Deere forecasts drop in equipment sales as farm incomes fall

Reuters
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(Reuters) - Deere & Co <DE.N> forecast a drop in equipment sales in the current quarter as lower grain prices discourage farmers from buying tractors, harvesters and other agricultural machinery.

Shares of the world's largest farm equipment maker fell 4 percent to $84.25 in premarket trading on Wednesday.

Deere, which also makes construction equipment, said it expected its overall machinery sales to fall about 21 percent in the quarter ending Jan. 31.

"The slowdown has been most pronounced in the sale of large farm machinery, including many of our most profitable models," Chief Executive Samuel Allen said in a statement.

Deere's sales have been hit as bumper corn harvests drive down prices, leaving farmers with less cash to spend on new equipment. Corn prices have fallen about 11 percent this year, on top of a decline of nearly 40 percent last year.

The Department of Agriculture said on Tuesday that falling grain prices and rising costs would drag down 2014 U.S. farm sector profits to their lowest since 2010.

Net income attributable to Deere fell to $649.2 million, or $1.83 per share, in the fourth quarter ended Oct. 31, from $806.8 million, or $2.11 per share, a year earlier.

Revenue fell 5 percent to $8.97 billion.

Up to Tuesday's close, Deere's shares had risen about 5 percent in the past year, compared with a 14 percent rise in the S&P 500 index <.SPX>.

(Reporting by Sagarika Jaisinghani in Bangalore; Editing by Saumyadeb Chakrabarty and Ted Kerr)

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