AGCO Innovating Through Downturn

Farm equipment manufacturers are experiencing a significant sales downturn. Low grain prices and high interest rates are two important contributors. CNH Industrial (Case IH and New Holland), John Deere and AGCO (Fendt, Massey Ferguson, Valtra, Gleaner, PTx) are among manufacturers that have reduced their workforce and realigned production to match demand.

DTN/Progressive Farmer caught up with Eric Hansotia, chairman, president and CEO of AGCO, at the Farm Progress Show in Iowa. We talked about the industry, about FarmerCore, AGCO's digitally based approach to providing customer service, and AGCO's $2 billion deal this past April with Trimble. That transaction formed AGCO's new technology arm, PTx (includes PTx Trimble and Precision Planting), that already is delivering automated and autonomous retrofit technologies for farm equipment brands sold in North America.

AGCO is projecting net sales for 2024 (including the positive impact of PTx) will be about $12.4 billion, compared to net sales of $14.4 billion in 2023.

Hansotia is convinced that after two or three years of good prices, farm balance sheets remain strong in 2024, as are land values. USDA supports that, reporting in August that cropland prices rose 4.7% over 2023.

"Farmers are a bit more upbeat than I expected," Hansotia said at the beginning of our interview. "All of them are trying to figure out how to be a little bit more productive and more profitable."

But that is not to say there is no stress in the farming countryside, Hansotia said. "When it goes from great to just OK that fast, it doesn't feel OK (to the farmer)."

Here is more from our conversation. It has been edited for clarity.

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DTN/Progressive Farmer: How is AGCO navigating a difficult market for agricultural machinery?

Eric Hansotia: Farmers are purchasing less, especially new equipment. We're cutting our production schedules to make sure we are building only what the market is demanding; we're taking costs out of our company.... (We believe) retrofits are an option in this market. Instead of buying a new planter, farmers can (add) new technologies to their existing machines.

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DTN/PF: You've said here today the best is yet to come. What do you mean by that?

Hansotia: Practically my whole (career) has been working at this intersection of understanding farmer problems and then bringing to them the innovations that will solve their (problems). I am convinced the next decade is going to be the most innovative decade in the history of agriculture. We are betting big in trying to solve the hardest farming problems, making it easier (for farmers) to do a better job, manage their inputs better, get better yields. Farmers are under a lot of pressure, and we think the way to solve it is with innovation. We think we can deliver differentiated results by innovating throughout the entire crop cycle. And that's what we mean by solutions for every season, not just planting, but the application phase where you're applying fertilizer, chemicals to control pests or herbicides, harvesting the crop, managing the water on your land, planning for the next year by sampling the soil. All of these are solutions that we bring throughout the crop cycle that no one has in the portfolio that we do.

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DTN/PF: Let's pivot to PTx, the result of AGCO's more-than-$2-billion deal with Trimble less than six months ago. How is this new technology arm developing?

Hansotia: It's the two big powerful brands in the marketplace (serving retrofit demand) -- Precision Planting and Trimble coming together into one team called PTx. PTx is Precision, Technology multiplied. The whole message is that we're here to serve every single farmer, regardless of what equipment they have. We're going to help you upgrade that equipment with new capabilities, new technologies to make it more efficient (and) more precise in managing inputs, growing higher yields. For example, we've had WeedSeeker, WeedSeeker 2, and now you're going to see the latest evolution with scouting, with the Symphony portfolio of products that we're bringing with spraying, reducing waste, saving time, bringing up to 4% in improvement to the farmer. And then, in the harvesting phase, helping us see how we can automate, reducing losses, automating operations with that grain cart, and improving the net farm income by 5%.

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DTN/PF: As you say, AGCO Fendt is bringing an autonomous grain cart to the market in 2025. Would you talk about that?

Hansotia: (It's) our first application of autonomy. We're retrofitting two brands of tractors -- Fendt and John Deere -- and we will be retrofitting more in the future. That same technology, its sensors and intelligence, can (be used) in other autonomy applications. Tillage will be next and more after that.

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DTN/PF: Regarding the autonomous grain cart solution, it will not yet autonomously unload the grain cart at the semitruck or other conveyance taking grain from the field to the bin.

Hansotia: This version of the system doesn't (unload autonomously). Typically, you have a semi-driver. The semi-driver will get into the tractor and unload. He will drive the semi away, and the tractor will autonomously go back (to the field). But this is a step in the value chain that we can automate in the next version.

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DTN/PF: AGCO is displaying a service truck here representing one piece, the service truck piece, of AGCO's FarmerCore strategy. Will you talk about it?

Hansotia: We have a distribution strategy called "FarmerCore" where the dealership comes to the customer. Through mobile trucks, we are doing maintenance and repair right on the farm -- and serving the entire farm's (equipment line).

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DTN/PF: Explain the strategy.

Hansotia: This all starts with the farmer. (FarmerCore) is a more convenient way to serve the farmer, and it's the way they want to be served. It is like people going to the mall. That has diminished. But online (retail) services are increasing. Why not do that in farming, too? We've built a suite of digital tools. You can do research online. Order online. Get your parts online. Get financing online. The digital tools are the key ingredient. On-farm service is (performed) by our very capable mobile trucks and technicians. We find that we can do all the work on the farm that customers would typically have to have done in the dealership. We can also service other brands of equipment. So, we're servicing the farm, not only the machine.

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DTN/PF: Through AGCO's corporate-owned dealership, Ag Revolution, you are experimenting with same-day parts delivery. How is that going?

Hansotia: It's our new approach to parts delivery, same day, even sometimes in a couple of hours. The notion is this: When it's planting time, when it's spraying time, when harvest needs to be done, every minute is critical. If a machine needs a part, we need to get that part to the farmer fast. We're continuing to break down paradigms. Whether it's mobile versus brick-and-mortar, delivering parts in hours ... we're trying to be the innovation leader serving customers in a differentiated way.

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DTN/PF: Parts by drone?

Hansotia: Certainly could happen.

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DTN/PF: AGCO is adding to its North American Fendt tractor line with the Fendt 600 Vario, a tractor sold currently in Europe. Explain the significance of the addition.

Hansotia: A few years back, the Fendt brand was a tractor focused predominately in Europe. That tractor design fit well for the row spacings in Europe but not North America. We have changed that. We have fundamentally redesigned the (Fendt) tractor. It fits well in Europe, but (Fendt) also fits perfectly well in North America. Model by model, we've been designing a global version of Fendt. Now, we have (in North America) a full line of Fendt tractors, the IDEAL combine is a Fendt combine, the Momentum planter and the (Rogator 900) sprayer. In all, it is a full cropping solution. Each one is a top-performing product for customers demanding the best of the best.

Dan Miller can be reached at dan.miller@dtn.com

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