Why Mother Nature Is Hurting This Company

Today, industrials editor and analyst Brendan Byrnes discusses how severe drought problems in the Midwest could hurt Deere (NYSE: DE  ) . The U.S. Department of Agriculture already reduced its 2013 corn and soybean yield expectations, and those numbers could only get worse as the drought continues. Even though farmers might make more money on higher crop prices per bushel, they are less likely to purchase new farm equipment in the face of a poor crop output. And while emerging-market demand will offset this somewhat, the drought accelerated the saturation of the U.S. markets that reduce Deere’s domestic sales. Because of these lower yields and other factors, Brendan sees Caterpillar as a better stock in the manufacturing sector to own now.

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Brendan Byrnes owns shares of Caterpillar. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On July 25, 2012, at 4:44 PM, SAPCAP wrote:

    Completely disagree. This is a great buying opportunity for the farm equipment companies, as the stocks have sold off considerably. While it is true that farmers that are fortunate enough to have crops to sell will be selling lower yields, crop insurance will guarantee very high farmer income, as crop insurance pays out at spot prices.

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