Jefferies-Machinery Ag Update：Record Com Crop and Elevated Ending Stocks...-20251007

Farmer sentiment has deteriorated as lower crop prices, higher ending stocks,and elevated input costs pressure farm income outlooks. While OEMs have worked to control inventory, we now see the large ag destock risks extending into 2026. Equipment volumes should bottom in the next few quarters, but we believe weak farm fundamentals likely elongates the trough even with increased gov't support. We trim our 2026 estimates for AGCO and DE ~5% each.

Where Are We in the Downturn? History Suggests Trough Is Near. Over the past five cycles, four lasted ~15 months with the most recent ~45 months long, albeit starting from a much higher base (note Here). The current downturn at ~24 months implies the trough could be this year,consistent with OEM commentary but weak farm fundamentals risk an elongated recovery. For new equipment, R3M SAAR HHP unit volumes are down ~43% from the prior peak vs. average trough down ~46%. New inventory-to-sales peaked last November (Ex. 15) and used inventory sits at ~pre- COVID levels (Ex. 16). Our used equipment webscrapes suggest that used pricing has come down ~10% since the peak, though remains largely stable.