Agco Corp. (AG) is turning to its home country amid tough times for makers of tractors and combines after a three-year commodity-fuelled boom.

The Duluth, Ga., company ranks third in the U.S. farm equipment market - behind Deere & Co. (DE) and CNH Global N.V. (CNH). And despite generating a fifth of its sales from North America, it only managed to scrape a profit in the region last year, the first since 2005.

Lower commodity prices and falling farm incomes in Europe and South America - where it is the market leader - are putting pressure on Agco executives to retain momentum in North America.

"We're going to do better than 2008 this year," Robert Crain, Agco's general manager for the region, said in an interview. "We think we have North America moving in the right direction."

The company had hit a sweet spot before the reversal in commodity prices, selling lower horse-powered tractors to so-called "recreational farmers" who don't rely on the land as their primary source of income. But the small tractor market is now suffering.

Agco executives credit its positive outlook to improved sales of larger Challenger brand equipment through an unusual alliance with dealers more used to selling machinery produced by Caterpillar Inc. (CAT).

Agco bought Challenger from Caterpillar in 2002 and still relies on the U.S. construction equipment company's dealers to market the tractors and combines.

As demand for construction equipment has waned, Caterpillar dealers with rural sales territories have ratcheted up their efforts to sell farm equipment. About three-quarters of Caterpillar's North American dealers offer Challenger.

"It's a very complementary fit," said Blake Quinn, president of Quinn Co. Caterpillar, which serves central California's farming-rich San Joaquin Valley.

"Even when the farming is bad, farmers are still running their tractors. When construction is bad, our construction customers park their equipment," he said.

U.S. farm equipment sales are holding up better than other regions this year despite an expected switch from corn to soybeans, which require less use of machinery to grow.

While credit availability has hit industry sales in emerging markets such as Brazil and Russia, Agco has a joint venture with Rabobank of the Netherlands to provide U.S. customer financing.

Agco reported $8.6 million in operating income from North America last year - just 1.2% of total income from operations - as sales climbed 21% to $1.79 billion.

Agco also sells Agco and Massey Ferguson branded equipment through its own network of dealers in North America but is still heavily reliant on importing stock from overseas plants.

"It's encouraging that they finally made money for a full year," says Charles Rentschler, an analyst for Wall Street Access. "But they need to increase the American content of what they're trying to sell here."

Agco shares are down 75% from their 12-month high last April. The stock trades at about six times projected 2009 earnings, 40% below the average multiple for other machinery manufacturers, according to FactSet Research. The shares were up 0.8% at $16.72 in late trading Wednesday.

-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com