The disconnect is all about expectations. The U.S. Department of Agriculture on Monday forecast a record corn harvest in 2013, which pushed the price down to $4.55 a bushel, near a three-year low. Now farmers - notoriously conservative - are widely expected to cut back on spending for equipment and acreage, which have also spiked in recent years.
No one is expecting a catastrophic decline in the purchase of tractors, combines and other farm implements. Deere believes farmers' cash receipts will fall 4 percent next year after a sharper 8 percent decline this year.
Why would a 50 percent drop in corn prices result in a much more modest hit for farmers? Well, cash receipts are a function of both quantity and price. Corn was a lot more expensive last year, but the drought cut into yields. What's more, farm income can include all kinds of non-crop revenue such as government payments, and crop and revenue insurance. Farmers also have lots of storage capacity, so they do not have to sell at current prices. They can store their grain instead.
Add it up. Lower expected farm receipts + lower corn prices = double trouble for Deere shareholders.
That is why many analysts who cover Deere, including Adam Fleck at Morningstar, expect the next few years to be tough for the company.
"We're a far cry from the farm crisis of the 1970s and 1980s," said Fleck. "But the cold hard fact is farmers can always run a tractor one more year."
Lower corn and soybean prices, combined with the possibility of lower farmland values and higher interest rates, are coming together in a bad way for equipment manufacturers already facing several years of really difficult comparisons.
Unlike farmers, Deere does not have a bin where it can store unsold farm equipment. It can't stockpile tractors and combines and wait for the farmers to return. Deere, and perhaps its stockholders, might just have to tough this one out.