From its low-slung headquarters tucked into woods near the Mississippi River, Deere dominates the $23 billion U.S.-Canada market for farm equipment with a 60 percent share, according to William Blair & Co. That helped the company post a record net income of $2.8 billion on record sales of $32 billion for the fiscal year ended Oct. 31.

Deere's strategy is to couple state-of-the-art machines with dealers who work so closely with farmers that they become virtual partners, often locking in customers over several generations. The company makes few acquisitions, preferring to develop products internally. Its biggest shareholder, with a 6.2 percent stake, is Cascade Investment LLC, Bill Gates's personal money-management firm.

Eoin Treacy's view The latest surge in soft commodity prices highlights the supply deficit issues that have plagued the sector over the last decade. Until this decade, the global grain and bean complex had ample stockpiles with which to weather temporary vacillations in supply. This resulted in highly seasonal price swings for related commodities. This long-term chart of corn from 1962 exemplifies the rangebound natural of nominal pricing until 2006.

The advent of hundreds of millions of new consumers with the buying power to consume more calories has resulted in demand for food commodities embarking on a secular advance. This has altered the previously highly cyclical environment that prevailed in the commodity complex. Prices have now moved to new highs and are holding more of the gain during corrections.

The supply side has struggled to raise output because of a number of factors not least the loss of subsidies in Europe and the USA, the siphoning off of corn supply to act as an oxygenate for motor fuel and extreme weather events. The deteriorating ability to increase carryover from one crop to the next leaves the market in a scenario where weather events can have an outsized effect on pricing.

For a farmer who is lucky enough to live in a prime growing area with access to storage, fertiliser and machinery, high prices are a boon. However as the spike in potash prices during 2008 demonstrates, newly flush farm balance sheets cannot pay any price for fertilisers. The fortunes of agricultural investments will ebb and flow with the mood of the crowd just like everything else.

I reviewed a number of fertilisers companies yesterday and thought a look at farm machinery manufacturers might also be of interest. (Also see Comment of the Day on June 27th 2011).

Deere & Co. (2.24%) failed to hold the move to new all-time highs in April 2011 and gave up approximately half of its previous advance by October. The share found support above the October low in June and has bounced impressively. While somewhat overbought in the very short-term, a sustained move below $70 would now be required to question medium-term scope for some additional upside.

CNH also pulled back sharply from its 2011 high but has been ranging mostly above $35 since December and bounced from that area again last week. A sustained move below it would be required to check medium-term scope for additional higher to lateral ranging. AGCO has a similar pattern. Both shares have discontinued their dividends.

Japanese listed Kubota has been mostly rangebound since mid-2009 and is currently rallying from the lower boundary.

Hong Kong listed First Tractor has failed to find support over the last couple of weeks and extended its downtrend today. A break in the short-term progression of lower rally highs will be required to question supply dominance.

India listed Mahindra & Mahindra has been largely rangebound since late 2010 and is currently rallying from the lower boundary. A sustained move above INR800 will be required to signal a return to medium-term demand dominance.

While not directly related Toro Co. (1.15%) remains in a relatively consistent uptrend. It bounced back emphatically from last year's correction to hit new highs by March and has found support in the region of the 200-day MA on successive occasions. A sustained move below $33 would now be required to question medium-term scope for additional upside.