Exhibit 10.7


                                    GUARANTY
                                   (LONG TERM)

         This GUARANTY dated June 10, 1997, is given by Ag-Chem Equipment Co
International Corp, a Virgin Islands corporation ("Guarantor") to NBD Bank, as
Agent (in such capacity, the "Agent"), and NBD Bank for itself, First Chicago
NBD Bank, Canada, The First National Bank of Chicago, Harris Trust and Savings
Bank, and Cooperatieve Centrale Raiffeisen - Boerenleenbank B.A., "Rabobank
Nederland", New York Branch (each a "Lender") and any other financial
institution that may from time to time become a Lender under the Credit
Agreement described below.

         WHEREAS, the Agent and the Lenders have agreed to extend certain
revolving loans to Guarantor's parent, Ag-Chem Equipment Co., Inc., a Minnesota
corporation ("Debtor"), pursuant to the terms of a certain Long Term Second
Amended and Restated Revolving Credit Agreement, dated June 10, 1997, and it is
a condition to the Agent's and the Lenders' obligations under such agreement
that the Guarantor provide this Guaranty.

         WHEREAS, Guarantor benefits from the financing provided to Debtor and
has determined it is in Guarantor's best interests to provide this Guaranty.

         THEREFORE, IN CONSIDERATION of and in order to induce the Agent and the
Lenders to loan money or extend credit to; to purchase, accept or discount
notes, instruments or other evidences of indebtedness of or from; and generally
to engage in financial accommodations and do business with Debtor, the
undersigned Guarantor hereby covenants and agrees with the Agent and Lenders as
follows:

         1. Definitions. Unless the context requires otherwise, capitalized
terms used herein shall have the following meanings:

                  (a) "Credit Agreement" means the Long Term Second Amended and
         Restated Revolving Credit Agreement dated June 10, 1997 among Debtor,
         Agent and the Lenders, and any amendments, restatements or replacements
         thereof.

                  (b) "Indebtedness" means any and all indebtedness, liabilities
         and obligations of every kind, nature and description, owed to the
         Agent or any Lender by Debtor under the Credit Agreement, whether
         direct or indirect, absolute or contingent, whether now due and owing,
         or which may hereafter, from time to time, be or become due and owing,
         whether heretofore or hereafter created or arising, including all
         indebtedness evidenced by any note(s) or agreements now or hereinafter
         executed and delivered by Debtor to any Lender, any and all renewals,
         extensions or modification thereof, and including, without limitation,
         reasonable attorneys' fees, costs and expenses incurred by the Agent or
         any Lender in connection with the enforcement of this Guaranty or any
         obligation against Debtor.

                  (c) Other capitalized terms shall have the meanings given them
         in the Credit Agreement.


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         2. Guaranty of Indebtedness. Guarantor or hereby unconditionally
guarantees to the Agent and to each Lender the full and prompt payment when due
of all Indebtedness of Debtor due and to become due the Agent and/or each
Lender. The Agent and/or each Lender may have immediate recourse against
Guarantor for full and immediate payment of the Indebtedness at any time after
the Indebtedness has not been paid in full at its maturity (whether at fixed
maturity or maturity accelerated after a default under the terms of the Credit
Agreement).

         3. Nature of Guaranty. This is a guarantee of payment, and not of
collection, and Guarantor therefore agrees that neither the Agent nor any Lender
shall be obligated prior to seeking recourse against or receiving payment from
Guarantor, to do any of the following acts (although they may do so, in whole or
in part, at their individual sole option), the performance of each of which is
hereby unconditionally waived by Guarantor:

                  (a) Take any steps whatsoever to collect from Debtor or to
         file any claim of any kind against Debtor; or

                  (b) Take any steps whatsoever to accept, perfect any security
         interest in, foreclose or realize on collateral security, if any, for
         the payment of the Indebtedness, or any other Guaranty of the
         Indebtedness; or

                  (c) In any other respect exercise any diligence whatever in
         collecting or attempting to collect the Indebtedness by any means.

         4. Waivers. Guarantor's liability for payment of the Indebtedness shall
be absolute and unconditional, and nothing whatever except actual full payment
to the Agent and the Lenders of the Indebtedness shall operate to discharge
Guarantor's liability hereunder. Accordingly, Guarantor unconditionally and
irrevocably waives each and every defense which, under principles of guarantee
or suretyship law, would otherwise operate to impair or diminish the liability
of Guarantor for the Indebtedness. Without limiting the generality of the
foregoing waiver, Guarantor agrees that none of the following acts, omissions or
occurrences shall diminish or impair the liability of Guarantor in any respect
(all of which acts or omissions may be done without notice to Guarantor of any
kind):

                  (a) Any extension, modification, indulgence, compromise,
         settlement or variation of the terms of any of the Indebtedness;

                  (b) The discharge or release of any obligations of the Debtor
         or any other person now or hereafter liable on the Indebtedness, by
         reason of bankruptcy or insolvency laws;

                  (c) The acceptance or release by the Agent or any Lender of
         any collateral security or other Guaranty, seizure or conversion of any
         collateral security by any person or by operation of law, or any
         settlement, compromise or extension with respect to any collateral
         security or other Guaranty;


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                  (d) The application or allocation by the Agent or any Lender
         of payments, collections or credits on the Indebtedness or any other
         obligations of the Debtor to the Agent or any Lender;

                  (e) The creation of any new Indebtedness covered by this
         Guaranty; or

                  (f) The making of a demand, or absence of demand, for payment
         of the Indebtedness, or giving, or failing to give, any notice of
         dishonor or protest or any other notice.

         5. Additional Waivers. Guarantor unconditionally waives:

                  (a) Any subrogation to the rights of the Agent or any Lender
         against the Debtor;

                  (b) Any acceptance of this Guaranty;

                  (c) Any setoffs or counterclaims against the Agent or any
         Lender which would otherwise impair their respective rights against
         Guarantor; and

                  (d) Any notice of the disposition of any collateral security,
         and any right to object to the commercial reasonableness of the
         disposition of any such collateral security.

         6. Assignment. This Guaranty shall inure to the benefit of the Agent,
its successors and assigns, each Lender and its successors and assigns,
including entities that shall become a "Lender" under the Credit Agreement and
each and every holder or owner of any of the Indebtedness guaranteed hereby. In
the event that there shall be more than one such holder or owner, this Guaranty
shall be deemed a separate contract with each such holder and owner.

         7. Termination. This Guaranty shall be binding upon Guarantor and its
successors and assigns, and shall continue in effect until Guarantor shall
deliver to the Bank (and each other holder or owner of the Indebtedness) 30
days' advance written notice of termination; provided that this Guaranty shall
continue in effect thereafter with respect to all Indebtedness in existence on
the effective date of such termination (including all extensions and renewals
thereof and all subsequently accruing interest and other charges thereon) until
all such Indebtedness shall be paid in full.

         8. Financial Statements. Guarantor warrants and represents to the Agent
and each Lender that any and all consolidated financial statements delivered, or
to be delivered, to them by Debtor are true and correct in all materials
respects as of the date of such statements

         9. Interpretation. The singular reference shall also include the plural
of any word, if the context so requires. Sections headings are for convenience
only and do not affect the interpretation of this Guaranty.


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         10. Governing Law. This Guaranty shall be governed by and construed in
accordance with the internal laws of the State of Michigan.

         11. Forum. Guarantor hereby irrevocably submits to the jurisdiction of
any Minnesota or Michigan state court or any federal court located in
Minneapolis, Minnesota or Detroit, Michigan over any action or proceeding
arising out of or relating to this Guaranty or any other Loan Document, and
Guarantor hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such state or court or federal court.
Guarantor hereby irrevocably waives, to the fullest extent it may effectively do
so, the defense of an inconvenient forum to the maintenance of such action or
proceeding. Guarantor agrees that judgment final by appeal, or expiration of
time to appeal without an appeal being taken, in any such action or proceeding
shall be conclusive and may be enforced in any other jurisdictions by suit on
the judgment or in any other manner provided by law. Nothing in this subsection
shall affect the right of the Agent or any Lender to serve legal process in any
other manner permitted by law or affect the right of the Agent or any Lender to
bring any action or proceeding against Guarantor or its property in the courts
of any other jurisdiction. Guarantor agrees that, if it brings any action or
proceeding arising out of or relating to this Agreement, it shall bring such
action or proceeding in Hennepin County, Minnesota or Wayne County, Michigan.

         12. THIS GUARANTY IS FREELY AND VOLUNTARILY GIVEN TO THE AGENT AND THE
LENDERS BY GUARANTOR, WITHOUT ANY DURESS OR COERCION, AND AFTER GUARANTOR HAS
EITHER CONSULTED WITH COUNSEL OR BEEN GIVEN AN OPPORTUNITY TO DO SO, AND
GUARANTOR HAS CAREFULLY AND COMPLETELY READ ALL OF THE TERMS AND PROVISIONS OF
THIS GUARANTY.


WITNESS:

  /s/ Joyce Lander                       AG-CHEM EQUIPMENT CO INTERNATIONAL CORP


  /s/ Ivy H. Wilcop                      By: /s/ John Retherford
                                             John Retherford
                                             Its:  Vice President

                                         Address: 5720 Smetana Drive
                                                  Minnetonka, MN  55343-9688