On August 31, Baird upgraded Deere & Company (NYSE:DE) to Outperform from Neutral and raised its price target to $800 from $640, implying meaningful upside from the share price cited in the report. The upgrade is based on an expected improvement in North American agricultural fundamentals in 2027.
Baird expects mid-2027 corn futures to move above farmer breakeven levels, while soybean economics are also improving. Deteriorating crop conditions and tighter projected stocks-to-use ratios could support higher crop prices and improve per-acre farmer margins.
That matters for Deere because stronger farm profitability typically gives farmers more room to purchase large tractors, combines, planters, and other equipment. The timing is important because Deere’s management has previously indicated that 2026 should represent the bottom of the current agricultural equipment cycle. At the same time, the company’s Production & Precision Agriculture business remains under pressure, showing that the expected recovery has not fully reached its results yet.
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The Growth Opportunity
The biggest bullish argument is that higher corn and soybean prices could signal the start of a new agricultural equipment replacement cycle. Farmers have delayed major machinery purchases during the downturn, so sustained improvement in crop economics could unlock pent-up demand.
Deere & Company (NYSE:DE) is well positioned for this recovery because of its strong exposure to North American row-crop agriculture. If farm margins improve through 2027, Deere could see large-equipment demand recover without needing significant market-share gains.
There are also signs that the broader business is becoming more resilient. Deere’s Construction & Forestry segment grew sales 18% in its latest quarter, with customer backlogs extending into fiscal 2027. This gives Deere another source of earnings support while its agricultural business recovers.
The potential upside goes beyond a simple rebound in sales. A recovery from a cyclical trough could improve factory utilization, margins and earnings at the same time. Baird expects Deere’s earnings power could move toward the mid-$30s per share by 2028 as the agricultural cycle normalizes. If 2026 is indeed the bottom, investors may be getting into Deere before the strongest part of the earnings recovery becomes visible. That could allow the stock to keep rising even after its strong 2026 performance.
Potential Headwinds
The biggest concern is that Deere & Company (NYSE:DE)’s stock may have already priced in much of the expected agricultural recovery. Shares have risen around 39% in 2026, so investors are no longer buying Deere simply as a depressed cyclical stock. They are paying for an expected recovery in 2027.
Higher crop prices also do not guarantee an immediate increase in equipment purchases. Farmers could use stronger cash flows to repay debt, rebuild liquidity, or maintain existing machinery instead of making large capital expenditures. Deere has already seen this behavior, with weak farm economics prompting customers to extend the useful lives of existing equipment.
There are also meaningful cost pressures. Deere & Company (NYSE:DE) expects net tariff costs of roughly $750 million in 2026 and about $1 billion in 2027, creating a significant headwind even if agricultural demand improves. Another risk is that farmer economics may not improve as quickly as Baird expects. U.S. farm income was still projected to decline in 2026, while farmers have been dealing with elevated input costs and weak crop economics. If commodity prices fail to remain above breakeven levels, the expected equipment recovery could be delayed.
Finally, Deere’s strong construction business could make the agricultural recovery appear healthier than it really is. Investors need to see sustained improvement in the core Production & Precision Agriculture business for the full bull thesis to play out.
Conclusion
Deere & Company (NYSE:DE)’s outlook is becoming more constructive as the agricultural cycle approaches a potential bottom and corn and soybean fundamentals improve. If higher crop prices translate into stronger farmer margins, Deere could benefit from a meaningful recovery in North American equipment demand during 2027.
The main concerns are valuation and timing. After a strong 2026 rally, the stock already reflects considerable optimism, while tariffs and weak farm equipment demand remain near-term headwinds. In short, Deere’s 2027 setup looks bullish if farm margins continue improving, but the stock’s strong rally means the agricultural recovery needs to materialize to support further upside toward Baird’s $800 target.
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Disclosure: None. This article is originally published at Insider Monkey.
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