Deere trims profit forecast
|Published
Moline - Deere & Co, the world’s largest farm equipment maker, reduced its profit forecast for fiscal 2015 as lower crop prices weakened the farm economy.
Net income for the year through October will be about $1.8 billion, the Moline, Illinois-based company said Friday in a statement. That’s less than the $1.9 billion that Deere forecast in May and the $1.92 billion average of 11 analysts’ estimates compiled by Bloomberg.
“Farmers have cut spending amid lower crop prices,” Karen Ubelhart, a Bloomberg Intelligence analyst, said in a report on August 12.
Most-active corn futures have slid about 55 percent from a record $8.49 a bushel in 2012. After climbing for three weeks through mid-July on speculation that wet weather in the US Midwest would reduce yields, corn prices tumbled again after the Department of Agriculture unexpectedly raised its crop forecast on August 12.
Tractor and combine sales have dropped in the Americas as large harvests of corn and soybeans weaken prices, which means less money for farmers to make equipment purchases from the US to Brazil. The decline began last year after seven years of gains through 2013, the longest on record, Ubelhart said.
Deere’s sales and profit fell in fiscal 2014, the first drop since fiscal 2009, and led the company to lay off hundreds of workers.
“The biggest problem in the North American market continues to be the glut of used equipment in the industry, but there is also excess new inventory,” Larry De Maria, a New York-based analyst for William Blair & Co, said in a report on August 17.
And the industry has yet to bottom out, he said.
“We expect 2016 to be another down year,” De Maria said. “We see continued downside in North America and Brazil, with less negative, but still cautious conditions in Europe at the moment.”
AGCO, the world’s third-largest farm equipment maker, on July 28 forecast lower-than-expected third-quarter earnings as farmers in the Americas rein in spending.
BLOOMBERG