Deere’s Disappointing Outlook Shows Farm Recovery Stays Elusive

DE -4.92% ZW=F +0.09%

(Bloomberg) -- Deere & Co.’s weak forecast for the year ahead reinforces the difficulty in predicting a recovery in the US farm economy as uncertainty continues to swirl over the impact of tariffs and trade deals.

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Shares of the world’s biggest farm machinery maker fell as much as 6.3% before the start of regular trading in New York as the company’s first profit outlook for 2026 fell short of expectations. The forecast underscores how the agriculture sector remains in the dark even after a US trade agreement resumes crop shipments to China.

Farmers have been grappling with President Donald Trump’s tariff policies that squeezed demand and raised costs. While the recent deal with China is raising hopes, there’s still questions on whether the ramp-up of soybean and wheat sales will be enough to shake the US farm economy out of a years-long slump.

“Deere’s widely underwhelming 2026 guidance suggests a more severe and prolonged agricultural downturn than we initially anticipated, though it offers clarity on trough earnings this cycle,” Bloomberg Intelligence analyst Chris Ciolino wrote in a report.

Deere said net income in the 2026 fiscal year will be between $4 billion and $4.75 billion. That misses the average Bloomberg estimate for $5.31 billion, and would be a drop from the $5.027 billion reported for the year just ended.

“Looking ahead, we believe 2026 will mark the bottom of the large ag cycle,” Chief Executive Officer John May said in a statement.

Even before the latest trade war, farmers had been pulling back on equipment purchases, stung by low crop prices but elevated costs for seeds, fertilizer and the machines to plant, treat and harvest crops. Trump called for farmers to go buy tractors after the US-China trade deal was announced, but it may take longer for those sales to materialize.

“Today’s results and initial guidance and outlook largely align with our view of another year of declines” in North American agriculture, Jefferies analyst Stephen Volkmann wrote in a note to clients.

Deere estimated 2026 sales for its large agriculture segment — which caters to the biggest farmers of crops such as corn and soybeans — to be down 15% to 20% in the US and Canada. South America is seen flat for tractors and crop-cutting combines.

The company reported increased fourth-quarter sales due to both higher shipments and prices, but operating profit decreased due to elevated costs linked in part to tariffs. Deere in August said tariffs such as those on US imports of steel and aluminum cost the company $600 million.

Many in the industry believe China’s resumption of US crop imports as well as a forthcoming aid package for American farmers should be a help in 2026. Trump said Tuesday that he urged Chinese President Xi Jinping to increase the speed and size of agricultural purchases and said Beijing had “more or less agreed” to do so.

However, that acceleration has yet to show up in US Department of Agriculture data. The Asian country has purchased nearly 2 million tons of US soybeans since Oct. 30, far short of the 12 million tons the US says China plans to buy this season.

Rival manufacturer CNH Industrial NV earlier this month pointed to “ambiguity” on the terms of the trade deal. Chinese officials have yet to confirm details of the accord, creating further uncertainty for farmers as they plan out next year’s planting decisions and equipment orders.

Meanwhile, the administration intends to announce its long-awaited plan to offer relief for beleaguered farmers shortly. US Agriculture Secretary Brooke Rollins said Wednesday the payments “should begin to move out early January.” Even then, the impact on growers may be limited.

The anticipated aid package “would provide only temporary relief to a sector strained by trade tensions and falling crop prices, potentially paving the way for another round of funding in 2026,” Nathan Dean, a Bloomberg Intelligence senior government analyst, wrote in a Wednesday note.

--With assistance from Matthew Griffin and Ilena Peng.

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