Deere & Co: Ploughing Towards Automated Farming

Deere & Co has built an iconic brand with a reputation for durable, reliable equipment, fostering deep customer loyalty. Deere has the largest dealer network across North America, with 2,288 locations. Though Deere's largest market is North America, the company has a truly global reach. In 2024, international revenue (from markets outside the U.S. and Canada) was approximately $13.3 billion (26% of total revenue) - a position of strength that will come in handy in a global agricultural equipment industry that is forecast to grow 8.5% annually through 2030.

Deere & Co. is trying to solve a major future problem. By 2050, the world's population is projected to grow by more than 2 billion, reaching 10 billion and increasing global food demand by around 50%. The company’s focus on advanced technology, precision agriculture, and sustainability initiatives puts it at the forefront of the effort to address the agricultural challenges posed by global population growth. For example, Deere’s development of autonomous tractors and machinery allows for 24/7 operation, increasing the amount of work that can be done in a given period and addressing labour shortages.

Innovation is the driver of Deere’s current success and future progress. The foundation of Deere's success is its advanced tech stack, a blend of AI, software, and automation that powers precision farming and the path to full autonomy. Deere’s developments, including fully autonomous tractors and SpaceX Starlink for rural connectivity, highlight its role as a leader in AgTech 4.0.

Commodity Prices

Commodity prices can directly impact Deere’s business, particularly the prices of key crops like corn, soybeans, and wheat, which directly affect farmers' income, which in turn influences their ability to purchase new equipment. If commodity prices remain strong, trade conditions are favorable, and technological advancements continue to improve productivity, the outlook for farmer incomes in the U.S. is generally positive. In the U.S., the $10 billion government support (2025) for farmers will help buffer downturns, sustaining equipment demand despite market volatility.

Technological Advancements: Deere's ongoing investment in autonomous machinery, precision agriculture, and connectivity (e.g., SpaceX Starlink for rural connectivity) is likely to drive innovation and efficiency in the agricultural sector. The commercialization of AI-powered, fully autonomous farming equipment has the potential to revolutionize agriculture by maximizing efficiency, reducing labor dependency, and optimizing resource usage.

Government Support: Increased government support for farmers, particularly in the U.S. (e.g., the $10 billion aid), may help buffer the downside risks for farmers' balance sheets, which could indirectly support Deere’s equipment sales.

Geopolitical & Trade Factors: Trade policies, tariffs, and government regulations, especially in emerging markets like Brazil, will be crucial for Deere’s growth, given its exposure to global markets.

Smart Industrial Strategy: Deere's "Leap Ambitions" strategy aims to unlock over $150 billion in incremental addressable market opportunity by delivering integrated, tech-driven solutions for precision agriculture and autonomous machinery. This could revolutionize agriculture and construction sectors by enhancing sustainability and productivity.

Global Population Growth: The expected global population increase and the corresponding rise in food demand by 2050 will likely drive a long-term need for more efficient farming equipment. Deere's focus on precision agriculture and sustainability could position it to capitalize on this trend.

Sustainability Goals: As global regulatory pressure on emissions and sustainability increases, Deere's push toward sustainable, alternative power technologies and solutions, such as electrification and hydrogen power, will shape its long-term product portfolio.

The company faces risks from rising input costs, semiconductor shortages, and global supply chain disruptions. While Deere has strengthened its supply chain resiliency through dual sourcing and stronger relationships with key suppliers to mitigate these risks, further inflationary shocks could affect profitability.

Deere’s core markets are highly cyclical, with farm incomes, commodity prices, and government subsidies influencing demand for equipment. While the company has improved resilience through diversified revenue streams, prolonged downturns in agriculture and construction could impact earnings.

John Deere faces significant tariff risks if it relocates production to regions like Mexico. While tariff exposure remains fluid, Deere must continuously monitor the rapidly changing global trade environment and be prepared to adjust its strategy to reduce exposure.