Like smaller competitors AGCO Corp. (NYSE: AGCO) and CNH Global NV (NYSE: CNH), Deere’s farm equipment sales in the US and Canada rose the most as acres under cultivation continue to grow. Sales in Asia were described as “up moderately, though slowing.” The largest of the equipment makers, Caterpillar Inc. (NYSE: CAT), has much more invested in Asia, particularly China, than does any of the others, and it was that commitment to China that haunted Caterpillar when it announced quarterly results last month. More about that later.

For the current quarter, Deere expects sales to rise 25% above the same period a year ago. Prices are expected to improve by about 4%, and currency effects are expected to reduce sales by about 4%. For the fiscal year, Deere forecast sales growth of about 15%, with a 4% improvement in prices and a -3% currency exchange impact. The company also raised its total net income forecast from $3.275 billion to $3.35 billion for the year.

Deere, unlike Caterpillar, does not have significant exposure in China. Caterpillar employs 11,000 people in the country and expects that number to double by 2015. The company pointed out that just 3% of its global revenues in the first quarter were attributable to China. Although the two statements may not be linked in management’s mind, they are in investors’ minds.

When Cat had to downplay China’s role in its business, what investors took away is that business was falling in China. And the new plants and new employees in Caterpillar’s Chinese operations are now going to be a drag on earnings, not a positive. That probably won’t turn out to be the case, but that was the effect of what the company had to say.

None of these four has had a particularly good past 12 months. As of last night’s close, every one’s share price is lower than it was a year ago, with AGCO down -19%, Deere and Caterpillar down -13%, and CNH down just less than -1%. Growth in North America is not going to drive record sales, only Asia can do that. As long as the Chinese economy continues its slowed growth, sales of farm and construction equipment won’t jump off the charts.

Shares of Deere are up about 1% in the pre-market, at $77.35, in a 52-week range of $59.92-$89.70.

Paul Ausick

Agrium attributed its increased sales to higher volumes and higher prices for nitrogen. Last week, CF Industries Holdings Inc. (NYSE: CF) also blasted through estimates, but the company’s best seller was also its nitrogen products. Potash Corp. of Saskatchewan Inc. (NYSE: POT) missed earnings estimates on lower potash sales and margins (gross margins fell -56% year-over-year). The Mosaic Co. (NYSE: MOS) also missed on earnings as potash volumes fell and phosphate costs rose. Monsanto Co. (NYSE: MON) pounded EPS estimates, but analysts believe that sales were all pulled forward due to the warm weather.

Agrium and CF are less dependent on potash and phosphates than are the others, and the rise in nitrogen is directly related to its ability to boost yields on the same amount of acreage. Potash fertilizer is needed to ensure healthy plants, but its contribution yields is less important.

Whether demand for nitrogen will continue through the Northern Hemisphere’s growing season remains to be seen, but as more people demand more food on the same amount of acreage, sales and margins on nitrogen are likely to keep pace.

The catch in Agrium’s results is that the company’s first half adjusted EPS guidance is a relatively weak $5.50-$6.10. Analysts had been expecting $5.67 before today’s blowout number. Investors are likely to interpret the lowish guidance as an indication that Agrium’s sales were also pulled forward into the first quarter.

Shares of Agrium are trading up about 0.13% at $84.68 in a 52-week range of $60.15-$93.49.

Paul Ausick

Earnings came in at $0.56 EPS versus Thomson Reuters expectations of $0.63 EPS.  The drop was 33% in raw earnings based on lower sales and volumes meeting higher operating costs per output unit. The company’s CEO noted that demand has taken longer to surface than it originally expected earlier this year, but he does expect that demand will accelerate through the rest of 2012.  Weaker potash prices have been seen based on lower demand and based on higher competition.

As far as guidance for the second quarter, the company sees earnings in a range of $0.90 to $1.10 EPS against estimates of $1.07 EPS.  The company is also lowering its fiscal 2012 annual earnings target to $3.20 to $3.60 per share from a prior range offered of $3.40 to $4.00 in earnings per share.  The top of the range is now under the $3.61 or so consensus target.

Potash Corp. (NYSE: POT) shares are indicated down about 2.3% at $43.25 against a 52-week range of $38.42 to $62.60 and the weakness appears to be elsewhere in competitors.  The Mosaic Company (NYSE: MOS) has not traded but the bid/ask range is indicated lower than the $53.20 close and its stock has been weak as well.

JON C. OGG

The reaction may be a bit premature as this was just a shelf registration statement.  It is worth noting that no underwriters were named in the offering.

After looking at the “use of proceeds” we also noticed a broad discretion of funds and that may be weighing on shareholders.  The company noted the “for general corporate purposes” and that includes working capital requirements, capital expenditures, acquisitions, acquisitions of additional ownership interests in New PE Holdco, and the repayment of outstanding debt.

Shares are down over $0.10 or about 10.6% at $0.885 this morning and the 52-week trading range is $0.25 to $3.78.  Raising the full $100 million might be a bit difficult in the current climate because the stock’s market capitalization rate today is down to about $78 million according to the Yahoo! Finance data.

As most ethanol producers have discovered, nothing comes for free these days.  At least not for long.

JON C. OGG

But the big news came on the earnings front. The company is now forecasting EPS of $0.53-$0.55, well above the current consensus estimate of $0.32:

This includes an estimated benefit of $0.09 to $0.11 per diluted share from the pull-forward of sales into the first quarter, from the second quarter, due to the early spring weather. Guidance also reflects the expectation that gross margin for the first quarter of 2012 will be slightly below prior-year levels due, in part, to warmer weather in January and February that necessitated markdowns to sell through winter seasonal merchandise.

Given the “pull-forward” of sales, here’s what the company expects the full year to produce:

Net sales are now expected to range between $4.61 billion and $4.68 billion compared to the Company’s previously expected range of $4.56 billion to $4.66 billion. Same-store sales for the full year are now expected to increase 4.0% to 5.5% compared to the prior expectation for an increase of 3% to 5%. Net income is now expected to range between $260 million and $265 million compared to the prior expectation of $246 million to $253 million. The Company now anticipates full year net income will range between $3.52 and $3.60 per diluted share compared to its previous guidance of $3.38 to $3.46 per diluted share.

The consensus estimate for full-year EPS had been $3.52 and the consensus revenue estimate had been $4.65 billion.

Shares have risen to $95.00 in the pre-market, which would be a new 52-week high if it holds up. Tractor Supply’s stock has traded in a 52-week range of $49.02-$93.50.

What changed is the US economy. At the height of the US financial crisis in 2008-2009, the estimated number of undocumented Mexican immigrants in the US fell from 12 million to 11 million. According to The Christian Science Monitor, since then

Mexicans without documents aren’t migrating at rates to replace the loss, creating a net zero balance for the first time in 50 years.

The implications for US agriculture, much of which depends on the cheap labor provided by undocumented workers, and on the Mexican economy are profound. Mexico has long depended on the billions of dollars sent back to the country from the undocumented workers as a form of social welfare. Those days are ending and the government may have to pick up the slack.

Adding to the decline in immigration are tougher border security, more violence, and the increasingly hostile state anti-immigration laws.

Paul Ausick

Monsanto, along with Mosaic Co. (NYSE: MOS), Potash Corp. of Saskatchewan Inc. (NYSE: POT), CF Industries Inc. (NYSE: CF), and Agrium Inc. (NYSE: AGU), has seen its share price rise steadily since the first of the year. Agrium and CF Industries are up around 30% year-to-date, while Monsanto is up about 17%, Potash Corp. up about 12%, and Mosaic up more than 4%.

Monsanto reported second quarter revenue of $4.75 billion compared with a consensus estimate of $4.53 and EPS of $2.24 compared with a consensus estimate of $2.12. The company also guided full-year EPS to $3.49-$3.54, slightly better than the consensus estimate of $3.51. The company’s CEO predicted continuing growth:

We’ve seen contributions from growth across crops and geographies, which position us well to deliver high-teens ongoing earnings growth this year

The company’s seeds and genomics business posted revenue of $3.9 billion, up $503 million from the same period a year ago. Monsanto attributed the increase to its sales of corn seed, particularly in the US. The company’s fertilizer business grew from $710 million in the second quarter a year ago to $824 million this year.

Shares of Monsanto are up about 1.6% in the pre-market at $83.09 in a 52-week range of $58.89-$83.95.

Paul Ausick

There appear to be two constraints on prices. First, China just completed building up a stockpile of nearly 19 million 500-pound bales as it replenished stocks from previous releases that were intended to keep prices in the country reasonable for cotton mills. Over the past two years, China accounts for two-thirds of the increase in cotton stockpiles.

Second, the US Department of Agriculture estimated cotton plantings in the US this year of 13.16 million acres, higher than a market estimate of 12.9 million acres. That means more cotton and lower prices.

The only possible bright light is the government of India’s ban on exports, instituted last month, is likely to last until the country’s currency strengthens versus the Chinese yuan. Which could take a long time.

Paul Ausick

But, as the recent past has shown, prices are driven by weather as much as any other factor. Droughts in the last two years in Russia and China has affected prices. The weather in the US has been unusually dry, and, at least this winter, unusually warm.

According to Reuters,

U.S. farmers will plant the most corn in 75 years to cash in on higher prices, topping expectations at the expense of soybean and spring wheat sowings

This new exchange traded product is technically not an ETF because it invests in futures contracts.  Still, it aims to allow investors to allocate investments in the four core agricultural commodities.  The move also allows investors to have exposure here without having to rebalance their exposure themselves.

The aim is to provide a greater degree of diversification as “a way to invest in a next-generation agricultural basket ETP that may be a better option than currently available alternatives.”

Interesting on the surface, but investors better read the fine print here as the underlying ETPs invest in futures rather than in the hard assets.

JON C. OGG