Farm Equipment Is Emerging From a Slump. Regulators Could Complicate the Comeback
Farm machinery is one of the most concentrated corners of US industry. A handful of manufacturers control tractors, combines, and the dealer networks that service them. This week, federal regulators opened a broad inquiry into how that market actually works.
What regulators are asking for
The Federal Trade Commission and the US Department of Agriculture issued a joint request for information covering equipment manufacturing and distribution, including potential anticompetitive conduct.
The agencies want business models, contracts, penalties, and documented cases of retaliation against those who bypass authorized dealers. Comments are open until Dec. 7.
Nothing in the filing alleges wrongdoing by any company. The agencies said responses could shape future enforcement and regulatory priorities, making this a starting point rather than a verdict.
The USDA says it keeps hearing the same complaint from growers.
"They shouldn't have to overcome artificial service barriers to keep their farm machinery running."
Andrew Ferguson, Federal Trade Commission
Who sits in the crosshairs
Deere carries the most obvious exposure. It settled a separate FTC antitrust case in July over repair restrictions, agreeing to give farmers and independent shops access to repair tools and software matching what authorized dealers get.
AGCO and CNH Industrial are the other two pure-play names caught in the sweep. Caterpillar got pulled in too, despite construction and power being its larger businesses.
The FTC framed the inquiry as part of a wider agricultural push. That work includes a settlement with Corteva over alleged anticompetitive conduct in pesticides markets, joined by twelve states.
The timing is political. The Trump administration has been moving on farm costs ahead of the midterms, including a temporary loosening of restrictions on tax-free, off-road diesel.
The cycle was finally turning
Demand has been ugly. AGCO said in July that North American demand for large agricultural equipment would decline about 15% this year, forcing manufacturers to cut production and clear dealer inventories.
The recovery signals arrived recently. Deere flagged an increase in orders for next year in August, with its North American planter and sprayer early order program up mid-single digit.
Crop prices are helping. Corn has moved above $5.00 per bushel from roughly $4.00 when that order program opened, according to Truist Securities.
Truist argues the farm equipment debate has shifted from whether the group can clear the trough to how big the recovery gets. The firm maintains Buy ratings on both Deere and Caterpillar.
How to think about exposure
Right-to-repair rules and dealer contracts are not side issues for these companies. Parts and service revenue, dealer exclusivity, and software locks feed manufacturer margins, and regulators named all three as areas of interest.
Valuations had already priced in a bottom before the inquiry landed, leaving less cushion for a multi-year regulatory process.
Caterpillar offers the most diversified route into the machinery trade. Truist points to power demand running ahead of expectations, with the company weighing facility repurposing to expand backup-power capacity.
The firm also sees underappreciated upside from oil and gas as an incremental margin driver inside Caterpillar's Power & Energy segment, plus opportunity in mining equipment off a depressed base. Construction demand remains strong.
For pure agricultural exposure, Deere remains the most debated name on valuation. Truist believes current earnings sit below trough levels and that operating leverage is underappreciated.
The practical question is sequencing. The equipment cycle appears to be recovering on order data, while the regulatory process runs on its own clock through Dec. 7 and beyond.
Anyone sizing a position in the group is now underwriting two separate outcomes at once.
