Deere & Co. cut its profit expectations for the year as beleaguered farmers and an escalating trade war with China cut into sales. Widespread and heavy flooding severely delayed planting this year for thousands of farmers. In the 18 states that grow most of the nation's corn, only 58 percent of the crop had been planted by the last week of May, far from the 90 percent in a typical year.
Less than half of the normal soybean crop had been planted in that same period, leaving many farmers to decide whether to plant at all. Rising trade tensions have exacerbated the situation.
China this month abruptly cut off purchases of U.S. farm products in protest of tariffs and tariff threats from the Trump administration. China bought $6 billion in U.S. farm exports last year, according to the U.S. Census. It's the world's biggest soybean buyer and it purchased about 60 percent of U.S. soybean exports in 2018.
Soybean prices have been deteriorating since the trade war began.
Deere now anticipates fiscal 2019 earnings of approximately $3.2 billion. Its prior outlook was for earnings of $3.3 billion. Deere still foresees a full-year revenue increase of about five percent.
"Concerns about export-market access, near-term demand for commodities such as soybeans and overall crop conditions have caused many farmers to postpone major equipment purchases," Chairman and CEO Samuel Allen said in a prepared statement. Sales of agricultural and turf equipment, Deere's biggest operation, slid six percent in the third quarter, and profits fell 24 percent the company said.
That was partially offset by strong activity in the construction industry. Sales of related equipment rose by a percent and profit rose 35 percent.
Deere earned $899 million, or $2.81 per share, for the period ended July 28. Excluding certain items, earnings were $2.71 per share, or nine cents short of per-share projections from industry analysts, according to a survey by Zacks Investment Research.
It was also short of last year's quarterly profit of $910 million. The Moline, Illinois, company reported revenue of $10.04 billion, with adjusted revenue totaling $8.97 billion. Analysts predicted $9.3 billion in revenue.
Shares fell $1.96, or 1.4 percent, to $141.75 before the market opened.