Deere & Co. remains confident about producing to demand during fiscal year 2025, JP Morgan (JPM) analysts reported following a virtual meeting with Deere Director of Investor Relations Josh Beal in early October.

JP Morgan analysts expect Deere’s North American production could be down 10-15% next year with pricing flattish, which they said would drive decremental margin down to the typical 25-40% vs. the greater than 40% seen during fiscal year 2024.

According to the report, less than 50% of the field inventory of 100+ horsepower tractors in North America are Deere units, which is lower than Deere’s overall market share in the region, JPM reported.

North American large ag equipment inventory remains a cause for concern, the JPM analyst said, which could drive OEMs to under produce vs. retail at least through the first half of 2025 before retail sales “start lapping negative comparisons in the second half of the year.”

The analysts also expect Deere’s high decremental margin to improve in fiscal year 2025, largely due to adjustments from its peak production levels. Those adjustments are based on layoffs and factory disruption inefficiencies, “compounded by significant wage inflation in North America from the 6-year UAW agreement,” they said. They added, “However, next year is expected to see more stable production levels, reducing inefficiencies, while the UAW contract’s step-up year in 2024 will not repeat”

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