As Congress debates a new bill that includes stimulus measures for farmers, I thought it would be timely to share a chart from my recent analysis of $DE (Deere). The chart breaks down tractor sales into four distinct categories. To better understand industry dynamics, I’ve converted all units into a “Compact” equivalent index (referring to 40-100 HP machines).

What stands out in the chart is the significant impact government policies can have on this industry—sometimes even distorting sector activity. Notice the sharp rise in tractor sales in the early 2000s, coinciding with the introduction of the “ethanol mandate.” Back in the late 1990s, less than 5% of the corn crop was used for ethanol production (a very inefficient process, when compared with ethanol produced with sugarcane). By 2015, that figure had climbed to nearly 40%. This shift contributed to a substantial bubble in agricultural commodities during that period.

More recently, you’ll see another notable spike in sales, which is only now beginning to subside. Among the broad pandemic-era stimulus efforts was a direct cash payment to farmers. Ironically, agricultural activity—which doesn’t require close contact—was not significantly disrupted. Yet, the result was another artificial boost in tractor sales, disproportionately benefiting companies like $DE.

Let’s see what new distortions might emerge as the agricultural lobby weighs in on the current bill.