November 29,2009 - Nobody could accuse Deere and company of painting a rosy picture in reporting its full year earnings last week.

Commentary accompanying the earnings report included a review of equipment division performance and outlook for the company’s construction & forestry equipment sectors.

Equipment Division Performance

Construction & Forestry. Construction and forestry sales declined 47 percent for the quarter and 45 percent for the full year, resulting in operating profit of $2 million for the quarter and an operating loss of $83 million for the year. Last year the division had operating profit of $89 million and $466 million for the same periods. The profit decrease for the quarter primarily was due to significantly lower shipment and production volumes, partially offset by improved price realization, lower raw-material costs and lower selling, administrative and general expenses. The decline in annual operating results was largely due to lower shipment and production volumes and lower equity in income from unconsolidated affiliates, partially offset by improved price realization and lower selling, administrative and general expenses.

Market Conditions & Outlook

Construction & Forestry. Deere's worldwide sales of construction and forestry equipment are forecast to increase by about 18 percent for full-year 2010. Sales are expected to be helped by aggressive inventory reductions in the previous year that position the company to align production with retail demand. Despite an increase in housing starts from historically low levels, U.S. construction-equipment markets are forecast to be down for the year resulting from a decline in non-residential construction activity and lower used-equipment values. Global forestry markets are expected to experience some recovery based on higher demand for pulp and paper, driven by higher worldwide economic output, as well as the increase in U.S. housing starts.