Deere & Co. (DE  ) shares were higher following its strong Q2 earnings result. The company topped expectations for earnings and revenue with the company, and it attributed its strong quarter to cost-cutting and rebounding farm sales.

Inside the Numbers

In its fiscal second quarter, Deere reported adjusted earnings per share of $5.68, a sharp increase from $2.11 in the same quarter last year. It was also above analysts' expectations of $4.52 per share. Revenue came in significantly above expectations at $12.1 billion vs $10.4 billion and was a 30% increase from last year.

The biggest catalyst for Deere has been strength in agricultural prices which is a leading indicator of increased planting and spending by farmers. As a result, the company noted strength across many segments. Agriculture and turf sales increased by 30% to $3.4 billion, driven by higher volumes and prices. Construction and forestry contributed $3 billion and grew by 36% on higher volumes. Financial services contributed $222 million in net income, a 270% increase from last quarter.

In terms of guidance, Deere sees its full year net income to be in the range of $5.3 billion and $5.7 billion which is and upgrade from the previous forecast of $4.6 billion to $5 billion. The company did not some supply chain challenges, such as the chip shortage, which could hurt its ability to meet demand.

In the conference call, CEO John May said, "While the company is clearly performing at a high level, Deere expects to see increased supply-chain pressures through the balance of the year. We are working closely with key suppliers to secure the parts and components that our customers need to deliver essential food production and infrastructure. Despite these challenges, Deere is on track for a strong year and we believe is well-positioned to unlock greater value for our customers and other stakeholders in the future."

Stock Price Outlook

If 2020 was about tech, 2021 is about commodities. As one of the largest producers of farm equipment, Deere's fate is closely connected to prices of agricultural commodities. These have been in a bear market for nearly a decade, following the previous bull market which led farmers to aggressively increase planting and companies to come up with seeds to increase yields.

Now, planting and planting intentions are not rising despite higher prices. In fact, the last decade rewarded cost-cutting and caution which seems to have become ingrained into farmers. In a sense, this means that the bull market is in its early stages as prices will continue to rise until supply materially increases. At the same time, a stronger global economy should mean more demand as meat consumption will rise in developing countries.