John Deere products on display at a trade show in Council Bluffs, Iowa, on Feb. 23, 2018.Nati Harnik/The Associated Press
Deere DE-N on Thursday trimmed its annual profit forecast for the second time and projected steeper declines in sales of large agriculture equipment, as farmers balk at buying tractors and combines due to falling crop prices.
Farm income is expected to slide 25.5 per cent to $116.1-billion this year from 2023, according to the U.S. Department of Agriculture, set for a second consecutive annual drop, as corn and soy prices plummet and production costs increase.
Higher interest rates have also piled pressure on farmers, prompting some equipment dealers to offer discounts or auction off machines at lower prices to manage bloated inventories, forcing Deere and peers to cut production.
“Underlying the demand decline is a tougher backdrop in global (agriculture environment),” said Deere’s Director of Investor Relations Josh Beal.
“Uncertainty has caused a decline in farmer sentiment. As a result, we’re seeing a softer retail environment today than we did just 6 months ago,” he said.
The world’s largest farm equipment maker expects sales of large agriculture equipment to decline between 20 per cent and 25 per cent this year, compared with its prior estimates for a roughly 20 per cent fall.
“There were some signs (that guidance might be impacted), but I was still surprised to see them cut guidance for the industry … It was a bit more broad-reaching than I would have expected,” M Science research analyst Alex Prudhomme said.
Deere now expects fiscal 2024 net income of about $7-billion, down sharply from its prior expectations of $7.50-billion to $7.75-billion. Its shares were down 3 per cent in midday trading.
Still, the company topped second-quarter estimates. Net income fell 17 per cent to $2.37-billion, or $8.53 per share, but beat estimates for $7.86 per share. Net sales declined 15 per cent to $13.61-billion, compared with estimates of $13.28-billion.