By Michael Hirtzer
Deere & Co. shares fell sharply as farm machinery sales stayed sluggish, raising questions on when the agriculture economy will start getting better.
The world’s biggest farm machinery maker kept its profit outlook unchanged as it reported fiscal second-quarter results. More uncertainty lies ahead for crop farmers, who have been under pressure for years with prices not keeping pace with elevated costs. Spending on new tractors, combine harvesters and other implements remains limited as the war in Iran sends costs for fuel and fertilizer even higher.
“While our customers face ongoing challenges, John Deere remains firmly committed to supporting their success through disciplined operations and resilience,” Chief Executive Officer John May said in a statement Thursday.
Deere, with its iconic green and yellow tractors, posted fiscal-second quarter earnings that topped expectations. It got a lift from construction and forestry segment as well as tariff refund claims of $272 million.
Still, shares were down as much as 8.1% in New York, to the lowest level since January. Deere in the previous quarter said 2026 would mark the bottom of the down cycle for the U.S. farm economy, sending its shares soaring the most in six years. The company reiterated those expectations Thursday even as the impacts from the conflict in the Middle East are set to hit farmers in countries like Brazil.
Oppenheimer analyst Kristen Owen pointed to a complex backdrop for farmers, with “crosswinds of modestly improved commodities prices against higher energy and fertilizer prices.”
Deere is considered a bellwether of the American economy. Net sales in its top segment of production and precision agriculture fell 14% in the second quarter. Shipment volumes declined in production agriculture while higher production costs also pressured profit in the farming segment.
For the year, Deere still sees sales down 15% to 20% in the U.S. and Canada. However, the annual outlook for South America worsened, with sales seen down 15%, compared with expectations for a drop of only 5% when Deere reported first-quarter earnings.
“The situation in Iran is affecting Brazilian growers at a particularly sensitive point in their production cycle as they prepare to plant a new crop in the September time frame while farmers in other parts of the world have largely locked in inputs for this growing season,” said Brent Norwood, who was named Deere’s chief financial officer earlier in May. “Brazilians have more exposure to current spot prices.”
More broadly, “input costs, particularly fuel and fertilizer, have increased globally and will contribute to higher inflation across the ag economy,” he added.
Construction gains
On the brighter side, Deere reported second-quarter sales in construction and forestry that were 29% higher than a year ago. Small agriculture and turf climbed 16%.
The boom in AI has creating more demand for construction machinery, bolstering companies such as Caterpillar Inc. Deere pointed to higher shipment volumes and prices in its construction and forestry segment.
For agriculture, last week’s U.S.-China summit holds the possibility of improved crop demand, with the White House estimating the Asian country will buy $17 billion in American farm goods annually, beyond an initial commitment for soybeans.
Third Bridge analyst Ryan Keeney said farmers need profits to rise significantly before sales of high-horsepower machines can rise meaningfully. “Current commodity prices and volatility around diesel and fertilizer pricing aren’t building confidence,” Keeney said.
Sentiment among American farmers eased in April, according to the Purdue University and CME Group’s index. About two-thirds of respondents expect the Iran conflict to bring down net farm income this year, the survey found.
Deere estimated annual net income between $4.5 billion and $5 billion, steady with an outlook in February. Bloomberg estimated net income at an average of $4.79 billion. Meanwhile, net income for Deere’s fiscal second quarter came in at $1.77 billion, above an estimate for $1.54 billion.
© 2026 Bloomberg L.P.