Trade-related concerns, along with higher fuel costs and increased crop output forecasts, have pressured farm equipment stocks in 2019. As a result, the group has underperformed the S&P 500 by about 7% so far this year. Despite these challenges, the U.S. Department of Agriculture (USDA) still projects net farm income to grow by 4.8% in 2019.
Stocks within the industry appear well positioned to keep this momentum rolling into 2020 as Washington and Beijing continue to iron out a three-phase trade deal. As part of an initial agreement, China is prepared to purchase $20 billion of agricultural products over 12 months in exchange for punitive tariff removals and increase that amount in future rounds of talks, Bloomberg reported in October. Furthermore, the