Dividends and Deere cuts profit outlook amid mounting US-China trade war

About 70% of the citizens live around cities, but if you go into the country, it is not hard to see Green tractors or John Deere tractors. If you drive past construction sites often you see Yellow machines or Caterpillar. The bulk of John Deere’s sales is related to agricultural machines and there is a slump in demand which has forced the company to cut production by 20% at two of its large factories in North America.

Ankit Ajmera of Reuters noted Deere & Co missed quarterly profit estimates for the 5th straight quarter and cut its full year outlook. As the trade war has increased, China has increased tariffs on soybeans and pork. Which has translated in farmers cutting back on crops and grains for export.

In particular, in mid May soybean futures fell to their lowest level in more than 10 years. In recent times, China was the world’s top importer of soybeans, they still import soybeans, they buy from Brazil, rather than the US. The market was worth $12 billion.

Deere & Co receives 60% of their sales from North America expects full year equipment to rise 5% rather than 7%. Profit on sales of $10.27 billion should be $3.3 billion rather than $3.6 billion.

Linking to dividend paying stocks, government policies affect companies, while many policies help companies, some will negatively affect the company’s operations. The government has its agenda and hopefully has a plan to achieve it; it is up to the company to adjust and figure out the plan while neither supporting nor opposing the government. If your company is seen to help the administration, the next administration may punish the company because it was too close. For companies balancing acts are the nature of the beast.

There are more questions than answers, till the next time – to raising questions.

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