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In a bid to improve efficiency, AGCO Corporation (AGCO - Analyst Report) is spending $20 million on its tractor manufacturing facility in Beauvais, France. The facility will build a new tractor cab production line. Moreover, the facility will also house the new Massey Ferguson International Sales Training Centre.

AGCO has decided to increase its efficiency level and cut down manufacturing costs at its Beauvais facility. The facility produces the most modern tractors and exports more than 70% of the production to countries globally.

The move fits well with AGCO’s long-term commitment to invest on its manufacturing facilities as well as product lines across the globe. The company focuses on innovation, quality and performance of the product lines to improve their efficiencies and provide high-tech solutions to the farmers.

Earlier, the company announced the $220 million multi-year investment plan at the Marktoberdorf plant in Germany. It produces Fendt tractors and CVT transmissions at the facility.

AGCO is spending on the Marktoberdorf facility to improve the production capacity and efficiency. In addition, the company intends to lower the fuel consumption by utilizing more efficient AGCO engines in its equipment. The company, in 2011, produced more than half of all tractors that were equipped with AGCO engines.

Recently, AGCO introduced Tier 4 Final/Stage IV engine emissions strategy for its POWER diesel engines. Tier 4 Final/Stage IV will provide farmers with an efficient technology to reduce nitrogen oxide (NOx) and particulate matter (PM) emission from diesel exhaust. With the introduction of Tier 4 Final engines, customers will get just what modern agriculture requires – emission and cost efficiency as well as reliable performance.

AGCO is investing heavily on its product line to meet the growing demand for agricultural products globally. Moreover, its decision to spend on facilities outside the U.S. will benefit the company. This is because part of the U.S. agriculture market has been hard hit by drought. Accordingly, the U.S. Department of Agriculture has lowered its forecast for the nation's drought-damaged corn crop.

The U.S. Department of Agriculture has reduced the estimate of corn production for the 2012-13 season to figures that represent the lowest production since 2006. Moreover, according to the report, average yield per acre is predicted at its lowest point since 1995.

AGCO retains a short-term Zacks #2 Rank (Buy). We have a long term Outperform recommendation on the stock.

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