Hold For Deere


Image source: Madeleine Stuart / Finimize

What's going on?

Dear oh Deere, shares of US agricultural equipment manufacturer John Deere rose by 2% on Friday despite the company delivering a quarterly profit that was below expectations.

What does this mean?

The US-China trade war has led to China imposing import taxes (a.k.a. tariffs) on US agricultural products like soybeans – but American farmers appeared largely unphased in the last quarter, replacing old machines and putting in orders for new ones (like a brand new combine harvester). But Deere’s quarterly profit was fallow – higher costs to transport its goods and rising prices of key materials aluminum and steel led the company to seek cost-cutting measures and raise its prices.

Why should I care?

For markets: Speaking of moving goods, enter A.P. Moeller Maersk.

Last week, Denmark’s third-largest company, Maersk – which transports about 20% of the world’s consumer goods by sea – cut its expectations for profit in 2018, with higher fuel costs to blame. Maersk’s moved left while everyone’s gone right: on Friday, it announced plans to spin off its oil drilling business and sell down its stake in French oil company Total (at a time when oil firms are raking in the cash). Maersk is doubling down on its logistics, freight and shipping businesses, despite concerns that trade wars could derail the industry’s growth.

The bigger picture: Deere’s been shopping for growth and efficiency.

In December, Deere bought German road construction company, Wirtgen Group (you can’t get to the farm without a road to get you there) – which made up almost half of Deere’s sales growth last quarter. It also bought Blue River Technology, a firm that uses computer vision and artificial intelligence to make farming more efficient through more cost-effective spraying of herbicides to weed out… weeds from crops.

Originally posted as part of the Finimize daily email.

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