Deere 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% 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% and 25% this year, compared with its prior estimates for a roughly 20% 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% in mid-day trading.
Still, the company topped second-quarter estimates. Net income fell 17% to $2.37 billion, or $8.53 per share, but beat estimates for $7.86 per share. Net sales declined 15% to $13.61 billion, compared with estimates of $13.28 billion.
