>> take a look at how equities performed. we want to look at the weekly perspective and you see big drops within the equity markets, further rotation out of technology and a flight to quality especially within the two year and 10 year yields, flowing back into bond prices that are higher, yields lower. the dollar strength as a traditional safe haven but still some weakness on the week. it was weakness within these equity markets. now looking at five out of seven weeks so far in this year that

have been weekly drops for the s&p 500, as we think about pricing in some geopolitical risks, impact on global markets and commodities. that was a markets wrap. what did you miss starts now. >> global commodities a part of the story. i'm romaine bostick. the triple take centers on that today. we want to focus on john deere, raising its forecast, but to provide caution on the supply chain bottlenecks. almost two years into the pandemic now, like many global companies it is fighting to keep up with what is robust amanda still -- robust demand still. we will start with the earnings we got.. >> a bellwether indeed because look at the factors here factoring into the net income outlook. you have 6.7 to $7.1 billion

expected, a raised outlook, and a part of that is inflation helping prices higher, helping farmers income and equipment orders. the bad news is a supply creating uncertainty in the outlook and wall street analysts expected a higher outcome here for this net income outlook. >> list dive into this -- let us dive into this. we are digesting quarterly reports and inking about the broader picture. we will do this with a deutsche bank analyst, nicole deblase, who has a hold and a $400 price target on the stock. talk us through some of the big tailwinds facing this country and headwinds you see on the horizon. >> absolutely. i think key tailwinds include high commodity prices, high demand for agricultural equipment, and a shift toward

more technology for farming, which john deere has a leading position in, and it is causing them to gain share versus competitors with respect to challenges they face. supply chain is a key one. they just got through a labor strike that impacted the first quarter result. and also, rampant commodity inflation that we are seeing impacting all industrials. >> give us a sense of how commodity price inflation affects the demand side of the equation for new tractors and other equipment. >> absolutely. there's a high correlation between farm net income and agricultural equipment demand, almost a .8, .9 correlation, and the biggest driver of farm income volatility year-over-year is the price of commodities, so with corn up year-to-date, farmers are definitely feeling good about their ability to

spend money on things like equipment. >> i want to talk about this outlook and the over-under. what does the uncertainty mean to you that they have cautioned on, and what is the biggest downside risk here? >> i think probably supply chain remaining a constraint is the biggest downside risk just because deere, like all companies we cover, have embedded an improvement in the situation over the year. if that doesn't play out, there could be a downside to revenue projections. with respect to commodities on the raw materials side, not only the commodity's side -- the commodities side, if things like steel return to an inflationary mode, that could affect things. >> a logistics person with walmart was stalking us through the relationship these companies have with suppliers, how they negotiate to make sure they are first in line if there are

supply chain issues. not walmart, but in your case deere, how are they positioned to negotiate with those key suppliers? >> they are the market leader in the act equipment space and are doing things with suppliers to help them, actually putting employees in supplier facilities in some cases, redesigning product to avoid semiconductors facing particular shortages, so they are not just sitting and waiting for this to go away. >> let's talk longer-term about the demand cycle and commodities cycle here. people only purchase new tractors every so often. it is not like they will re-up every year. is there enough sustainability in demand for agriculture products that it can support, i guess, an additional cycle of buying of tractors going forward? >> that is a key debate now for investors. our view is that we have at

least one more year of strong end-user demand. the current backlog goes out through 2022, which is actually pretty rare to have this much visibility into your shipments into a year, and beyond that, we have another year of strong demand driven by inventory resale, because inventory levels are at lowe's at the moment -- at lows at the moment. projecting beyond that gets difficult because a lot of this is driven by where crop prices are and it is tough to predict where they might be in two years. >> we have talked about supply chain, little bit about technology and commodity input, but what about labor? how much control do they have it the labor story in terms of how it will impact them moving forward? >> sure. they just finished a very large uaw contract negotiation and we think that wage increases for deere have been in the 10% zone,

similar to what we are hearing from other companies, so that's also a factor impacting profitability this year. >> the next conversation we are going to have is how they positioned when it comes to technology, the ai, the ability to forecast with more precision than previous equipment and relative to competitors. how do you see their position as a technology player? >> it is clear to me that, at the moment, with respect to some technologies, they are head and shoulders ahead of the competition. if we look at some of the basic technology farmers use today like guidance systems, telematics, low levels of its on a missed technology -- of autonomous technology, our view is that all the big providers are on an equal playing field, but where they differentiate is

moving faster into the subscription space, having a better user interface that's created a market share moat for them. today, they announced they are targeting 10% revenue from recurring sources, so subscriptions, and that is a rare thing to see in the agricultural equipment space, so our view is that they are number one from a technology perspective. >> thank you. that is nicole deblase, deutsche bank managing director. we turn now to soaring prices of crops, higher over the last six months. anything, you name it, it is higher. the leader of agricultural coverage for bloomberg joins us now. i want to start with agricultural prices specifically. we have seen corn prices up 20% the last several months, similar story for wheat and soy.

what is driving them and is what is driving them sustainable? >> i mean it is a bit of a perfect storm. last year, you had major weather issues in brazil, drought on the west coast, a very good season on the east coast. you know, i was talking to one of my colleagues yesterday about, with ags, it is often a supply-side situation. demand stays static, especially when you compare it with the energy or middle-market, so stockpiles of all these crops and grains are not at high levels, so with demand staying pretty darn good, especially through the pandemic, you have situations where it does not matter which ag you look at, it is hitting a new high every other day. >> supply chain issues will be a headwind, but at the same time you have them having control over another input, which is technology and efficiency, so how much will that benefit them

and offset some issues we see in the to help deere out over here? >> nicole was talking about this already, which is the technology side will be huge for deere, but when you finally are a former -- farmer, putting new technology into your tractors and you are getting better harvests and more efficient planting, that is the ballgame for them. the less time they have to spend worrying about where everything goes and gets picked up, the more we are making money, and that is a question on the horizon. over 10 years -- nicole said this -- they are looking for 10% of the revenue from recurring subscriptions. it is now less than 1%. that is a huge jump. if they can getugh farmers to actually saying this is good enough for us and we will use it

on a massive scale, that's a big ballgame. and we are only talking about the united states. if you look at brazil right now, you are talking about entire farms that are completely off the grid. they have no satellite connection. this is an untapped market they will be looking out over the next decade and longer. >> what is the path to getting there? you said it is only 10% from 1% but is the demand there for that? >> well, listen, they say that, you know, all of their farmers are excited about whatever tech they bring out, and when the companynnounced they had a fully autonomous tractor, a lot of analysts were coming out and saying they have to knock this out of the park, because if they bring on enough fully autonomous tractors with bugs in it, farmers are going to hesitate and say this is not for us. that is a big deal because the farmers have not been that way with the other technology they have ruled out. it has been so good the farmers

have said we need more of it. this is what has put deere on that path for the customers have said we demand this, one more of it. why did everybody like the iphone over a decade ago? it was easy to use. the fruits -- the truth is there touchscreen and everything on the tractor is intuitive for farmers for a job that is already hard enough out in the fields. >> i have used some of those touchscreens and it is night and day between what farmers were using even 20 years ago, 10 years ago really. i am curious though about the idea of the maintenance of these things. in the old days, if your tractor broke down, you got under the hood and fixed it and got on with the harvest. it is more complicated now and you have to interface with deere people or someone authorized to deal with these software issues, which connect to the hardware issues. >> you are touching on a massive topic, and that is the right to repair.

there's a lot of farmers who say i can no longer make slight adjustments to my tractors because the proprietary technology on the tractor forces me to have to go to my dealer, a.k.a. wait for one of my dealer's guys to show up on my farm, which can take days, to make the adjustment or repair. in the meantime, i have to let a tractor sit idle, not putting any hours on it. this is a legitimate concern. we are seeing legislation pop up in various states. there was one bill in nebraska that recently got through committee, and that is a big deal. it is up for debate. how much of a right to these farmers have to control their own tractors? >> that is a debate we will have with our next guest. have a wonderful weekend. joe deaux, who leads our agricultural coverage here on bloomberg. it has become a big issue for farmers and these newfangled tractors.

they are great but how do you fix them when they break down? we will talk with gay gordon-byrne of the repair association about the ability of these farmers to get under the hood and fix these things themselves. this is bloomberg. ♪

>> the issue in agriculture is labor availability and we have had this movement of populations from rural environments to urban environments, the population growing to 10 billion people by 2050, food production going up 50% as a consequence. all this drive this intensity around producing more food with less, and less labor is one thing we need to economy -- to

accommodate, and we see autonomy as key. >> deere's chief technology officer talking about the new autonomous tractors. we will talk about the technology that goes into this. you talk about a company with a chief technology officer. i remember when they first appointed one. everyone was like, why? now we see. we see how sophisticated these machines have become and let their farmers do their jobs better in a way. >> he spoke to deere ces, a technology show and showroom. >> not typically someone you expect to see, but this idea of autonomous vehicles and this larger right to repair issue. >> that is the thing is these things become more complicated in the way they do things, they also become more complicated to fix. there is a debate as to who has the right to get under the proverbial hood and fix these tractors? gay gordon-byrne is the

executive director of the repair association, a consumer advocacy group that pushes for consumer friendly policy and regulation. gay, we've had this discussion about iphones and other technology. we have not had it about tractors. what is the main impediment if you could summarize? what is the main impediment now for farmers to go in and fix the tractor themselves? >> the main impediment appears to be limitations that the manufacturers and john deere have put on what farmers are allowed to fix and what they are not allowed to fix. i just gave testimony yesterday in georgia, and the various dealerships were saying, there is no problem here. farmers can fix 93%, 90 5%, 90% of the products they have. the problem ismers expect to be able to fix 100% of the problems of things they

purchase, so there is a disconnect between what manufacturers want to permit and what farmers want in the field. >> i will play devils advocate for a second because the manufacturers will say this is really sophisticated. you do not want just anybody rooting around whether it is in the software or even the hardware without a full understanding and knowledge of what they are doing. what do you make of that argument? >> i am an old mainframe ge ek, so i'm used to big, complicated machines with millions of lines of code, but i do not really buy that as a fundamental principle. the people repairing these tractors and heavily automated equipment today, they are provided with tools and the diagnostics and the software tools that let them do the job because things are so darn complicated. you do not have a guy hovering over the engine, listening to see it -- see if it sounds right.

he has a diagnostic tool that tells him it is working correctly. if you do not have that same level of information already kind of pre-created for the purpose, then you will not have a qualified tech because you are preventing them from being qualified. >> on a day when we are focused on geopolitical events and tensions between competing nations, how is the right to repair also furthering, in many cases, the u.s. interests? we are importing fewer items from china. >> we have a lot of problems with importing things from china now. computer chips. there is a report from deere that they are constrained on their ability to manufacture because they cannot get their hands on enough chips. we don't have the ability currently to make enough of the chips that we should be making to suit our own needs so there is a problem, definitely. >> do you think the shift we have seen in the industry, and not only with deere but other

manufacturing companies and consumer products companies, to move to, i guess, effectively, a sort of hemming and other technology to prevent people from getting to it, will that hold up from a legal standpoint? >> not at all. we have a system of ownership that says you buy it, you own it, it is yours. it no longer belongs to the manufacturer or dealer. just like when you purchase a used car, the former owner doesn't get to tell you how to drive. we are used to the idea of we become responsible for these things for good or bad when we buy them. >> i am wondering also, as a consumer, if you can give us a sense of how much power the consumer really has as they fight for the right to repair? >> individually, no power at all. collectively, tremendous power. everybody that wents to be able to fix their stuff has a voice with their legislators.

and it is the combined voices of consumers reaching their legislators that has created this situation today where there are multiple states where bills are moving and we have every expectation that they will pass a bill federally this year. >> so you see a full movement here and a shift underway? >> yeah. we started back in 2010 and incorporated in 2013 and every year we have had more and more support from legislators. we have found that legislators, the more they learn, the more committed they are to making these changes, so time is on our side. we are educating increasingly certainly the federal trade commission, who did a tremendous job when they did a two year study in may saying there are not really reasons from preventing consumers from having control of repair. >> when we talk about these new

products and the idea of what constitutes ownership, i mean, it makes sense. you buy an iphone, a car, it is yours. but we have seen these manufacturers can do software updates and other updates to these products remotely, which they would argue gives them a certain degree of control and ownership if not responsibility here. >> they are actually deeply wrong. there is no law that says they have a right of ownership beyond the sale. they can provide a license for software and you don't, in fact, on the license, but there's a huge amount of problems, especially antitrust problems, when you start linking these two things together, because any claim of a software license over a piece of hardware destroys the value of the hardware, so there's a lot of problems there but the manufacturers have yet to articulate, and not just to me -- i don't matter much -- but

they have certainly not been able to articulate to the federal trade commission that there is any right for them to control, under any reasonable circumstances, what a consumer does with a product post purchase. >> you mentioned the collective power of the consumer and the ability to call their lawmakers, and i am wondering where are you seeing the most traction in the country? >> largely in urban areas, because most people are exasperated by their cell phones, and other tractors. it is the same exact problem. if you cannot fix your stuff, whether it is a small thing or a large thing or a big, expensive thing or a small, cheap thing, it doesn't matter. the fact that you cannot fix it is the problem. >> how do you see the realistic way to do this? we read through some issues about broken parts can be replaced with good parts from other machines and, you know what, we are awaiting, romaine,

some geopolitical events. >> that was gay gordon-byrne. going to the white house now, where biden, the president, is expected to address the situation in ukraine. >> two vital calls on the situation in russia and ukraine. the first was through a bipartisan group of congress currently representing the united states along with vice president harris at the munich security conference. the second was the latest in a series of calls over the past many months with heads of state of our nato allies and the european union. to bring us up-to-date on what the u.s. thinks is the current state of affairs, what is likely to happen in the ukraine in the coming days, to ensure we continue to remain in lockstep, that is, the european union and nato. despite russia's efforts to

divide us at home and abroad, i can confirm that has not happened. the overwhelming message of both -- on both calls was one of unity, determination and resolve. i shared with all of those on the calls what we know about a rapidly escalating crisis in ukraine. over the last few days, we have seen reports of a major uptick in violations of the cease-fire, russian backed fighters attempting to provoke ukraine in the dom -- donbas. for example, a shilling -- shelling of a ukrainian kindergarten that russia falsely claimed was carried out by ukraine yesterday. an information being put out to the russian public, including russian backed separatists, that ukraine is planning to launch a massive offensive attack in the donbas.

it defies basic logic to believe the ukrainians would choose this moment, with well over 100 50,000 troops are arrayed on its borders, to escalate a year-long conflict. state media of russia continues to make phony allegations of a genocide taking place in the donbas, pushing fabricated claims warning about ukraine's attack on russia without evidence, saying that ukraine is thinking of attacking russia. these are consistent with the playbook the russians have used before, to set up a full justification to act against ukraine -- a false justification to act against ukraine, the pretext we and our allies and partners have been warning about. through these moments, the ukrainian forces have shown great judgment and, i might add, restraint. they have refused to allow the russians to beat them into war, but the fact is that the

russians have ukraine surrounded from belarus, along the russian border, to the black sea. we have reason to believe the russian forces are planning and intend to attack ukraine in the coming week, in coming days. we believe they will target ukraine capital, gf, a city -- capital, kiev, a city of 2.8 million people. we are saying this not because we want a conflict but because we are doing anything in our power to prevent them from moving. make no mistake. if russia pursues its plans, it will be responsible for a catastrophic and needless war of choice. the united states and our allies are prepared to defend every inch of nato territory from any threat to our collective security as well. we also will not send troops in to fight in ukraine but will

continue to support the ukrainian people. this past year, the u.s. provided a record amount of security assistance to ukraine to bolster its defenses to $650 million, from javelin missiles to ammunition. we also previously provided $500 million in humanitarian aid and economic support for ukraine. and earlier this week, we also announced an additional sovereign loan guarantee of up to $1 billion to strengthen ukraine's economic resilience. but the bottom line is this. the united states and our allies and partners will support ukrainian people. we will hold russia accountable for its actions. the west is united and resolved. we are ready to impose severe sanctions on russia if it further invades ukraine. i will say again that russia can still choose diplomacy. it is not too late to de-escalate a return to the negotiating table.

last night, russia agreed with secretary of state blinken and the foreign minister, lavrov, should meet on february 24 in europe. if russia takes military action before that date, it will be clear they have slammed the door shut on diplomacy. they will have chosen a war and will pay a steep price, not only from the sanctions we and our allies will -- the rest of the world will visit upon them. there are many issues that divide our nation and our world, but standing up to american aggression is not one of them. the american people are united. europe is united. the transatlantic community is united. the free world is united. russia has a choice between war and all the suffering it will bring, or diplomacy that will