Original equipment manufacturer (OEM) AGCO continues to respond to softness in the large agricultural machinery market by reducing dealer inventories and tapping into tech opportunities as it positions itself for growth on the other side of the down-cycle, executives shared during Wells Fargo’s 16th Annual Industrials & Materials Conference on June 9.
The combination of lower commodity prices and high input costs continues to impac large ag machinery purchases, AGCO’s CFO and Senior VP Damon Audia explained. The maker of Fendt and Massey Ferguson machines, AGCO is “sitting at around 85% of mid-cycle,” having been around 109% of mid-cycle a couple of years ago, he added.
The OEM is “seeing higher anxiety from farmers around the world today versus three months ago, given the [Iran] war,” Audia explained. Some North American farmers got ahead of fertilizer volatility in the spring, but growers are facing the possibility of higher prices for next year’s crop, he added.
“When you look at where we’re sitting with diesel fuel cost increases [and] the fertilizer cost increases that farmers are potentially dealing with, it’s created a tremendous amount of uncertainty. And if you just look at some of the health indexes or the barometers — here in the U.S. we look at that Purdue Ag Barometer — and you’ve seen that tick down over the last couple months, so we know there’s a lot of anxiety,” he elaborated.
However, several conditions could come together that provide the groundwork for a rebound in ag machinery sales, Audia noted. A combination of crop rotations and less fertilizer applications could result in less yields in 2027, which could spike corn future prices, providing tailwinds for farmers going into that year’s harvest, he added.
“There’s lots of reasons to think that the industry could be in a much better position next year as we look at our production. If that industry starts to pick up or even stays flat, we’re going to see higher levels of production either way because today we’re underproducing relative to retail demand,” Audia said.
He added, “We’re still trying to work our dealer inventory down. We’re sitting at around seven months right now. We want to get that down to six, but we were up in the nines a couple of quarters ago, and so we’ve been underproducing that retail demand, trying to bring that dealer inventory to the right level. So, as that sort of stabilizes here over the next quarter or two — even if that industry doesn’t pick up — you’re still going to see a higher level of production flowing through our factories because we’ll be producing more in line with retail.”
AGCO’s precision ag play with PTx
While cautious on making large ag machinery purchases, farmers are still investing in ways to boost productivity often through precision agriculture and digital farming capabilities, including AGCO’s precision agriculture service PTx, which it acquired a majority stake through a joint venture in 2024.
AGCO generated $860 million in PTx revenues in fiscal year 2025 and expects around $860-900 this year, across its three main channels by integrating the technology into its equipment directly, selling it to other OEMs, or offering it as a retrofit product through third-party vendors, Audia said.
“Our whole PTX portfolio is targeted at retrofit first, and it’s allowing those farmers to keep their old traditional iron, but upgrade it, make it smarter, make it more productive by bolting on these PTX pieces of equipment that generally yield a one-year ─ maximum two-year ─ payback for them," Audia said.
He added, “If they’re looking to reduce their fertilizer, there’s options on their planters. You look at the targeted spraying, again reducing their herbicide use, because now you’re bolting on our vision system and our nozzles to your existing sprayer. You don’t need to buy a brand-new sprayer."
