Deere & Co., the largest maker of farm equipment, cut its 2015 earnings forecast as lower crop prices reduce farmer spending on high-horsepower tractors and combines in North America.
Net income will be about $1.8 billion in the fiscal year through October, Moline, Illinois-based Deere said Friday in a statement. That’s less than the company’s November projection for about $1.9 billion.
Farm income in the U.S., the top agricultural producer and exporter, will drop this year by the most since the Great Depression, according to the government. Deere has cut production and laid off hundreds of workers in the past year as it adjusts to lower demand in the U.S. and Canada, which together are its biggest market.
“The really big issue in agriculture is what’s happening in North America,” Mircea Dobre, a Milwaukee-based analyst for Robert W. Baird & Co., said in an interview on Thursday. “Retail sales are terrible. Large agriculture equipment is down significantly.”
Deere rose 0.8 percent to $92.43 at the close in New York, erasing an earlier decline.
Equipment sales in the three months through Jan. 31, Deere’s fiscal first quarter, dropped 19 percent to $5.61 billion.
Net income fell to $1.12 a share from $1.18 a year earlier. That beat the 83-cent average of 21 analysts’ estimates compiled by Bloomberg, helped by higher earnings from the company’s construction and forestry machinery segment.
Deere said economic growth and more building in the U.S. will lift that unit’s revenue 5 percent in the full year.
For its agriculture and turf segment, the company’s largest, it’s a different story. Deere forecast sales there will fall about 23 percent for the year. The decline includes a drop of about 4 percent attributable to the stronger dollar.
“It is putting significant pressure on reported sales made outside of the United States, a fact reflected both in our first-quarter results and our full-year forecast,” Susan Karlix, a spokeswoman for Deere, said on a conference call to discuss earnings with analysts.
Industry-wide, the number of combines sold in the U.S. fell 25 percent in 2014, while sales of tractors with at least 100 horsepower declined 12 percent, according to data from the Association of Equipment Manufacturers.
Agco Corp., the world’s third-largest agricultural-equipment maker, said earlier this month it expects weaker demand and currency headwinds to make 2015 more challenging than 2014.
Corn has dropped more than 50 percent and soybeans declined more than 40 percent from record prices seen in 2012. U.S. farm income this year will decline in 2015 for a third straight year on lower receipts from crops and livestock, the government said earlier this month.
Warren Buffett’s Berkshire Hathaway Inc. increased its stake in Deere to 5 percent, according to a Tuesday filing.