Deere raises sale forecast amid signs of farm recovery

CHIC A GO Deere & Co., the world’s largest farm machine maker, raised its full-year sales forecast, and there’s reason to believe that good news will keep coming.

After a prolonged slump for crop prices that slashed farmer income, fundamentals are starting to rebound, according to Farha Aslam, an analyst at Stephens Inc. There’s a chorus echoing that view. Bunge Ltd. chief executive officer Soren Schroder said this week that there are early signs of a recovery for the markets. An index measuring sentiment in rural agricultural communities rose to the highest since 2014 in February, while a Federal Reserve Bank of Kansas City report showed farmland prices are starting to stabilize.

Green shoots for the farm economy can only help Deere, which is already on an upswing as corporate farmers begin to replace older equipment. Cuts to inventory and output during the downturn are now adding to the company ’s positive outlook as it produces more of its iconic green-and-yellow machines to meet demand.

A turnaround in the farm economy “would kick-start demand to an even greater extent,” said Matt Arnold, an analyst with Edward Jones & Co. in St. Louis. Sentiment in agriculture “can change on a dime. A weather event could prompt an upswing in grain prices and income, and it’s been a long time since we’ve seen one of those.”

Outside of agriculture, Deere expanded its construction equipment unit last year, and that industry currently is in the midst of a global boom.

Deere said Friday in a statement that net revenues will increase by about 25 per cent in fiscal 2018, up from a prior view of about 22 per cent.