Farm equipment manufacturer AGCO is shifting its model to deliver servicing to farmers on their farms.
As the farm equipment industry navigates continued uncertainty, AGCO’s FarmerCore initiative expansion represents a significant shift in its dealer model to an “Amazon-style” on-farm service approach using mobile fleets, Damon Audia, senior vice president and chief financial officer of AGCO, said Tuesday during a presentation at the 2025 UBS Global Industrials and Transportation Conference in Manalapan, Fla.
The expansion of FarmerCore represent one of several efforts AGCO has made over the past 18 months to weather the storm facing the farm equipment industry, Audia said. Concerns remain as many in the industry face financial declines and fellow farm OEM John Deere expects sales for its production and precision agriculture division to fall between 5% and 10% in 2026, according to the company’s Nov. 26 full-year earnings report.
AGCO dealers can do more than 85% of the work on the farm, he said, which allows them to “service the farm rather than the piece of equipment.”
It is “a real structural shift as to how we’re approaching our distribution, and how our dealers are servicing our farmers, and [we are] seeing a lot of good traction on that,” he said.
AGCO’s shift also enables dealers to use smaller brick-and-mortar sites supported by mobile service trucks and parts depots, lowering costs, expanding service coverage and boosting parts-and-service profitability, Audia said.
“As we start to roll that out in our North and South American dealers, [we’re] seeing good momentum with them as to how the farmers are responding,” he said. “Once you get used to being serviced on the farm, it’s sort of hard to go back to having to bring your equipment into the dealership versus having them come to you.”
Additional operational changes
In addition to the FarmerCore initiative, the company changes include:
- A precision farming technology platform expansion with Trimble;
- The exit from the low-margin grain and protein business;
- A restructuring set to generate $175 million to $200 million in annual savings;
- A new capital allocation strategy that supports share repurchases.
Strong 2025 harvests and weak commodity prices mean AGCO expects to further underproduce in 2026 as it works to reduce dealer inventories and reach its six-month inventory target, especially if industry outlook remains poor, Audia said.
“Our dealer inventories are based on the next 12-month sales,” he said. “If that industry outlook comes down, that will put more pressure on what our dealers’ month of supply looks like.”
AGCO lowered its sales outlook for 2025 to $9.8 billion, down 16.2% compared with 2024, as part of its Oct. 31 third-quarter earnings release. Meanwhile, net farm income is forecast to land at $179.8 billion in 2025, up an inflation-adjusted 37.2% year over year, according to the U.S. Department of Agriculture.
As a result of the operational changes and muted industry outlook, farmer recovery may be as far off as 2027, although AGCO plans to achieve higher mid-cycle margins once industry demand finally recovers, Audia said.
“If commodity prices start to pick up, and [farmers] see more predictability for their income, given the age of the fleet, if they think about the technology of the new equipment versus the older equipment, there’s an inherent desire to upgrade, but if you’re not profitable or your net farm income is fairly limited, that’s giving you reasons to pause,” he said.
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