Deere & Company CFO on Tariffs, Farmer Behavior, and Agricultural Sector Headwinds

Impact of Tariffs on Deere & Company

• ⚠️ Deere & Company is experiencing significant headwinds, with its stock slumping due to a recent earnings report that showed a 9% year-over-year revenue and net sales decrease.
• 🎯 The primary driver identified for this downturn is the impact of tariffs, with Deere increasing its projected annual impact from $500 million to nearly $600 million.
• 📈 The company has also revised its full-year outlook downwards due to these tariff-related challenges.

Tariff Breakdown and Geographic Impact

• 💰 Deere experienced approximately $200 million in tariff costs in the third quarter and anticipates $300 million in the fourth quarter, totaling around $600 million for fiscal 2025.
• 🌍 The most significant tariff impacts for Deere are currently from the European Union (steel and aluminum) and India, a shift from previous quarters where Mexico and China were larger concerns.
• 🇺🇸 While 90% of the steel Deere uses is sourced domestically, the company is still affected by tariffs on imported components that contain steel and aluminum.

Shifting Farmer Behavior and Market Uncertainty

• 🚜 Farmers are exhibiting increased caution, leading to more equipment rentals versus new purchases of combines and tractors.
• ❓ This behavior is attributed to uncertainty surrounding commodity prices and where crops will be sold, exacerbated by trade reshuffles and tariffs.
• 🌱 Despite the challenges, Deere continues to invest in technology and solutions aimed at helping customers improve margins, reduce costs, and increase yields.

Broader Agricultural Economic Factors

• 📊 While stocks-to-use ratios for agricultural commodities remain relatively tight, uncertainty in trade is a major concern for farmers.
• 📈 Net farm income has seen a decline from $182 billion in 2022 to $139 billion in 2024, even before considering the full impact of recent tariffs.
• 💸 Higher input costs for growers, including fertilizer, seeds, and chemicals, have also contributed to pressure on farm economics, with many of these costs remaining sticky post-pandemic.