What’s going on?

• Deere & Co. posted better-than-expected earnings, as its agricultural equipment became a must-have for the industry.

What does this mean?

• Farmers have been spending more on its machinery to meet demand, which brought Deere’s quarterly revenue and profit ahead of expectations by 11% and 16% respectively.
• And while that boom has started to diminish a little, Deere is still optimistic to hike its earnings forecast for the rest of 2021.

Why should I care?

The bigger picture: Being a bellwether and its side effect

• Deere is considered a bellwether of the US economy, but that also affects its stock in a weakening economy.
  • Goldman Sachs just lowered its US economic growth forecast, and Invesco’s broad index of commodities (which has locked with Deere’s stock since October 2020) has been on the decline.
  • Investors, therefore, might be feeling a bit nervous about adding Deere’s stock to their portfolios.

Zooming out: Land or gold

• The US government estimates that around 30% of the US’s farmland is now owned by those who don’t actually farm themselves (e.g: Bill Gates was the biggest landlord last year).
• Farmland rental offers a steady income, as the land itself is likely to keep rising in value when it becomes more and more limited.

Content source: Finimize (2021) Hay Fever. Available at: https://www.finimize.com/wp/news/hay-fever/ [Accessed on Aug 21, 2021]