(Reuters) -Deere & Co forecast lower-than-expected 2025 profit on Thursday, as sagging farm incomes and inflationary pressures affect demand for the company’s tractors and other agricultural equipment.
A decline in farm incomes, high interest rates and an uncertain economy have compelled farmers to reassess large expenses on agricultural machinery and forced dealers to limit inventory restocking.
U.S. farm income is expected to fall for a second consecutive year in 2024, as farmers grapple with corn and soybean prices hovering near four-year lows.
The U.S. Department of Agriculture estimates this year’s net farm income, a broad measure of profitability in the agricultural economy, to hit $140 billion, down 4.4% or $6.5 billion from a year earlier.
“Amid significant market challenges this year, we proactively adjusted our business operations to better align with the current environment,” CEO John May said.
The world’s largest farm-equipment maker expects profit for fiscal year 2025 in the range of $5 billion to $5.5 billion, compared with analysts’ average estimate of $5.93 billion, according to data compiled by LSEG.
For 2025, Deere (NYSE:DE) expects net sales to fall about 10% to 15% across all its machinery segments.
Concerns around supply chains and a surge in demand led dealers to significantly increase their inventories last year, boosting sales for Deere, which primarily sells its agricultural and construction equipment through independent and franchised dealers.
However, amid the recent demand slowdown, skeptical dealers have slowed inventory restocking.
The company reported a net income of $1.25 billion, or $4.55 per share, compared with $2.37 billion, or $8.26 per share, a year earlier.
Fourth-quarter worldwide net sales and revenue fell 28% to $11.14 billion.