Deere’s disappointing outlook shows farm recovery is elusive

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

Shares of the world’s biggest farm machinery maker fell as much as 5.7% 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 U.S. 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.

“Our organization is used to managing cyclicality, but this year we faced an additional headwind of heightened uncertainty in a rapidly changing business environment,” Chief Executive Officer John May said on a Wednesday call with investors.

May said in a statement that Deere believes 2026 “will mark the bottom of the large ag cycle.”

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 U.S.-China trade deal was announced, but it may take longer for those sales to materialize. 

“It was clearly surprising that they would set such a low bar for 2026 but clearly the farmer is not running back to put orders in,” said Brian Sponheimer, a portfolio manager at Gabelli Funds, which has a position in Deere. “It’s clearly a challenged market — but I think that they are providing at the bottom of guidance a more or less worst-case scenario.” 

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 U.S. 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 estimated tariff costs before taxes to be about $1.2 billion for 2026. 

Many in the industry believe China’s resumption of U.S. 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 U.S. 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. U.S. 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.

Deere shares were down 5.1% at 11:37 a.m. in New York. The stock is still up about 12% for the year, touching a record in May.