In June 2021, Holland-based CNH Industrial NV (CNH), a major manufacturer of tractors and farm equipment and construction machinery, announced its plans to acquire US-based Raven Industries Inc., a key player in the Ag-Tech industry, for a sum of $2.1 billion. The acquisition is expected to position the company to take on major competitor Deere and Company in the precision agriculture technologies space.
They don’t make ‘em like they used to
Agricultural equipment manufacturing has changed rapidly over the past 20 years, evolving from standard tractors to equipment capable of leveraging global positioning satellites and the internet to automate plowing, harvesting and other field work. The efficiency gains of automating farm equipment are unparalleled; however, the high technology now used in tractor and equipment manufacturing has greatly increased their cost to farmers.
Moreover, the advances have outpaced most farmers’ abilities to diagnose and repair their own farm equipment without an understanding of complex software and computer code required to repair such advanced equipment. Furthermore, skyrocketing steel prices have increased the cost of conventional equipment in tandem.
This sounds familiar…
While farmers once had an intimate knowledge of how their equipment worked, they have become disjointed from the process due to otherwise helpful technological advancement. At the center of this is the right to repair movement.
The movement has been a significant hurdle for major manufacturer Deere and Company, with farmers in 20 states pushing for right to repair legislation. This could be a key competitive edge for CNH as they prepare to take on Deere and Company, though in July 2021 President Biden has also asked the Federal Trade Commission to outline rules on the right to repair farming equipment in the United States specifically. As a European company, CNH must currently comply with recently passed right to repair legislation.
The bottom line is that CNH may be more ready and willing to work with these changing constraints, whereas Deere and Company is outspoken against customers altering or modifying copywritten software.
Poor harvest
In an inflationary environment, and in a struggling Agriculture sector, rising operating efficiencies and growing costs of sophisticated tractors and equipment may not serve to benefit farmers. Rising machinery prices have constrained affordability for farmers. Concurrently, the COVID-19 (coronavirus) pandemic has caused additional issues within the industry. While consumer demand at retail chains surged, processors raised selling prices.
Simultaneously, processors bought low priced commodities due to the fact that reduced processing capacity amid the pandemic caused agricultural commodities to flood the farmgate and push prices down. Furthermore, according to the US Department of Agriculture, government transfer payments now make up the highest share of total farm income than ever recorded, a sign that does not bode well for the purchase of highly expensive equipment. However, when tractor needs meet the dirt, considering the right to repair and affordability, farmers may ask themselves, American- or Dutch-made? High- or low-tech?
