By Mark Maurer and Bob Tita

Agco for years has been trying to boost its business in the U.S., where it has held the No. 3 spot in essentially a three-company farm-equipment market. But a wave of new tariffs means it will be harder to boost its standing there.

The Duluth, Ga., company doesn't have enough U.S. sales to justify moving more production out of Europe, where it has most of its production and sales, Chief Financial Officer Damon Audia said. And the likely need to raise prices to offset tariff costs could further depress sluggish demand for farm equipment in the U.S., where the company is continuing to invest.

Meanwhile, in Europe, where much of its supply chain and sales are aligned, the company could see a boost by avoiding many tariff costs that its peers Deere & Co. and CNH Industrial face.

Agco, whose brands include Massey Ferguson, Fendt and Valtra, is evaluating whether to shift its supply sources, in instances where it has more than one distinct source for a particular component, Audia said. That could mean moving from suppliers in Europe to ones in the U.S., or from Western Europe to Eastern Europe. The company is also looking to push its suppliers to be more efficient with their operations to limit the tariff cost they pass onto Agco, Audia said.

Those moves won't eliminate tariff costs, making price increases necessary, Audia said. "All of us are looking at these costs trying to figure out how to keep it low for the farmers," he said. "But ultimately, these are things that we're going to have to try to pass through in some capacity over time."

The company might spread out price increases across its brands, for example charging more for planters and sprayers made in the U.S. so it wouldn't have to raise prices as much on tractors from Germany, Audia said, adding no decision has been made.

Agco makes tractors, combines, retrofit kits and replacement parts. Agco has always imported a lot of its equipment and components from its overseas plants, which are mostly in Europe. About 35% of Agco's $2.85 billion in North American sales in 2024 came from imported products, largely from Europe, Audia said.

Europe also represented about 60% of the company's $11.66 billion revenue in 2024. Agco is most exposed to U.S. tariffs on European Union goods, Audia said.

"This is a period of incredible uncertainty for Agco and its customers," said Kristen Owen, a managing director at Oppenheimer & Co. "Agco, being the smaller player in the North American region, is not likely to be the first to lead with that price increase but could be fast followers."

Agco makes products in Brazil that it also makes in China and France, but in Brazil it is facing a 50% U.S. levy on imports. "If I know that those 50% tariffs are going to be in place for the next three years, I will re-evaluate the source of that product," Audia said.

Agco shares are up about 26% over the last 12 months on the New York Stock Exchange. The company booked $314.8 million in net income for the latest quarter ended June 30, compared with a net loss of $367.1 million a year earlier, in part driven by growing interest in precision agriculture and sustainable technologies.

Agco would migrate more production to the U.S. if it reaches "critical mass" of its market share there, potentially through the higher sales of German tractor brand Fendt, Audia said.

"Over time, as our market share in combines and some larger tractors grows, that would be something that we would look at, and then likely expand [existing factories in states such as Kansas and Minnesota]," Audia said.

Agco said North America remains a key growth market. The company expanded the Fendt product line in North America in 2018. North American Fendt sales have more than doubled since 2020, but the market share remains low. Agco's North American sales fell by 24% to $2.85 billion in 2024.

Agco's U.S. revenue growth could be weakened by price increases made in response to tariffs, however. Tariff costs make it harder for Agco to expand its sales in the U.S., where it has a small market share, compared with its market share in Europe and Brazil, said Stephen Volkmann, a managing director at Jefferies.

"If what we really want as a country is more U.S. manufacturing, then making it harder for people to do that seems counterproductive," Volkmann said.

Write to Mark Maurer at mark.maurer@wsj.com and Bob Tita at robert.tita@wsj.com

(END) Dow Jones Newswires

August 26, 2025 06:00 ET (10:00 GMT)

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