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(Reuters) -Deere & Co surpassed market estimates for quarterly profit on Wednesday, as a surge in crop and livestock prices encouraged farmers to splurge on tractors and combines.
The results sent shares of the world’s largest farm equipment maker 3% higher in premarket trading and eased some fears around the impact of a worker strike that had hit Deere (NYSE:DE)’s operations for about three weeks of the fourth quarter.
Higher corn and soybeans prices this year have brightened the financial outlook for farmers, with the U.S. Department of Agriculture projecting net farm income to rise 19.5% to an eight-year high of $113 billion in 2021.
That has driven up sales of farm equipment despite price hikes by manufacturers. Deere’s sales of its large and some medium equipment jumped 23% in the quarter, while sales of smaller farm and turf equipment rose 17%.
The Illinois-based company also signaled the boom was expected to continue, forecasting 2021 earnings between $6.5 billion and $7 billion. The midpoint of the range was higher than analysts’ estimates of $6.72 billion, as per Refinitiv.
“Unlike previous boom/bust replacement cycles, the agriculture equipment industry is in the midst of a much smoother demand environment,” Third Bridge senior analyst Patrick Donnelly said.
Deere this month agreed to a new deal with its UAW workers, ending the near six-week strike just ahead of the winter buying period during which farmers purchase equipment for the spring planting.
It raised prices by 8% for its large and medium equipment orders in the quarter to offset rising inflation, helping fatten its margins.
Net income rose 69% to $1.28 billion, or $4.12 per share, in the quarter to Oct. 31, while analysts had expected a figure of $3.90 per share.
Deere’s equipment sales rose 19% to $10.28 billion, but came in slightly below expectations.
