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Machinery: Biofuels – Why We Don't Worry About the 'Stronger for Longer' Ag Cycle
Jefferies published a report exploring cycle support for the machinery space stemming from biofuels, a key component of our “stronger for longer” view of the ag cycle. The potential growth in ethanol, renewable diesel and sustainable aviation fuel could boost demand for corn and soybeans by ~10% and ~40%, respectively. Specifically, Jefferies estimates biofuels could support an increase of ~14 million harvested acres for corn and ~100 million for soybeans. While shares of DE and AGCO continue to be strongly impacted by cycle assumptions, as valuation and consensus estimates reflect peak cycle conditions in 2023, multiples can revert to cycle averages and growth expectations can increase in 2024 and 2025. Jefferies believes this could drive substantial upside for DE and AGCO.
— Steve Volkmann, Machinery