Whatâs Going On Here?Deere posted better-than-expected earnings late last week, and ainât yâall investors too kind, pushinâ the farm equipment-makerâs liâl olâ share price higher. What Does This Mean?Deereâs worth paying attention to because itâs an economic bellwether, meaning demand for its products gives a good indication of how busy US farmers are keeping. So itâs a strong sign that the companyâs profit surged 169% from the same time last year, and that it upped its expectations for the rest of 2021 for the second quarter in a row. Thatâs partly thanks to a recovering global economy in need of food production and construction equipment, and partly thanks to a surge in the prices of grains, which has given farmers more money to spend on new toys. Why Should I Care?For markets: All the demand, none of the supply.
Deere did warn that it might struggle to secure necessary parts in the months ahead, and itâs not alone: manufacturers across a host of different industries are running out of the steel, plastics, and rubber they need for their products, as the economy picks up again and demand overwhelms supply. Microchips too: Ciscoâs shares dropped last week when it warned its profit might be lower than analysts were expecting, with the lack of semiconductors pushing up prices of whatâs available.
The bigger picture: Deere ainât foolinâ anyone.
Deere might masquerade as a folksy, salt-of-the-earth type, but itâs actually an uncanny hybrid of industrial and tech company â with one investment manager even including it in their autonomous technology and robotics ETF. Thatâs because the companyâs investing big into âprecision farmingâ technology â from crop-surveying drones to soil-analyzing artificial intelligence â thatâll allow farmers to grow more with less water, fertilizer, and land. Thatâs a market with big potential: Morgan Stanley reckons precision farming could rake in $17 billion of revenue in 2030 â up from $5 billion in 2019. | 