The agricultural equipment oligopoly
If you want to buy a tractor, a combine, a tiller, a sprayer, a spreader, or most other kinds of agricultural vehicles, you'll find that you can choose between a wide number of brands. But all those brands are essentially owned by three multinational companies that have over the decades bought up rivals in the US and across the world.
John Deere is a $22 billion dollar US-based company whose origins go back to making steel plows in the 1830s. Deere sells both agricultural and construction/forestry equipment. It a thriving credit business for those buying its equipment. Deere also has a sideline in consumer products like lawn mowers and mini-tractors, and another in manufacturing small engines. (It is even going into the business of selling wind turbines.)
In contrast to the other two market leaders, Deere has grown almost exclusively internally, with no major acquisitions in the past five years. It has expanded operations with more global manufacturing plants and also in the area of agricultural and landscape consulting. It also has seen an expansion in sales when it started to sell tractor-mowers through retail (non-dealer) channels. The last deal of note was the 2000 purchase of Finland-based Timberjack, a major maker of forestry equipment.
The second major agricultural equipment company is Dutch-based CNH Global, the #2 ag equipment maker and the #3 construction equipment maker. Farm equipment makes up 70% of its $11.8 billion in sales. The company is 90% owned by Italian automaker Fiat, a company that is itself fighting for its life. It will be interesting to see what this means for CNH's future, though for now it is bringing Fiat badly needed profits.
CNH is the result of the 1999 merger of ag industry giants Case (whose history goes back to the 1830s) and New Holland (started in 1895). Brands and companies subsumed under its name over the years include Braud, Case, Claeys, Fiat, Flexicoil, Ford, International Harvester, New Holland, Steyr.
Like Deere it has a major credit business, and like Deere it has made only a few deals in the last few years:
- In 2002, CNH acquired a 65% interest in Kobelco America, a division of Japanese heavy construction equipment maker Kobelco. It also bought 10% of the parent company, which is mostly owned by Japanese conglomerate Kobe Steel Company.
- In 2002, CNH bought Flexicoil, a Canadian maker of planters and tillage equipment.
AGCO is well behind as the #3 company, but it is acquiring frantically in an attempt to be a contended. It is a $5 billion US-based company, which was started in 1990, when a US investment group bought farm equipment maker Deutz Allis from German company Kloeckner-Humboldt-Deutz AG (KHD). KHD had bought US-based Allis-Chalmers in 1985, and then decided to spin off the whole business five years later. Subsequently in 1997, KHD changed its name to Deutz AG, and is now a specialist in making diesel and gas engines, both for vehicles and power generation.
AGCO is a truly multinational company with 75% of its sales outside of the US. It has continued to expand over the decades, by buying yet other ag equipment vendors, including the US's Massey-Ferguson and Germany's Fendt. AGCO products are now sold under the brands AGCO, Ag-Chem, Challenger, Farmhand, Fendt, Fieldstar, Gleaner, Glencoe, Hesston, LOR*AL, Massey Ferguson, New Idea, Soilteq, Spra-Coupe, Sunflower, Tye, White Planters and Willmar.
One big recent purchase was that of the MT Challenger tractor series from construction equipment giant Caterpillar, as that company exited the ag equipment business. AGCO also recently bought:
- Ag-Chem Equipment Co., Inc., a sprayer company (2001)
- Sunflower Manufacturing Company Inc., a producer of tillage, seeding and specialty harvesting equipment (2002)
- Valtra Corporation, a Finnish tractor and off-road engine manufacturer especially big in Scandinavia (2004)
- Beeline Technologies, a maker of steering systems for tractors (2005)
The reality now is that while there were once dozens of companies selling equipment to the agricultural market, there are now only three. Typically, #3 is far behind the two leaders. As with seeds, fertilizers, and pesticides, world agriculture is dependent on a very tight oligopoly in buying tractors and other machinery.
