High crop prices have persuaded US farmers to keep on investing in farm equipment despite yield losses to drought, CNH Global said, unveiling a rise in earnings which exceeded Wall Street expectations.

Shares in the maker of Case and New Holland machinery closed up 4.6% to $44.80 in New York.

CNH said that demand, worldwide, for farm equipment "remained solid" in the July-to-September period, with sales rising 12.3% to $4.0bn.

The increase, which fed through into a 16.5% rise to $479m in operating profits from agricultural machinery, was "driven by high commodity prices offsetting the effects of severe drought in North America".

Indeed, at 46%, North America accounted for a greater proportion of CNH's sales than in the previous quarter, when the figure was 43%, and the 42% in the July-to-September quarter in 2011.

Yields vs prices

The data follow broad industry concerns that the worst US drought in 56 years would, in cutting crop production, reduce farmers' willingness to spend, with Deere & Co, the top farm equipment group, in August cutting its profit hopes.

However, CNH's data appear to tally with ideas floated by the likes of Titan International boss Maurice Taylor, and supported by US Department of Agriculture data on farm income, that arable growers, if not livestock farmers, will see their income supported significantly by higher crop prices.

A report from Creighton University earlier this month showed a sharp revival in farm equipment sales in the major US growing states to a five-month high, with farmland price growth recovering too.

The briefing concluded that "the negative impacts of the drought are being more than offset by the positives of very strong incomes from high agriculture and energy prices".

The comments were echoed by rival  Agco, the maker of Massey Ferguson and Fendt equipment, which also reported results on Thursday - although these fell short of Wall Street expectations thanks to a hit from  weather on European sales.

Market share gains

CNH flagged a "positive" performance worldwide, in terms of market share in both tractors and combines, in the latest quarter, flagging gains in the large tractor segment in North America.

"Combine market share was up in every region except for North America, where the group performed in line with the market."

The improvements helped offset the impact of a slow market for construction equipment, reflecting soft economic growth, which sent the division into an operating loss of $15m, compared with a $49m profit a year before.

Company forecasts

Group earnings, excluding one-off items, rose 18.8% to $323m, on sales up 4.8% at $4.83bn.

On a per-share basis, the earnings were equivalent to $1.34, ahead of the $1.17 that Wall Street had expected.

CNH stuck by expectations of its revenues for the whole of 2012 rising by at least 5%, and operating margin beating 8.6%.

The world market for farm equipment will at best match 2011's in terms of volume sales, with potential for a 5% decline.

The group made no mention of its potential merger with major shareholder Fiat Industrial, the truck-maker, which in a separate report, said that it had "reconfirmed to the CNH board that it desires to move forward with a transaction promptly".