That almost looks like the O-ring was cut during assembly, then the grease just pushed the damaged part out.
It's possible to push the O-ring out by over pressurizing that grease zerk, but that usually just pushes the O-ring out.
On that part and the trunnions where the front axle pivots, it's important to not apply too much pressure when greasing or it will blow the O-rings out. Some tractors, usually bigger one, have a built in relief valve to prevent exactly that.
The purpose of the o-rings there is to keep water and dirt from getting in.
Personally, I see no point on really file a warranty claim for a couple cents worth of O-ring, specially in this situation that's easily fixable. The trunnions on the front axle pivot are a lot more work to fix.
All it should take is take that part off, put a new o-ring and assemble back together.