The generations-old war in the Farm Belt between Green and Red is turning into a battle between Green and everybody else. But at least the battlefield is still there.

Green is Deere & Co., which paints its tractors that color. Red is International Harvester Co., whose products wear that hue -- and whose balance sheets lately have been spattered with it. The battlefield is the farm-equipment business, which has been a disaster for the past couple of years. But now it looks like there is finally hope of recovery in the industry -- with Deere leading the charge.

Brand loyalty is everything in the farm-equipment business. A farmer is either a Green man or a Red man -- and so was his father before him.There are other colors and other companies, but for decades, this loyalty has kept Deere and Harvester one-two in the implement industry. But in recent years, Deere has been pulling away, gaining market share because of Harvester's woes and from the problems of smaller suppliers like Massey-Ferguson and Allis-Chalmers, which are nearly as badly off as Harvester. in many product areas, Deere holds as much as 50 percent of the market, and many analysts believe that in coming years, the industry leader will account for more than half the market share for tractors, combines, and other farm equipment -- leaving Harvester and the others to divvy up the rest.

Deere's emergence as the General Motors of the farm-equipment industry is perhaps the greatest change that will result from the economic nightmare that has gripped the farm-equipment business in the past couple of years.

Several of the smaller manufacturers may disappear or be gobbled up by other companies in the field, and Harvester, for one, is actively pursuing deals with competitors that could lead to joint production agreements -- the red Harvester tractor of the future could be a Massey-Ferguson machine under a coat of IH color. There is also-speculation that Japanese manufacturers, who have made considerable inroads in the construction-equipment market, will try to apply their magic to farm tractors.

Yet there is considerable optimism in the farm-equipment business these days, for the first time since the sour economy all but wiped out the industry. Although everyone in the business has more or less written off 1983, because of the negative effects of the government's payment-in-kind (PIK) program, they believe that PIK will be a positive force in the longer run in fostering farm-sector recovery.

"We think that the market will come back as soon as the economy improves and as the farm sector itself improves," says Robert A. Hanson, Deere's chairman.

"There's going to be a time here in the next few years when everything is going to be running full blast," says Stan Lancaster, vice president of marketing for Harvester's agricultural division. And, venturing a philosophy little heard around Harvester recently, he adds: "There's going to be a tomorrow."

First, though, there's today to get through, and that means weathering the effects of the PIK program. But while PIK seemed to pose new short-term problems for the farm-equipment industry when it was announced by the Reagan administration earlier this year, those in the industry are now downplaying its potential for trouble, because of what it could mean down the line.

PIK encourages farmers not to grow crops this year, in an effort to reduce a price-dampening surplus of grain. In return, the farmers will get surplus grain from the government to sell as they wish. That means that the farmers make money -- but they'll have no need to spend it on new farm equipment.

That's why many farm-equipment industry executives and analysts were leery of the program at first -- it seemed to stoke recovery for everyone but the tractor-makers. But there is a growing belief that farmers will use the money to buy tractors whether they need them or not.

"Farmers typically buy equipment when they get the money," says one analyst.

For this year, however, tractor sales are expected to be flat, and sales of combines, the gigantic harvesting machines, are expected to drop as much as 15 percent.

But nobody expected 1983 to be much of a year anyway, even before PIK was announced. What excites the industry about PIK is what it could mean in the long run by sparking a recovery that might have been a remote hope without the program.

Looking ahead to that recovery, industry executives differ on what form it will take. Many would be happy just to improve significantly over current market levels, while others, like IH's Lancaster, see more potential. Some are even willing to hope that demand for equipment will return to the robust levels of the late 1970s, a peak that has made the recent drop all the more precipitous.

No matter what the recovery's size, the industry will have a different look to it than it did just a few years ago, as its members stuggle up out of the depths.

Riding the crest of the recovery will be Deere, with a full line of farm equipment. The Moline, Ill.-based company has had its share of problems in recent years -- it has cut its dividend, laid off thousands of employes, and last fiscal quarter reported its first quarterly loss in recent memory. But Deere is fundamentally strong, analysts say, with excellent, up-to-date products, a fine dealer network, and the kind of financial strength that companies like Harvester have been lacking in recent years.

"They really don't have any weaknesses," one analyst says of Deere. "Once the cycle starts to pull, they'll really make money." About the only things analysts say could hurt Deere will be the slower recovery of its construction-equipment and overseas businesses.

Even Harvester executives conceed their old rival the No. 1 spot, "I've always mentally seen Deere as No. 1, and not a heck of a lot of inroads being made on them, in the short run at least," says Donald D. Lennox, IH's president.

The question in coming years, though, is who is going to be No. 2. Harvester, whose market share is estimated at around 25 percent, boasts that its share has been firming lately after several years of decline. The company's chances of survival, which appeared dim a few months ago, have brightened considerably under a strong new management team that includes Lennox, and analysts say the company's excellent product line will provide strong sales once recovery comes.

But some analysts nevertheless see IH and smaller competitors scrambling to split up what Deere doesn't have, with perhaps no company emerging as a strong No. 2 -- at least not as the industry is presently constituted. That doesn't take into account the possibility that one or more makers will go bust, or that there may be mergers or cooperative agreements that will blur the lines between companies. Additionally, until markets recover fully, the industry will be plagued with too much production capacity, making it difficult for companies to grab a greater share of the market.

"I think we've either got too many players or, certainly, too much capacity," Dahlman says. "They'll all be down there in the 5 to 10 percent market share, unless we see some marriages."

One solution apart from out-and-out mergers is manufacturing agreements in which companies with complementary product lines would join forces to turn out equipment for each other.

And the farm-equipment industry is still far from stable. No one is ruling out the possibility that one or more implement makers will fail or get out of the business, especially if PIK doesn't perform as advertised and the recovery is tardy.

Still, IH's Lennox says he's ready to fight the kind of competitive battles that have been traditional in the land of the Red and the Green.

"The question comes: If there are other fallouts of smaller people, who will get their market share?" Lennox says. "We're going to be out there aggressively fighting for it. At this point in time, I don't know of anyone who's showing signs of giving up. But if they should, we're going to be out there fighting with Deere to get our share of it."