deeU.S. farmers, struggling with global trade disputes, are getting stingier on spending, and that is starting to include Deere & Co.’s iconic yellow and green tractors and combines.
The world’s biggest agriculture equipment maker reported first-quarter results that missed analyst expectations for sales and profit. Chief Executive Officer Samuel Allen cited worries by farmers struggling with the impact of tariffs and trade spats with China and other nations. Higher costs for raw materials such as steel have also taken a toll. Amid “unsettled conditions in some of our key markets,” Deere still affirmed its annual forecast.
“Although Deere has continued to make solid progress on a number of fronts and reported higher earnings for the quarter, our results were hurt by higher costs for raw materials and logistics as well by customer concerns over tariffs and trade policies,” Allen said Friday in a statement.
The Moline, Illinois-based company’s disappointing results come amid signs that the farm belt’s malaise is deepening. The U.S. Department of Agriculture said Thursday that soybean exports would stay below their pre-trade war levels until the 2026-2027 season. That followed a report that sales of the oilseed in early January had the worst week ever. The Federal Reserve Bank of Kansas City also warned that farm incomes were likely to have a weak start in 2019, and that credit was tightening at lenders.
Deer’s stock fell as much as 4.1 percent to $155.75 in premarket trading.
The company’s agriculture and turf segment’s margins were disappointing, largely because of higher material and freight costs and a weaker mix, said Christopher Ciolino, an analyst at Bloomberg Intelligence.
Farmers still have to buy to replace aging machines, which is driving demand. Industry sales of agricultural equipment in the U.S. and Canada are forecast flat to up 5 percent, helped by demand for both large and small equipment, according to Deere. Sales of construction equipment is also helping the company.
“Until we have more visibility on trade, demand will be replacement driven,” Ciolino said. “There is some optimism over the balance of the year.”