Is AGCO gaining market share in North America? What’s the status of Section 179 depreciation allowance for this year and beyond? Is there any good news for ag machinery sales going into 2015?

Investment analysts came away with some interesting notes on these topics and others while meeting with executives from the four major farm equipment manufacturers during the Farm Progress Show in Boone, Iowa on August 26-28.

Mircea (Mig) Dobre, analyst for RW Baird, offered these insights in an August 28 note to investors:

“AGCO insisted that it was taking share in the North American market as its dealers reacted quicker to the weakness in the used equipment market, allowing AGCO dealers to continue to take trade-ins, unlike dealers of competitor OEMs which have refused trade-ins due to high used inventory levels. AGCO also cited lack of ‘rolling’ used equipment for new equipment annually during periods of strong crop prices contributing to the relative outperformance vs. other ag OEMs.

“At the New Holland booth, there was a meaningful disparity in financing availability between the smaller, livestock equipment and the larger, crop equipment. While the large equipment generally had financing available for ~36 months, the smaller equipment generally had longer financing options (~60 months). CNH management attributed this difference to OEMs generally chasing the livestock market as it has been a source of relative strength in ag.

“Both Deere and AGCO are expecting a renewal of Section 179 after the mid-term elections in November. Deere expects a 2 year extension through 2015 (one year retroactive) as the most likely scenario, with some potential for a permanent extension. AGCO expects a renewal to boost demand late in the year, while CNH noted that a renewal would largely benefit the used equipment market. Both Deere and CNH are not modeling an extension in their outlook assumptions.”

Steven Fisher, UBS analyst, provided the following insights for investors following his time at the Farm Progress Show:

“Overall the mood was relatively downbeat, as the reality has generally set in that ag equipment demand is declining after the strong upcycle over the last few years. Large ag is consistently expected to be disproportionately weaker relative to small equipment, as livestock demand remains healthy. However, the market for row-crop tractors is poised to become even more competitive next year as Kubota introduces higher horsepower models, while at the same time, price competition on smaller equipment may intensify as manufacturers of large equipment shift focus to smaller equipment.

“The Deere meeting highlighted hay tech, while setting expectations low for 2015. Deere noted that ag sales are likely to be down next year. Early order programs for combines have reverted to a more normal August 1 start, compared to 2013's June start. Deere indicated that their forecasts are expected to exclude potential benefits from Section 179, regardless of whether it is expected to be extended. The focus on hay is likely due to a combination of strength in livestock & weakness in grain.

“AGCO highlighted the bright spots of livestock driven equipment demand, commercial spraying and storage. While there is not enough time to build significant new storage in North America for this coming harvest, AGCO expects orders for the following season will be healthy. On equipment overall, AGCO acknowledged some pricing pressure, and reiterated that order book visibility for Q4 is limited. AGCO will likely consider capacity reductions for 2015 as part of its planning efforts, to be conducted in the near term.”