BusinessSep 13, 2022
Deere is the undisputed king of farming equipment with strong demand from a global food crisis
Industrial Automation
Victor Lei
Discover
Deere is the largest farming equipment company globally — controlling 53% of the U.S tractor market.
The company wants to help farmers become more efficient with better tech, self-driving tractors and software — which could also become the key to driving its stock higher…
Global hunger has been on the rise from conflicts, natural disasters and climate change. The Russian invasion added to the crisis — hitting supply chains and sending crop and fertilizer prices soaring.
Then, two things happened:
Tractor demand has been so high that many of Deere’s tractors are sold out. Great, except Deere can’t meet that demand with a chip shortage.
Deere has also been struggling with soaring costs — which rose 24.4% in the recent quarter — resulting in Deere lowering its full-year earnings forecast.
Later this year, you can buy your very own self-driving Deere tractor. By 2030, Deere wants to have an autonomous version of its entire equipment line (Stat: 2021 was a record year for robot sales).
Deere has invested billions into tech to improve farmer efficiency — aiming for 10% of sales to come from software fees by the end of the decade.
Software is a lot more profitable than equipment. A 2021 Bernstein report estimates farming software to have 85% gross margins — compared to 25% for equipment (WSJ).
…and that food must come from somewhere, provided by humans or robots. Investing in Deere is like investing in the picks and shovels of an industry (agriculture) that isn’t going away.
has provided investors with consistent returns over the past 20 years — outperforming the S&P 500’s (2,174% vs. 552%). Even more, if you consider its dividend, which it’s paid since 1995 (yield currently at 1.2%).
