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With farmers reassessing expenses, particularly for compact tractors, Deere said it now expects net income for fiscal 2024 of $7.50 billion to $7.75 billion. This is below its prior forecast of $7.75 billion to $8.25 billion and below analysts predictions of $7.93 billion, which already marked a decline from the prior quarter.

Deere, a barometer of the global economy, said operating margins contracted due to lower sales for large agriculture equipment which the company is expecting to decline 20% this year. Operating profit across its equipment divisions fell 13% in aggregate.

Executives have expressed caution about margin performance amid a weakening farm economy, and said Deere intends to cut equipment production in 2024. Rival CNH Industrial has also tempered investor expectations even after posting better than expected profit for the fourth-quarter, saying softening commodity prices will lead to a downturn in farm equipment demand.

Net farm income in the U.S. is set to fall 27% this year to $116 billion, from its inflation-adjusted total in 2023, according to the U.S. Department of Agriculture. U.S. grains and soybeans are at three-year lows and face stiff competition for export business from South America and the Black Sea region, translating to tighter balance sheets for growers and causing them to pull back on new equipment purchases.

Deere’s sales for production and precision agriculture equipment, its largest division, declined 7% year-over-year in the fiscal first quarter. Revenue for equipment operations fell 8% to $10.5 billion year over year, but topped consensus forecasts of $10.3 billion.

Net income fell to $1.75 billion, or $6.23 per share, for the first quarter, beating analysts estimates of $5.21 per share, according to LSEG data.

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