It can be condensation if the conditions are just right.
But more commonly, if stored outside, there is rain water getting in somewhere, like around the shifter or a failed rubber boot, broken vent cover, an opening somewhere that is letting water get in.
Unlike an engine that "breathes" air while it's running, once moisture is trapped in a gear case or hydraulic tank, even when it boils up from operating heat, it mostly condenses on the cooler areas of the upper case and drips back into the oil. Changing it is about the only way to clean it up. Even that is difficult once the water is emulsified into the oil.
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Today's Featured Article - My Ford Golden Jubilee - by Troy Estes. This article is about my '53 Ford Jubilee and a story that starts with taking the tractor to my brother's Starter/Alternator Rebuilding shop for a wiring fix. The generator was shot as well as all the wiring. I dropped off the tractor expecting a transformation from a 6 volt to a 12 volt system utilizing the original generator housing, and a total rewiring of the whole tractor. The front end center pin bushing was worn also so I ask that they replace it if they had time. Well, that’s wha
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