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Thursday, February 19, 2009

Deere earnings and profit outlook are down; how much of a barometer is it for U.S. agriculture?

Agriculture and major farming areas have been lingering bright spots as the economic outlook darkens, but the shadows grew longer yesterday when Deere & Co. "posted a drop in quarterly earnings and lowered its full-year profit forecast by more than 20 percent, citing weaker demand for its farm and construction equipment in the global economic downturn," reports Bob Tita of The Wall Street Journal.

"Deere's performance is widely watched as a barometer of conditions in global agriculture," Tita notes. "For the past five years, Deere's sales and profits have surged amid rising prices for farm commodities and livestock. But falling commodity prices, tighter credit conditions, higher material costs and volatile currency exchange rates are putting the brakes on the Moline, Ill., company's performance."

However, Deere's status may not be as good a barometer for U.S. agriculture as usual, because its NAFTA market appears stronger than those overseas. "The company sees North America as its strongest market for farm machinery, predicting that retail sales will be flat to up by as much as 5 percent," Vita reports. "Sales of large tractors and combines are expected to be a pocket of strength as commodity prices remain healthy and fuel and fertilizer costs moderate." (Read more)

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