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Farmer demand drives John Deere to upgrade its 2021 earnings outlook

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The John Deere 6R Series tractor

The John Deere 6R Series tractor

The John Deere 6R Series tractor

John Deere upgraded its fiscal 2021 earnings forecast after profit more than doubled in the first quarter on improved demand for farm and construction machines and a higher adoption rate for its technology offerings.

The world’s largest farm equipment producer expects annual net income in the range of $4.6 billion to $5.0 billion, higher than $3.6 billion-$4.0 billion forecast earlier.

Deere’s shares, which have outperformed the broader market with a gain of 17pc since the last earnings report, were last up 5.8pc at $317.5 in pre-market trade.

Prices for corn, soybeans and wheat have rallied to their highest in more than six years on rising exports to China and government efforts worldwide to build food stocks during the COVID-19 pandemic, making 2021 the strongest season in years for the US farm economy.

High crop revenues are enabling farmers to retire debts and upgrade machinery after years of challenging market conditions, lifting sales of tractors and harvesting combines.

Deere expects large tractors, combines and sprayers to drive up its worldwide farm machine sales by 26-28pc in 2021.

Industry sales of large agricultural equipment in the United States and Canada - the company’s biggest combined market - are forecast to grow by 15-20pc this year.

Construction machine sales are also tipped to increase following a double-digit decline last year.

Improved equipment demand has boosted Deere’s pricing power, which together with cost control measures led to a 196pc year-on-year increase in operating profit in the latest quarter.

Earnings for the first quarter came in at $3.87 per share compared with $1.63 per share last year. Analysts surveyed by Refinitiv, on average, expected quarterly earnings of $2.14 per share.

Equipment sales rose 23pc year-on-year to $8.05 billion.

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