By James B. Kelleher

NEW YORK (Reuters) - Deere & Co reported
better-than-expected quarterly results Wednesday, lifted by
robust demand for its biggest tractors and harvesters in the
United States, where surging commodity prices are lifting
farmer income and sentiment.

Strength in U.S. and Canadian sales helped offset
deteriorating conditions in Europe, where the company said
markets were "down sharply."

Deere, which also makes construction and forestry
equipment, said demand for those products from builders was
rebounding from the lows hit after the popping of the worldwide
property bubble. But it said sales were still "far below normal
levels."

"Profitability is great in ag and improving in
construction," said Eli Lustgarten, an analyst at Longbow
Securities. But he said investors might be disappointed with
Deere's fourth-quarter forecast, which "wasn't better than
anyone expected."

Deere shares were down 2.4 percent in premarket trading.

The world's largest maker of farm equipment reported a
profit of $617 million, or $1.44 a share, for the fiscal third
quarter ended July 31, up from $420 million, or 99 cents a
share, a year earlier.

Sales rose 16 percent to $6.84 billion, lifted by a 19
percent increase in sales to customers in the United States and
Canada.

Analysts, on average, had expected the Moline,
Illinois-based company to report a profit of $1.24 a share
before one-time items, on sales of $6.52 billion, according to
Thomson Reuters I/B/E/S.

Deere said it expects industrywide sales of agricultural
equipment in the United States and Canada to rise 5 percent to
10 percent this year, lifted by solid commodity prices and low
interest rates, which are boosting farm incomes.

But it said it now expects industrywide sales in Western
Europe to fall 15 percent to 20 percent because of weakness in
the livestock and dairy sectors. Big inventories of used
equipment, especially combines used to harvest crops, are also
hurting sales in the region, it said.
(Reporting by James Kelleher; Editing by Derek Caney and John
Wallace)