Deere Starts Off 2023 on a Strong Note; We Expect Demand to Continue Outpacing Supply

Deere reported strong fiscal first-quarter results to start 2023. For us, the key takeaway was that demand will continue to outpace supply throughout the year. Deere pointed to solid ag fundamentals, elevated fleet ages, and low dealer inventories as key near-term demand drivers. The current ag cycle is running longer than average, but the industry has been working through numerous extraordinary items over the past few years, namely significant supply chain disruptions. While raw materials and freight costs are starting to ease, management is still calling out purchase components, labor, and energy costs as near-term headwinds. Even so, the company’s ability to main positive price/cost levels has been impressive over the past couple of years. We expect equipment pricing to expand by a low-double-digit rate in 2023.