Despite weak commodity prices marring the near term outlook of the Zacks Manufacturing – Farm Equipment industry, it will benefit from increased agricultural equipment demand to meet the food requirements of a growing population. Deere & Company DE, Kubota KUBTY and Lindsay LNN are well-poised to capitalize on this demand, backed by their efforts to grow their products.
Focusing on revolutionizing agriculture with technology to make farming automated, easy to use and more precise across the production process is expected to be another major catalyst. Deere, CNH Industrial CNH and Kubota are, thus, investing heavily in upping their technology game.
About the Industry
The Zacks Manufacturing – Farm Equipment industry comprises companies that manufacture agricultural equipment. These equipment include tractors, combines, cotton pickers and harvesting equipment; tillage, seeding and application equipment, consisting of sprayers, nutrient management and soil preparation machinery; and hay and forage equipment, comprising self-propelled forage harvesters and attachments, balers and mowers. Some companies in the industry produce turf and utility equipment, consisting of riding lawn equipment and walk-behind mowers, golf course equipment, utility vehicles, commercial mowing equipment, and garden tillers and snow throwers. Some participants manufacture irrigation equipment. Deere, CNH Industrial and Kubota are presently the top three global manufacturers of agricultural equipment (in that order).
Trends Shaping the Future of the Manufacturing – Farm Equipment Industry
Low Commodity Prices Act as a Woe: The U.S. Department of Agriculture (USDA) forecasts a 29.5% year-over-year increase in net farm income to $180.1 billion for 2025, indicating an increase of 29.5% from that reported in 2024. This projects an improved scenario, considering the 19% and 6% decline in net farm income in 2023 and 2024, respectively. However, the increase in net farm income this year will be mainly due to the $33.1-billion year-over-year increase in direct government farm payments to $42.4 billion. Meanwhile total crop receipts are forecast to decrease 2.3% from the 2024 level due to lower soybeans and corn prices.
Demand for Food to Fuel the Industry: Despite the ongoing volatility in commodity prices and lower crop receipts, agricultural equipment demand will continue to be supported by increased global demand for food, stemming from population growth and an increasing proportion of the population aspiring for better living standards. In the United States, the agricultural machinery market is forecast to reach $42.05 billion in 2025 and grow to $57.08 billion in 2030, seeing a compound annual growth rate (CAGR) of 6.3%. With farm sizes increasing, there is a greater need for labor, but escalating labor costs are prompting farmers to turn to mechanization. Additionally, subsidies on agricultural machinery purchases are enabling even small-scale farmers to invest in equipment.
