Bernstein: Recovery Scenarios Broaden for Agricultural Equipment Sector

The industry debate for agricultural equipment manufacturers is shifting beyond a prolonged downturn as recovery scenarios broaden, according to analysts at Bernstein. Following meetings with major producers at the Farm Progress Show, the firm noted a significant change in sentiment, particularly in North America.

Improving Market Fundamentals

The improved outlook in North America is partly driven by corn prices, which now stand around $5 per bushel, compared to breakeven costs in the high $4 range for rented land, Bernstein reported. Analysts also noted that scenarios of $6 to $7 per bushel are now entering discussions.

Several factors are fueling this optimism:

• Lower-than-expected crop yields due to drought pressure
• Increased soybean purchases by China
• Potential for growth in biofuel demand
• An aging equipment fleet requiring replacement

Elsewhere, the outlook in Europe remains largely unchanged, though uncertainty around the 2028 CAP reform could spur pre-buy activity in 2027, the note said. The South American market remains weak, despite the release of FINAME funding in July.

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Distinct Paths for Industry Leaders

Bernstein highlighted that the major equipment producers are positioning themselves with distinct strategies for the next cycle.

Deere & Company (DE) is focusing on its precision agriculture ecosystem, evolving its offerings into an integrated farm operating system. The company recently debuted its JD AI assistant and expanded its See & Spray technology, which is now utilized across 4.5 million acres.

Agco (AGCO) is positioned as a potential market share gainer, according to the analysts. The company reiterated its goal to double its North American market share to approximately 20% over five years, highlighting recent year-over-year gains of 200 basis points overall and 300 basis points in large tractors.

CNH Industrial (CNH) was characterized by Bernstein as the "self-help story" of the upcoming cycle. Management is targeting 50 to 70 basis points of year-over-year EBIT margin growth in 2027 through internal operational improvements, including supply chain optimization and dealer rationalization.