BD Live reports, John Deere, the world’s biggest agricultural equipment manufacturer, cut its fiscal full-year earnings outlook, as lower commodity prices hurt farmers’ income and a glut of unsold machinery continues to pile up at dealerships.

Full-year net profit will be about $1.2bn in the year until October, Illinois-based Deere said in a statement on Friday, compared with the $1.3bn it forecast in February. The shares fell as much as 4.3%.

Industrywide sales of agricultural equipment in the US and Canada would drop as much as 20% this year, Deere said. It described market conditions as “challenging” and added that it saw further weakness in the construction industry, a sector that Deere also serves. The company has battled the downturn by eliminating jobs and cutting production, and said it was still looking at ways to cut more costs.

Corn and soybean prices have fallen for the past three years, and the US Department of Agriculture predicts farm net income sliding this year to the lowest level since 2002. However, a rebound in those commodities may give some farmers the confidence to start buying machinery again as this year’s US growing season starts. Soybean futures traded in Chicago entered a bull market in April as heavy rains flooded fields in Argentina, among the top exporters.

There was some slightly more positive news in Deere’s earnings: full-year equipment sales are now projected to decline about 9%, instead of an earlier forecast for a drop of about 10%. The company also posted better-than-expected second-quarter earnings.

“If people are comfortable with the thesis that we’re nearing a bottom, I don’t think there’s anything here to dissuade them,” Stephen Volkmann, a New York-based analyst at Jefferies Group, said of Deere’s report. “There’s a little something here for everybody.”

Profit excluding one-time items was $1.56 a share in the three months until April, beating the $1.47 average of 19 estimates compiled by Bloomberg.

Equipment revenue dropped to $7.11bn, from $7.4bn a year earlier. Deere said it expected third-quarter machinery sales to be about 12% lower than in the same period a year ago.

The shares fell 5.5% to close at $77.74 in New York.

Deere expects soybeans to average $9.10 a bushel for the 2016-2017 marketing year, up about 2.8% from its estimate for the year before, the company explained in slides on its website.

“With agricultural commodity pricing at these levels, I could see that giving them some light,” Kwame Webb, an analyst at Morningstar in Chicago, said by phone on Thursday. “Most of the (agricultural) commodities have taken a step up. Everyone wants to know what that means for order boards in North America.”


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