In this episode of On the Record we take a look at AGCO's recently introduced Transformational Assessment Process (TAP) for its North American production ag dealers. In the Technology Corner, Michaela Paukner examines how CNH Industrial and John Deere's tech stacks compare. Also in this episode, the latest earnings reports from Deere & Co. and Kubota.


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AGCO Launches Dealer Assessment Process

In April, AGCO introduced a new program designed to help its dealer network grow and evolve. Over the last 10-12 years, AGCO has made significant investments in its product portfolio, technology, manufacturing capabilities and people, and as a result, it is positioned to increase its presence significantly with the North American farm base,” said Bill Hurley, vice president, distribution, Americas. 

AGCO developed a program called the Transformational Assessment Process (TAP) that will allow the OEM to sit down with its production ag dealers to help assess what each dealer needs to promote growth. The OEM will use highly detailed analytics in individual discussions with each dealer to model what it will take to grow each location’s business exponentially. 

In most cases, AGCO said those dealers could double or triple their business.

Hurley said the company is targeting specific geographies in North America, rather than specific dealers. He added that areas with the highest density of production ag dealers — like the central and upper Midwest — are most likely where the process will begin. AGCO’s distribution and account managers will largely lead TAP.5-20-22_Slides_OTR.jpg

The assessments will look at the volumes required; examine whether additional technicians, parts counter people and salespeople are needed; and assess the number of service vehicles required to help dealers achieve growth, he said.     

“This is not as much about AGCO giving them a number,” Hurley said. “It’s being able to sit down with the dealer and ultimately arrive at what this looks like. With our growth ambitions, when you look at those investments, the additional people, those types of things, it’s significant.”

Hurley said TAP will give dealers a transparent picture of what they need to do and where they need to invest to be able to support this level of dealer growth. It will likely take 18-24 months to work through all the assessments, according to Hurley.

Dealers on the Move

This week’s Dealers on the Move include Atlantic Tractor and Hoober Inc.

Soon-to-be 19-store John Deere dealer Atlantic Tractor announced on May 5, 2022, it will be acquiring Smith’s Implements located in Hagerstown, Md., and Mercersburg, Chambersburg and Carlisle, Pa.,  on or about June 6, 2022.

Case IH dealer Hoober Inc. is planning a $3 million expansion project that will include a 22,400 square foot building adjacent to the existing 51,580 square foot facility in Intercourse, Pa.

Technology Corner

Both CNH Industrial and John Deere consider their technology stack, the set of technologies stacked together to build an application, central to their companies’ strategies for growth. Today, we’re comparing the two OEMs’ high-level explanations of their tech stacks.

Deere and CNH have been making acquisitions to support their tech stacks and further their autonomous capabilities.Fig-2--John-Deeres-Tech-Stack-1.png

Deere illustrated its tech stack in its fiscal year 2022 investor presentation. The company has been establishing the foundation of its autonomous capabilities since acquiring guidance manufacturer NavCom and electronic hardware manufacturer Phoenix International in 1999.

Deere moved into autonomy with the purchase of Blue River Technology in 2017. Blue River’s tech powers the Deere autonomous 8R tractor announced at the beginning of this year. Deere also acquired Bear Flag Robotics, a startup that retrofits autonomous driving technology onto existing machines, in 2021.Fig-1--CNH-Industrials-Tech-Stack-1.png

In 2016, CNH introduced an early prototype of autonomous equipment, a cabless Case IH Magnum tractor intended for broad-acre and row-crop farmers.

The company made its major move into autonomy with its acquisition of Raven Industries in 2021. CNH’s chief digital officer of precision technology told investors the acquisition bridged CNH’s “autonomous gap” and added automation capabilities that position CNH to make gains over its competitors.

Looking ahead, CNH intends to build a tech stack that automates all in-field jobs. In February, CNH’s president of agriculture said the company plans to bring a significant amount of autonomy to market over the next 3 years.

Analyst Shane Thomas of Upstream Ag Insights says tech that focuses on agronomy is an area of opportunity for CNH in the future.

“If you look at previous annual reports or investor days, there was more of an emphasis on the physical hardware than the agronomic data itself. This is likely an area for CNH to further partner or acquire, and empower the dealer network as well.”

Deere, meanwhile, has been openly incorporating agronomy at its dealerships for a number of years and making acquisitions to support agronomic-focused equipment like its green-on-green See & Spray Ultimate smart sprayer.

Ag Equipment Intelligence went more in-depth into agronomic technology offerings and opportunities for CNH and Deere in a recent article.

Deere Announces 2Q Results

On May 20, Deere & Co. announced its second quarter results for the period ending May 1, 2022.

5-20-22_Slides_OTR9.jpgDeere reported net income of $2.1 billion for the second quarter compared with net income of $1.8 billion for the same period last year. For the first 6 months of the year, net income attributable to Deere & Co. was $3 billion, flat with the same period last year. 

Net sales and revenues increased 11%, to $13.4 billion, for the second quarter of 2022 and rose 8% to about $23 billion, for 6 months. Net sales were $12 billion for the quarter and $20.6 billion for 6 months.

Production and precision agriculture sales increased for the quarter due to price realization and higher shipment volumes. Operating profit rose primarily due to price realization and higher shipment volumes / sales mix. These items were partially offset by higher production costs, higher research and development and selling, administrative, and general expenses, and impairments related to events in Russia and Ukraine.

Analysts with J.P. Morgan described Deere’s report as a “messy fiscal second quarter.”

Commenting on Deere’s outlook, CEO John C. May said,

“Looking ahead, we believe demand for farm equipment will continue benefiting from positive fundamentals in spite of availability concerns and inflationary pressures affecting our customers’ input costs. The company’s smart industrial strategy and recently announced Leap Ambitions are focused on helping customers manage higher costs and increasingly scarce inputs, while improving their yields, through the use of our integrated technologies.”

Kubota Reports 1Q22 Revenue Up 10%

Kubota recently reported its total first quarter 2022 revenue increased by 10.3% to $4.6 billion.5-20-22_Slides_OTR7.jpg

Domestic revenue dropped 2% year-over-year to $1.2 billion because of decreased revenue in Farm & Industrial Machinery. Overseas revenue rose 15.5% to $3.4 billion because of increased revenue in Kubota’s Farm & Industrial Machinery segment.

Operating profit in the quarter decreased by 14.6% to $510 million mainly due to a rise in material prices and an increase in logistics expenses, despite some positive effects from sales price increases.

In Kubota’s Farm & Industrial Machinery segment, revenue increased by 12.4% to $3.9 billion and accounted for 84.2% of consolidated revenue. Overseas revenue in the Farm & Industrial Machinery segment increased by 15.9% to $3.3 billion due to increased sales of farm equipment and construction machinery.

Revenue from Kubota's tractor sales in North America totaled roughly $730 million in the first quarter of 2022, a 14% increase from $640 million in the same quarter last year.