November 26, 2020

Deere & Co quarterly earnings rise thanks to boosted US farm economy

Deere & Co, the maker of John Deere and the world's largest farm equipment producer, reported increased quarterly earnings compared to analysts' forecasts thanks to higher crop prices, subsidy payments by the government, and higher farm machine sales, Reuters reported.

The company forecasts net income of US$3.6 billion to US$4 billion for the 2021 fiscal year, projecting to benefit from improving farm economy conditions and stabilised construction and forestry markets.

Refinitiv analyst estimates for Deere was US$3.3 billion. The company reported US$2.75 billion in earnings for 2020.

John May, CEO of Deere, said the agricultural sector has been boosted by increased crop prices and improved fundamentals, leading to higher demand for farm equipment.

Deere's biggest combined market, agricultural equipment industry sales in the United States and Canada, are projected to grow between 5% to 10% in 2021. The company also estimates higher sales in South America and Europe.

Corn and soybean prices have surged by a third since early August due to lower grain supply stockpiles and strong China demand for commodities.

This is a sharp change, especially as prices have stayed low because of worldwide grain stocks surplus in the last four years.

Government federal payments to farmers are estimated to reach US$51.2 billion in 2020, a new record that will contribute to US farm income's fastest growth in nine years. There is also an increased need for farmers to replace their old tractors and combines.

- Reuters