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 - Restoration Story: Fordson Major - by Anthony West. George bought his Fordson Major from a an implement sale about 18 years ago for £200.00 (UK). There is no known history regarding its origins or what service it had done, but the following work was undertaken alone to bring it up to show standard. From the engine number, it was found that this Major was produced late 1946. It was almost complete but had various parts that would definitely need replacing.
... [Read Article]
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