Deere cuts profit outlook as crop slump hurts tractor demand

Deere & Co. trimmed its profit outlook for this year as tumbling crop prices give farmers less money to use on equipment purchases. The shares declined.

The world’s biggest farm-machinery producer is seen as a bellwether for the health of the agriculture industry, with demand for its tractors rising and falling with farmers’ fortunes. Machinery makers have been hit by declining agriculture income and crop prices, even as a growing world population and an increased focus on food security helps to provide long-term demand for equipment.

Deere on Thursday said net income for the fiscal year will be between $7.5 billion and $7.75 billion. That’s down from its initial outlook in November for between $7.75 billion and $8.25 billion, and compares with estimates compiled by Bloomberg of $7.75 billion.

The lower full-year forecast came as Deere reported first-quarter earnings that beat analyst estimates.

During the company’s first quarter, it shipped fewer tractors but the reduced volume was partially offset by higher prices. Meanwhile, farm income in the U.S. is set to drop by the most since 2006 . Corn, the most widely planted American crop, is trading near the lowest levels since 2020.

“Moving forward, we expect fleet replenishment to moderate as agricultural fundamentals normalize from record levels in 2022 and 2023,” Deere Chief Executive Officer John May said in a statement.

Deere and other equipment makers aim to make more money through recurring revenue models such as subscriptions. Deere in January announced a partnership with Elon Musk’s SpaceX to connect its farm equipment to the internet through Starlink satellites.

Deere shares were down about 3.8% in premarket trading in New York.

Through Wednesday, they had slipped 14% from a record closing high reached in July .