John Deere tractors are for sale at a dealership in Longmont, Colorado, U.S., February 21, 2017. REUTERS/Rick Wilking/File Photo

Feb 18 (Reuters) – Deere & Co (DE.N) raised its full-year profit forecast on Friday as the world’s biggest farm equipment maker expects margins to rise on higher prices and solid demand for its tractors and combines.

Shares of the Moline, Ill.-based company rose 1.3% to $385.58 in light premarket trading.

Record grain prices have put more money in farmers’ pockets and prompted them to increase investment in farm machinery amid a tight labor market. The U.S. Department of Agriculture estimated that net farm income would have increased 25% to $23.9 billion in 2021.

Deere has raised prices to combat rising shipping and supply chain costs, but that hasn’t deterred demand, with the company’s North American order books full for most of its large agricultural equipment in 2022.

“Looking ahead, we expect demand for agricultural and construction equipment to continue to benefit from strong fundamentals,” chief executive John May said in a statement.

Deere forecasts net income for fiscal year 2022 between $6.7 billion and $7.1 billion, up from its earlier expectation of $6.5 billion to $7.0 billion.

Net sales from the equipment business increased about 6% to $8.53 billion for the first quarter ended Jan. 30.

Net income fell to $903 million or $2.92 per share from $1.22 billion or $3.87 per share a year earlier, as costs weighed.

Reporting by Abhijith Ganapavaram in Bengaluru; Edited by Ramakrishnan M.

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