Dive Brief:
- Deere & Co. finished the year stronger than expected after aggressively cutting production and seeing solid demand for new tractors and precision agriculture technology.
- The Moline, Illinois-based tractor giant reported a net profit of $1.3 billion in the fourth quarter compared to $2.4 billion last year as farmers grappled with high interest rates and low commodity prices. Sales and revenue totaled $11.1 billion, down 28% from a year ago.
- Despite economic challenges, Deere Chairman and CEO John May said in an earnings call Thursday that company performance was better than expected, which led to strong reinvestment across the enterprise. Executives are bracing for another tough year in terms of demand.
Dive Insight:
Despite lower sales across its business segments, the company plans to continue investing in farm innovation and technology, such as digital precision systems and automated sprayers, which farmers see as a way to increase productivity and crop yields.
Josh Beal, Deere’s director of investor relations, said in the call that order books are full for the company’s new high-horsepower 9RX tractor through the fourth quarter of 2025. The company also noted “record adoption” of its technology stack, including hardware, software, data platforms and applications.
Recently, Deere changed its pricing model for its precision technology solutions from a one-time cost to a recurring license that allows farmers to pay a fraction of the traditional upfront investment.
“This example highlights the importance of finding new ways to meet our customers at every stage of their precision tech journey,” Josh Jepsen, Deere’s chief financial officer, said in the call. “It also emphasizes our commitment to providing cost scaling solutions that enable all customers to adopt precision technology regardless of the size of their operations.”
During the fourth quarter, May said Deere lowered production costs and inventory levels over last year to better position itself for challenging market conditions in 2025. The company is expecting strong global harvests to keep commodity prices low next year, pressuring farmer incomes as input costs remain high.
“Amid significant market challenges this year, we proactively adjusted our business operations to better align with the current environment,” May said in prepared remarks. “Together with the structural improvements made over the past several years, these adjustments enable us to serve our customers more effectively and achieve strong results across the business cycle.”
As borrowers pulled back on big-ticket purchases like tractors and combines due to lower incomes and high interest rates, agriculture equipment sales tanked this year and led to mass production layoffs. Deere cut more than 2,000 jobs this year, including salaried positions, to shore up costs.