INDUSTRY INSIDER | May 23, 2024

Farmers Finding Problems With Right-To-Repair Agreement

Original Source: The Gazette
During the 2023 harvest season, one of Jake Lieb’s tractors quit working. A week later, his combine stopped working, too. Both were new — and he was locked out from making any repairs himself because of software restrictions embedded in the machines.

Instead, a technician from John Deere was dispatched to diagnose and repair the problems. While waiting for the technician to come out, Lieb fired up a 20-year-old tractor he hadn’t used for harvesting in years. Crops are vulnerable to the weather, and had he not, Lieb could have lost at least a day of harvest, potentially costing him thousands of dollars.

“Meanwhile,” Lieb said, “we’ve got over a million dollars of equipment in the field, inoperable.”

When the technician from John Deere arrived at his farm near Monticello in central Illinois, it took about 30 minutes to plug in a diagnostic tool, see which sensor was bad, unscrew it, replace it and close everything up in the combine.

“If I knew what sensor was bad in that combine, I could have had it fixed in five minutes,” Lieb said. “But if you don’t have the software, it’s impossible to know what’s wrong.”

For more than a decade, farmers like Lieb haven’t been able to fix their high-tech equipment. Until recently, manufacturer restrictions meant only company-authorized representatives could own and use diagnostic tools, and make fixes when needed.

2023 agreement

But in March 2023, in an attempt to address farmers’ frustrations, the American Farm Bureau Federation signed a memorandum of understanding with John Deere and four other farm equipment manufacturers. The farm bureau called it a “private-sector solution to the right-to-repair issue.”

In the agreement, Deere, Kubota, Case New Holland, AGCO and CLAAS of America promised to give farmers and independent repair shops access to customer diagnostic tools. In exchange, the Farm Bureau agreed not to support any federal or state repair legislation.

When the agreement was first announced, Chad Hart, an economist at Iowa State University, said he sees the memorandum of understanding as a “first step” between the two sides.

“This represents an ongoing negotiation,” Hart told the Associated Press, noting the agreement calls for the two sides to talk every six months. “They expect fully they’re going to have to make adjustments along the way.”

Advocates for repair legislation say that the non-binding agreement and the customer versions of tools provided by the companies fall short of the protections legislation would ensure. These same advocates are supporting bills across the country, including one introduced this year in the Illinois Senate, which went nowhere.

Right-to-repair legislation was introduced in 15 state legislatures this year — including Illinois, Minnesota, Missouri, Michigan and Indiana, but not Iowa. Only Colorado lawmakers approved the measure.

Multiple class-action complaints were filed against Deere, alleging the company has monopolized the repair-service market with onboard computers called engine control units, of which the software and tools necessary to fix are inaccessible to farmers and non-Deere repair shops.

Cost of repairs

The demand for new tractors and combines ebbs and flows, but a consistent source of profit growth for John Deere is the sale of parts and services.

Despite a 19 percent drop in sales of new ag equipment sales from between 2013 and 2019, supply chain disruptions and food system upheaval in 2020, and a monthlong labor strike of 10,000 workers across five states in 2021, Deere’s profits swelled the past three years, totaling a nearly 270 percent increase from 2020, according to the company’s SEC filings.

According to Bloomberg, the sale of parts helped buoy the company’s portfolio — parts sales grew by 22 percent between 2013 to 2019.

While Lieb’s fifth-generation family farm operates on annual tractor trade-ins so his machines stay on a warranty, which includes free parts and services, he’s in the minority. According to the U.S. Department of Agriculture, only 20 percent of farmers in the U.S. regularly buy new machines.

The rest hold on to their equipment for longer periods of time or buy secondhand machines, which come with limited warranties or none at all, making repair restrictions more consequential.

Equipment made before 2014 doesn’t have as much complicated software, and there are more repair workarounds. Still, the costs of repairing older machines add up.

According to the Bureau of Labor Statistics, the cost of parts and labor, for ag equipment of all ages, has nearly doubled in the past two decades and has spiked 41 percent since 2020. (Farm machinery is grouped together with construction and mining equipment by the bureau.)

In 2023, Kevin O’Reilly, then with the Public Interest Research Group, conducted a study of the cost of repairs directly tied to downtime and repair restrictions imposed by equipment manufacturers. He found that farmers lost an average of $3,348 per year to repair downtime.

The study of 53 farmers in 14 states estimated that if every farmer in the country faced similar losses, repair restrictions placed on them would cost U.S. farmers more than $3 billion a year.

“Even with our older machines — the stuff without software,” said one farmer in the study, “we were paying more because we were running up the hour counts. When stuff gets old, it breaks down more often.”

Digital revolution

In the mid-1990s, the Environmental Protection Agency introduced emissions standards for agriculture diesel equipment as part of a growing effort to curb air pollution. The agency gave manufacturers nearly two decades to meet certain benchmarks in a set of four tiers, each with increasingly stringent regulations.

The final set of standards rolled out in 2014.

To meet those emissions standards, complex computers were installed in agricultural machinery, which manage a wide range of functions and systems in the machines. This, in part, led to a technological revolution in farm equipment manufacturing, and drove the shift from mechanical operations to electronic controls.

In addition to monitoring emissions output, combines and tractors are now loaded with digital sensors that measure everything from humidity in the air to the density of the soil on a centimeter-accurate grid, instantaneously sharing those metrics with the cloud via satellite and GPS imaging. Deere’s quest to create optimum efficiency is driving the company to develop a fully autonomous fleet by 2030.

In reality, a faulty sensor in Lieb’s case caused his combine to shut down. And up until the memorandum of understanding last year, farmers like him and independent repair technicians couldn’t access the necessary software tools to make their own repairs or clear a code once the repair was completed.

But why was the memorandum of understanding even necessary? Over the years, Deere has argued in court that farmers may own a tractor, but they don’t own the software that makes it run.

In a seeming win for farmers seeking the right to repair, the Library of Congress ruled in 2015 that repairing agricultural equipment is not an infringement on copyright. However, the ruling fell short of requiring equipment manufacturers to make their diagnostic tools publicly available.

Customer tools lacking, advocates say

In the 2023 memorandum negotiated by the American Farm Bureau Federation with Deere, CNH Industrial, CLAAS, AGCO and Kubota, the companies agreed to release customer diagnostic tools, which range in annual subscriptions between $1,500 from CNH to $3,100 from John Deere.

Repair advocates with the Public Interest Research Group said the customer version leaves much to be desired. That is why state or federal regulation or laws are required, they argue.

“It was almost like (the customer’s tool) is redacted or obfuscated,” PIRG Director Nathan Proctor said.

The customer tool provides a lot of information, Proctor said, but it’s inferior compared to what dealers have, and requires customers to go through extra steps in order to accurately diagnose issues and clear codes once the repair is complete. This leaves independent technicians and farmers at an unfair advantage in the market of equipment repair, he said.

PIRG focused its study solely on Deere tools because of the company’s dominance in the market. Three companies control the highly concentrated U.S. market for agricultural equipment — CNH, AGCO and Deere — and Deere commands nearly half of that. Globally, Deere controls a quarter of the market share of all ag equipment sales worldwide.

Deere & Company has been headquartered in Moline, Ill., for the last 176 years, growing into the agricultural giant it is today with more than 80,000 employees worldwide and profits topping $10 billion in 2023.

The company’s rapid technological innovations over the past decade coincided with an aggressive merger and acquisition strategy, which the federal government has said erodes competition. Deere has acquired multiple machine learning and artificial intelligence companies over the last decade and recently announced a partnership with SpaceX, all but dissolving the categorical differences between Big Tech and Big Ag.

As for its competitors, Deere’s net income surpasses its competition by the billions. The company made more in the first quarter of 2024, which ended Jan. 28, than AGCO and CLAAS combined for all of 2023.

Why the opposition

Jake Lieb looks at his John Deere planter March 18 on his farm near Monticello, Ill. He is among the farmers backing the right-to-repair push to get dealers to release diagnostic tools so farmers can fix their own equipment. (Darrell Hoemann/Investigate Midwest)
Jake Lieb looks at his John Deere planter March 18 on his farm near Monticello, Ill. He is among the farmers backing the right-to-repair push to get dealers to release diagnostic tools so farmers can fix their own equipment. (Darrell Hoemann/Investigate Midwest)

Equipment manufacturers and private business interest groups, such as the Illinois Chamber of Commerce, have spent the past seven years lobbying against proposed right-to-repair legislation in Illinois, saying they’re concerned about safety and emissions tampering, whether intentional or accidental.

A spokesperson for the Association of Equipment Manufacturers said in a written statement to Investigate Midwest that current legislative proposals go further than what is safe and could “increase the likelihood of cybersecurity attacks on equipment … and leave equipment vulnerable to untrained or unauthorized parties looking to steal or use it for an unintended purpose.”

Farmers, and the Environmental Protection Agency, which regulates emissions standards, say that isn’t the point of repair advocacy.

“We’re not looking to turn our tractors into hot rods and soup them up,” said Lieb, the central Illinois corn and soybean farmer. “We need them for longevity, and when you start turning up horsepower and messing with things that they’re not designed to do, inevitably, you’re going to shorten the life span.”

Mike Stranz, vice president of advocacy at National Farmers Union, said that passing right-to-repair legislation will bring more competition, openness and transparency to the market for farm equipment repair.

“Having more choices in the marketplace and a more open repair market that drives competition makes things work better for farmers,” he said. “What big companies are pushing against is more competition — they want less.”

O’Reilly, formerly with the Public Interest Research Group, said he hopes right-to-repair laws become common across other industries, including construction and forestry.

“But right now,” he said, “the people calling for change are the farmers.”