Agricultural Machinery Outlook 2026: Market Bottom Approaches, but Recovery Remains Uneven

Following the exceptional boom that began after 2020, the global agricultural machinery sector has experienced a substantial market correction. High inventory levels at dealers, falling revenues across many agricultural businesses and persistently elevated input costs have placed particular pressure on the market for large tractors and harvesting machinery.

Nevertheless, signs are mounting that the cyclical low has either been reached or is approaching. AGCO and CNH both report gradual market stabilization, while cautioning against interpreting the current situation as the start of a conventional upswing. CNH even identifies 2026 as a possible bottom year and anticipates an L-shaped recovery. Initially, this would be driven primarily by replacement demand rather than a broad increase in agricultural investment.

Kubota's assessment also reflects these differences, while demonstrating that the market cannot simply be divided into strong demand for small tractors and weak demand for large ones.

In North America, the 0–40 hp tractor segment remains subdued, with inflation and challenging consumer conditions particularly affecting private buyers. The 40–100 hp category is also experiencing pressure. Meanwhile, demand from livestock customers is holding up comparatively well, and selected medium-sized Kubota tractor models are outperforming the broader market.

Consequently, the economic viability of each application is becoming an increasingly important factor. Livestock operations, replacement investments and machinery essential to productive farming activities may perform significantly better than purchases primarily driven by consumer spending or farm expansion.

Dealer Stock Levels Will Shape the Next Recovery Phase

For suppliers, including foundries, one distinction is particularly important: an increase in agricultural machinery manufacturers' production does not necessarily indicate that demand among farmers has already recovered.

Throughout 2024 and 2025, original equipment manufacturers (OEMs) substantially reduced output to bring elevated dealer inventories back into line with demand. At John Deere, for example, North American stocks of high-horsepower tractors and combine harvesters have already declined considerably from their previous peaks. AGCO and CNH are also continuing to bring their distribution channels back towards normal levels.

For suppliers, the sequence of developments is therefore crucial:

Dealer inventory normalization → OEM production normalization → Recovery in actual end-market demand

The first two stages may already be underway in certain segments, whereas the third remains significantly less certain.

For foundries, this distinction offers an important indication of what may lie ahead. Orders from OEMs and Tier 1 suppliers could stabilize or begin increasing again even before sales of tractors and harvesting machinery show substantial growth.

North America: Approaching the Low Point, but Heavy Machinery Still Struggles

North America remains one of the most difficult markets. AGCO recorded a nine percent decline in tractor retail sales, excluding compact tractors, during the first half of 2026. Higher-horsepower models were particularly affected. For the full year, the company anticipates a contraction of approximately 15 percent in the North American market for large agricultural machinery.

CNH likewise continues to see demand under pressure. However, there are some encouraging developments: inventories of both new and used machinery are returning towards normal levels, equipment fleets are continuing to age, and the previously unusually wide price gap between new and used machines is beginning to narrow.

Farm profitability remains the main obstacle. Weak prices for agricultural commodities continue to coincide with high fuel, fertilizer and transportation costs. Unless this balance improves, a strong new investment cycle is unlikely to emerge in the near term.

For the foundry industry, the implications are clear. A broad recovery in demand for heavy castings used in large tractors and harvesting machinery should not yet be anticipated. Medium-sized machinery and equipment serving livestock and dairy operations may offer opportunities earlier.

Brazil: Demand for Larger Machines Remains Under Pressure

Brazil's agricultural machinery market is also showing mixed developments. According to AGCO, tractor retail sales declined by eleven percent during the first half of 2026. Larger tractors experienced particularly weak demand, while stronger sales of small and medium-sized machines partly offset the downturn.

Brazil remains an important market for agricultural machinery, but the sector is still in a downward phase in 2026. Suppliers should therefore pay close attention to individual machinery categories rather than relying solely on the performance of the overall market.

Europe: A Gradual Stabilization, Not a Strong Upswing

The outlook for Western Europe points to a broadly stable but fragile market environment. Rather than entering a strong growth cycle, the region appears to be moving towards a period of stabilization.

For European foundries, replacement demand could play a particularly important role. Aging machinery fleets eventually require renewal, even when farms are not significantly expanding their production capacity. Europe's recovery may therefore depend more on necessary replacement investments than on agricultural expansion.

India and Asia Offer More Promising Structural Growth

India and selected Asian markets present a considerably more positive picture. While North America and Europe are primarily waiting for cyclical stabilization, these regions continue to benefit from structural growth in machinery volumes.

This development could further alter the regional distribution of activity within the global agricultural machinery industry. In Western markets, demand is increasingly shaped by replacement requirements and inventory normalization. India and parts of Asia, by contrast, offer more favorable conditions for additional machinery sales.

For internationally active foundries supplying housings, transmission, axle, engine, hydraulic and chassis components for agricultural machinery, their regional positioning is therefore likely to become increasingly significant.

Implications for Foundries: One Market, Multiple Cycles

The central message for foundries and other suppliers is that agricultural machinery can no longer be treated as a single, uniform market cycle. Regions, machinery categories and applications are progressing through different stages of the downturn and subsequent stabilization.

The current outlook can be summarized as follows:

• North America: The cyclical low may be approaching, but large machinery remains under pressure. Livestock farming and selected medium-sized categories are showing greater resilience.
• Europe: A fragile stabilization is creating potential opportunities through replacement investment.
• Brazil: The downturn continues, particularly in the larger machinery segments.
• India and parts of Asia: Structural growth offers more attractive long-term prospects for machinery volumes.
• OEM production: Output could start recovering before end-customer demand visibly improves, as the process of reducing dealer inventories comes to an end.

Production discipline among the major OEMs will also be an important factor. John Deere, AGCO, CNH and other manufacturers appear committed to aligning production levels more closely with dealer inventories and actual demand.

If this approach continues during the early stages of recovery, the next cycle could deliver less spectacular growth in unit sales but potentially better economic quality. For suppliers, however, the return to higher production levels may be slower and less synchronized across regions than in previous cycles.

Recovery Will Progress at Different Speeds Across Regions

The global agricultural machinery industry appears to be gradually emerging from a synchronized downturn, but a coordinated recovery has yet to materialize.

For the foundry industry, the message is therefore straightforward: waiting for a single, decisive turning point may not be the most effective approach.

The first opportunities are likely to emerge where several favorable conditions coincide: dealer inventories have returned towards normal levels, replacement demand is necessary, customer groups remain economically stable and regional growth provides additional support. Livestock farming could recover before grain farming, medium-sized machinery before high-horsepower equipment, and India before established Western markets. At the same time, OEM production may begin to rise even while farmers themselves have yet to experience a genuine market recovery.

For foundries, this points towards a recovery that unfolds at different speeds. Companies that assess their customers not only by OEM and region, but also by machinery category, application and end-customer structure, are likely to recognize earlier where demand for cast components is beginning to return.