Stocks

I Agree With JP Morgan’s Bearish Call On Deere & Company

Deere & Company manufactures and distributes various equipment worldwide agriculture equipment such as utility tractors; tractor loaders; combines, cotton pickers, cotton strippers, and sugarcane harvesters; harvesting front-end equipment; sugarcane loaders and pull-behind scrapers; and tillage, seeding, and application equipment.

A couple of days ago, I talked about the collapse in soybean prices and supply exceeding demand now and in the coming months.

All Eyes This Weekend On…..Soybean Prices – Part 3

China’s announcement Monday of higher tariffs on $60 billion of American exports puts another dagger in the heart of American farmers as China is their biggest consumer and source of revenue.

J.P. Morgan turned bearish on the agriculture, construction and turf care equipment maker citing the “rapidly deteriorating fundamentals” in the U.S. agriculture industry. Analyst Ann Duignan cut her rating back to underweight, after being at neutral since June 2017, while lowering her price target to $132 from $154. Duignan said the U.S. farming industry is being hit with a “perfect storm,” as tariffs have weighed on U.S. soybean exports, import demand from China has fallen as it deal with reduced hog herd as a result of an African swine fever outbreak, near-record soybean and corn production in Brazil and Argentina, strength in the U.S. dollar that has made U.S. exports more expensive and potential yield losses as the U.S. Midwest got off to a “very slow start.”

Source

Today Deere & Co. posted weaker-than-expected second quarter earnings and lowered its full-year profit outlook, as “softening” agricultural market conditions. Deere also plans to reduce production in its core Ag business to control inventory. At two of their larger plants in the US, Deere will reduce production by 20%.

So where is price headed next for Deere, lets go to the charts? The chart suggests there is further downside to at least the weekly demand at $127.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

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