By: Rob Wertheimer 

Farm consolidation explains many of the cycle questions and misconceptions we hear from investors. This note uses the once-every five-years ag census data, out late last week, as a platform to explain how the US ag machinery cycle works. There’s an important debate. Ag stocks trade at the highest multiples in machinery. Ag OEMs say sales are at trough, and that farmers want to buy more for replacement. We say sales are at normal levels, and there is too much tractor power on farms, with no need to replace. Both statements are actually true, and we hope that after reading this note investors can judge which narrative they lean towards.

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