Deere Says Trade Anxiety Is Getting Overblown in the Farm World

(Bloomberg) -- If Deere & Co. has anything to say about it, the hand-wringing over global trade tensions has gotten overblown -- at least as far as the farm economy is concerned.

While China’s retaliatory tariffs against U.S. soybeans has sparked a collapse in prices for the commodity, that story could be overshadowing other improvements in the agriculture world, Chief Financial Officer Raj Kalathur said Friday on a call to discuss quarterly earnings. He pointed to strengthening fundamentals in the corn, wheat and cotton markets and said overall global demand for grain is still growing.

“The farm economics picture for next year may actually be stronger than realized,” Kalathur said. Costs will be relatively stable, and “absent all these other noises,” demand for crops “will be up,” he said.

Still, the $12 billion of federal aid for U.S. farmers announced in July is just a band-aid, Deere executives said on the call, and it’s unknown how it will play into farmers’ spending calculations.

While it’s too soon to draw conclusions about 2019, there are positive signals even amid worsening farmer sentiment, he said. Early orders for new planters and sprayers are still “slightly higher” than the prior year, and more farmers are paying a premium for technology, according to Deere.

In 2019, farmers’ cash receipts are likely to be higher, a leading indicator of sales for large machinery, and net returns per acre for major crops could be the highest in five years, Kalathur said.

“Uncertainty surrounding the trade market conditions may have distracted from the North American farm economics today,” Kalathur said.

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