UPDATE 3-Deere offers upbeat 2014 forecast on construction rebound
* Lower commodity prices will weigh on tractor sales
* Construction equipment sales expected to rise 10 pct
* Latest earnings, outlook top estimates
(Adds details on commodity forecast, updates shares)
CHICAGO, Nov 20 (Reuters) - Deere & Co offered an unexpectedly upbeat forecast for 2014 on Wednesday, saying sales of construction and forestry equipment should offset an anticipated slowdown in demand for agricultural machinery.
Shares in the world's largest maker of tractors and harvesters rose nearly 4 percent in premarket trading as the company also reported higher-than-expected fourth-quarter results.
"It's a big quarter," said Eli Lustgarten, an analyst with Longbow Research.
"Volumes were better than expected and profitability was a lot better. And it's actually even stronger than it looks because the company took a writedown on its landscape business that - back of the envelope - probably shaved 17 cents a share off (earnings per share)."
The past five years have been great for farmers and for companies like Deere that supply their equipment. Agricultural commodity prices were pulled higher by rising demand in fast-growing emerging markets, a growing appetite for ethanol and biofuels, and weather-related harvest issues.
But with corn futures prices near a three-year low, pulled down by forecasts of a huge U.S. harvest and a proposal to slash U.S. biofuel rules, farm profits are expected to fall next year.
Lower prices would mean a drop in total farm cash receipts. Armed with less cash, farmers would not be able to spend as much on equipment, even if they have to harvest a lot of corn.
On Wednesday, Deere acknowledged that 2014 worldwide sales of agriculture and turf equipment would fall about 6 percent as farmers adjust to the new environment.
Deere said it expects overall demand for tractors and combines to fall in almost all of its key markets, including the United States, Canada, Europe, and South America.
The key culprit was soft commodity prices, which drive farm income and equipment demand.
Deere expects that corn planted next spring in the United States will fetch $4.50 a bushel by the time it is harvested in the autumn, a 35 percent decline from the price last fall but about 10 cents a bushel higher than the current price.
Soybeans, meanwhile, will fetch $11 a bushel next fall, Deere said, down from $12.50 this year and $14.40 last year. Wheat will go for $6.75 a bushel next fall, the company forecast, down from $7 this year and $7.77 last year.
As a result, Deere now expects total U.S. farm cash receipts to come in at $377.7 billion in 2014, off about 4 percent from 2013 and down 7 percent from last year.
Despite the headwinds, Deere now expects to post a fiscal 2014 profit of about $3.3 billion. Wall Street estimated $3.04 billion, according to Thomson Reuters I/B/E/S.
The company's better-than-expected outlook for 2014 is driven by what it says will be a welcome rebound in demand for its construction and forestry equipment as the housing market continues to recover. Housing had languished while agriculture had boomed in recent years.
Deere expects worldwide sales of construction and forestry equipment to increase by about 10 percent in 2014.
In the latest quarter, Deere reported net profit of $806.8 million, or $2.11 per share, up from $687.6 million, or $1.75 per share, last year.
Revenue fell 3 percent to $9.451 billion.
Analysts, on average, expected the Moline, Illinois-based company to report a profit of $1.89 a share on revenue of $8.68 billion, according to Thomson Reuters I/B/E/S.
Deere's stock rose to $86 in premarket trading after closing at $82.81 on Tuesday.
(Editing by Jeffrey Benkoe)