to accelerate after the Ukrainian war as corn and soybean prices skyrocketed.

Farm income followed, fueling a buying spree among farmers. Flush with cash, they replaced aging equipment, notably tractors and combines.

Like all agricultural booms, however, this one has since gone bust... and where it goes, nobody knows.

Corn and soybean prices have plunged from their 2022 highs, taking the farm economy along with them. That, in turn, has led to a slump in sales of farm equipment, resulting in a glut of dealer inventory...

Therein lies our story...

Sales are Sputtering

Ag-equipment sales are sputtering, and it appea…