Good morning and welcome to the Deere & Company third quarter earnings conference call. (Operator Instructions) I will now turn the call over to Ms. Marie Ziegler, Vice President of Investor Relations. Please go ahead. Marie Ziegler: Good morning. Also on today's call are Mike Mack, our Chief Financial Officer, as well as Susan Karlix and Bill Ratzburg from our investor relations staff. Today we'll take a closer look at Deere's third quarter earnings and then spend a few minutes talking about our markets and where things are headed for the rest of the year, and after that, we'll respond to your questions. Please note that slides are available to complement the call this morning and they can be accessed on our website at www.deere.com. First, a reminder. This call is being broadcast live on the Internet and recorded for future transmission and use by Deere, Thomson, and third parties. Participants in the call, including the Q&A session, agree that their likeness and remarks in all media may be stored and used as part of the earnings call. This call includes forward-looking comments concerning the company’s projections, plans and objectives for the future that are subject to important risks and uncertainties. Actual results might differ materially from those projected in these forward-looking statements. Additional information concerning factors that could cause actual results to differ materially is contained in the company's most recent Form 8-K and our periodic reports filed with the Securities and Exchange Commission. The company, except as required by law, undertakes no obligation to update or revise its forward-looking information. This call also may include financial measures that are not in conformance with generally accepted accounting principles. Additional information concerning these measures including reconciliations to comparable GAAP measures are posted on our website at www.deere.com/financialreports, under third quarter…

Your first question comes from Steven Wharton – JP Morgan. Steve Wharton - JP Morgan: Good morning. A question on ag margins. First, maybe I just wasn't looking at this quite right, but it sounded to me like in the last quarter call you were giving us a few things that we ought to be cognizant of in terms of some headwinds on margins in the quarter. Margins came out in ag much better than I had expected. Either I misforecast that or things went a little better there than you had expected. Can you give me a sense of that? Marie Ziegler: Absolutely. Well, it's true that our financial performance is better than what we had anticipated, frankly in all of our equipment operations. But the headwinds do continue in SA&G and R&D, and just as a reminder for those who may not have heard this last time, this again is true in all of our businesses, but particularly in ag as we are investing to grow our businesses in places like Brazil and Russia and China, we are encountering higher SA&G and some higher R&D as we continue to develop products for those markets as well as our existing major markets. We think we have some real opportunities in the years ahead. We do expect and that's consistent in the guidance that Bill just shared with you for the overall company in R&D and SA&G, that we will continue to see some headwinds. That said, ag clearly performed very well in the quarter. Steve Wharton - JP Morgan: Just where are we with respect to sort of normal volumes in ag? Marie Ziegler: There's a fair amount of upside in ag without giving a point-blank answer. But there's some upside. Steve Wharton - JP Morgan: So if we're doing 14% margins now with still a fair amount of upside in volume, it seems like maybe we ought to be thinking about margin potential in this business being bigger than it has been historically? Does that follow? Marie Ziegler: Mike, do you want to take that? Mike Mack: I think a couple things. I would answer that we're probably very near our normal volumes in ag right now. As we increase as a percent of normal volumes, we do experience operating leverage in each of our businesses. Certainly that's the case in ag, as you get more absorption in the factories. They are running, I think efficient. We've benefited in the last quarter from pricing and volume in that business, as well.

Your next question comes from Andrew Casey - Wachovia. Andrew Casey - Wachovia: A question on agricultural equipment market. Your two comments you expected 63% Q4 U.S. and Canada tonnage increase, and the decision to prebuild components indicate pretty high expectations for future demand. Likely you already stepped up production in August. So what, if any, supply chain constraints have you encountered or are you concerned about? Marie Ziegler: Well, it's true that we are working with our supply chain. With planning you can do a number of things. At this point, we don't have anything really to discuss in terms of supply chain constraints. We have added, I think you're aware, even in our own operations, we've added a little bit of capital. We've talked about this at Waterloo, that'll come online, machine tooling. We also added some machine tooling down in Brazil to help accommodate that market. So we're really not at this point aware of anything that we would need to discuss. But certainly, a lot of work to make sure that we can meet customer demand. Andrew Casey - Wachovia: You're modestly reversing a multi-year inventory reduction in North American ag equipment. Does that mean this level of field inventory is pretty much the bottom as a percentage of trailing sales? Marie Ziegler: I would say that over time we will continue to strive to lower that ratio as a percent of sales. But I would also tell you that everything that we know that we can do, we are doing. We've talked in the past that there may be things with logistics. There may be things in terms of some of the processes, the way we run our operations. We have flexible workforce arrangements, so we are looking at other things that will permit us, in the longer term, to potentially run with lower levels. At this point, this is about where we think we can support our customer demand. Mike Mack: I would just add, every time we've looked at the reductions in assets, we always think about the context of making sure we're going to have our order fill and the fill rate metrics consistent with providing the fill rates for both customers and dealers that we want to have. It is a balancing act.

Your next question comes from Ann Duignan – Bear Stearns. Ann Duignan - Bear Stearns: Could you give us a little bit more color on your investments in Brazil? Also an update on your proposed acquisition in China? How is the ramp-up expected to take place in Brazil, in particular, and whether you're comfortable with your distribution there? In China, if and when that deal does close, will either of these or both of these be detrimental to margins? Marie Ziegler: Let's start with China first. China, we are waiting still for government approvals. We have said that we expect that acquisition to create positive income in its second full year of ownership. Between now and the time we get there, it would be slightly negative in terms of its income. Very, very immaterial, quite candidly. Looking on to Brazil, there are we are in a limited build mode in the new factory. The first two models that go into production will not be products that have been produced in Horizontina. So we're going to ramp up that first and then we will transition production from the existing factory in Horizontina into Montenegro. All things are on track. We expect to start ramping up regular production over the course of the fall and into winter. Actually as it gets up and gets going, we would anticipate it would start to reverse what has been a bit of a margin drag right now, because basically you've got a lot of people in the factory with no production to speak of. You've got people being trained, establishing supply relationships, et cetera, et cetera. So as we move through 2008, we would expect that would become less of a drag as you move through the year. Ann Duignan - Bear Stearns: Just for clarification on China, you said it will overall be losing money or it will be detrimental to current margins? Marie Ziegler: The operation itself between now and the second full year of ownership -- once we get approval, of course to buy it -- would be slightly negative, but Ann it's going to be so small, you won't see it in our margin.

Your next question comes from David Raso - Citigroup. David Raso - Citigroup: A question on construction. The further reduction of receivables and inventory at the end of the year and now forecast, how much of that do you have already in the third quarter? Mike Mack: It's really done. If you look at where we are with our year-over-year, we're basically there. David Raso - Citigroup: So you were able to do that with, again, your pricing was up in construction in the quarter. Marie Ziegler: It was positive. David Raso - Citigroup: Looking into '08. Just kind of get a feel philosophically about your construction inventory. If you're already done and you feel essentially you don't need to reduce it further in the fourth quarter, if retail hypothetically was flat next year, are we no longer thinking we have to under produce retail in '08 given the comments you just made about you completed essentially your full year '07 inventory and receivable reduction already? Marie Ziegler: Based on what we know about the market, it would appear and we would tell you that we feel very good about the position of our inventories and receivables. I would have to answer your question, yes. But time will tell.

Your next question comes from Andrew Obin – Merrill Lynch. Andrew Obin - Merrill Lynch: Just on the financials, are you expecting any impact on performance going into '08 due to widening spreads? Mike Mack: No, Andrew, we don't at all. The way we run our credit company, we have a very tight management for interest rate risk management. I wouldn't anticipate any impact on that at all, really. Andrew Obin - Merrill Lynch: So that should just be a function of volumes that you sell, right? Mike Mack: That’s right. Andrew Obin - Merrill Lynch: In terms of farmer behavior, historically we’ve looked at interest rate as a component of farmer behavior, and interest rates have been so low for so long. Are you seeing any impact on farmer behavior or any potential impact from the recent turmoil in credit prices and accessibility of credits? Marie Ziegler: There has been no impact whatsoever on that. Now granted, events are rapidly developing, but we did check with our credit people. The other thing I want to point out is many farmers have cash and pay cash for their product. Mike Mack: I would just like to chime in that the past dues and writeoffs in total on the credit company are really very good levels still, and almost about the same as they were last yea and compared to our historical levels, a very clean portfolio right now.

Your next question comes from Terry Darling – Goldman Sachs. Terry Darling - Goldman Sachs: I wanted to follow-up on the ag incremental margin discussion. If I'm translating or extrapolating some of the things you said about 4Q profitability for construction and forestry and C&CE, my extrapolation of those comments would suggest that the farm equipment incrementals targeted within the guidance is more like a low 30%. The question is, can you be more direct about where you see on a full year basis looking out the incrementals? Should we think of 40% this quarter as sustainable? Marie Ziegler: Things do bounce around quite a bit. I will tell you that typically our second quarter is a strong quarter in terms of our production. Fourth quarter in contrast would not typically be so strong. Some of that production tonnage increase you're seeing is not going to actually be reflected fully in margins because it's going to be a little bit going into inventory. For the full year, the majority of what will affect our incremental profit for the full year has already occurred because we're three quarters into that. So you're probably looking at something in the range 25% plus or minus for the full year, if that helps you. Terry Darling - Goldman Sachs: I'm not sure how that math works into the mid 20s, I think it's got to be low 30s. I could follow-up offline. The follow-up question is on other income, that number's bouncing around a lot, as well. Should we think of this quarter as a trend line or sort of the average of the last couple of quarters? Thinking about that $21.8 million other operating expense which was versus $48 million last year. Marie Ziegler: The other operating expense is just a whole host of little items that affected it. Conversely in the fourth quarter and by its very nature you understand this is somewhat hard to predict because it is miscellaneous. Our forecast would have it actually flipping around. The fact that you're a little light versus a year ago in the third quarter will be made up in the fourth quarter. I don't really have any more insight, frankly than the similar comment in terms of our other income, as well.

Your next question comes from Heiko Ihle - Gabelli. Heiko Ihle - Gabelli: A quick question on the slight 20, you show the provision for the credit losses, which seem to be going off slightly and still low on historical levels. What segments do you see those losses in? Marie Ziegler: We have had extremely low levels in all of our businesses. It would be true that we would be keeping maybe a little closer eye on CNS and on consumer, as well. They continue to remain comfortably below historic levels. There's really no story there. Heiko Ihle - Gabelli: There's no story. Can you maybe elaborate on where these losses are? Marie Ziegler: I don't have anything more than what we just said. We're keeping a little closer eye on the construction and forestry and on the consumer. One thing -- maybe, the most important thing -- is this is very consistent with what we actually went into the year with. So we've seen no deterioration from what our expectations were.

Our next question comes from Barry Bannister – Stifel Nicolaus. Barry Bannister - Stifel Nicolaus: You bumped up your ag segment trade receivable inventories by a couple hundred million. It accounted for 80% of the full year change. What I'm curious about is since you're increasing your production tonnage in North American ag by 63% in Q4 against a minus 17% a year ago,, how much of that build is subassemblies that have not yet made it to the finished goods stage? Or is it a production issue all the way to the finished good where you're getting the equipment ready for final sale? Marie Ziegler: It's really raw materials and components. There's really very little in the way of finished goods that would be in that $200 million change from our previous guidance. Barry Bannister - Stifel Nicolaus: When you measure tonnage, though, you're talking about things that are not yet to the finished goods stage. Marie Ziegler: So that could include finished goods, as well. Barry Bannister - Stifel Nicolaus: It would not necessarily have the same incremental margin? Marie Ziegler: That is absolutely true. Barry Bannister - Stifel Nicolaus: Related to your production, which I presume your production is somewhat in line with both your market growth forecast and your market share forecast. I've noticed that your market share has slipped versus the industry. Would you comment on the market conditions and why Deere share is down this year and what's caused that? Marie Ziegler: You're talking specifically in North America? Barry Bannister - Stifel Nicolaus: Yes, North American agriculture. Marie Ziegler: As you know, you've heard this repeatedly. We've talked about that market shares need to be looked at over a long period of time in any given month you can have an awful lot of…

Your next question comes from Mark Koznarek – Cleveland Research.

Just some clarifications. The discussion we were just having about the $200 million of extra ag inventory and receivables, is there an earnings impact to that buildup of components? Does that contribute at all to your bottom line? Marie Ziegler: Yes, but you get some absorption on that change, if you will. And again, it's about $200 million, but you don't get the margin from selling it. The benefit, if you will, in our fourth quarter for our ag operations would be in round numbers about $20 million.

$20 million of operating income? Marie Ziegler: Yes.

The other clarification has to do with Brazil. I thought I heard you say that as you're starting up, you're going to be transitioning production between the two facilities that in '08 we'll clearly have production volume to offset the expenses you've been incurring down there. Marie Ziegler: To start off, that is correct.

What I'm looking for is whether we actually get into positive contribution to earnings in '08 based on the ramp-up that you're expecting or is it less of an expense? Marie Ziegler: I think at this time our forecast is less of an expense because you're still looking at pretty low levels of production volume as you even start into fiscal '08 as you're transitioning. Remember, you've got a lot of training, brand new factory, new people, a lot of activity down there.

So what does the overall start-up schedule look like? When do you expect to be up, I don't know if there's a normal level of volume production that you're targeting. How should we look at the ramp-up period? Marie Ziegler: Again, we've said we we'll start in the fall and then continue to ramp up through the northern hemisphere winter. We have some flexibility depending on what happens with market conditions, Mark. So we don't have a firm date that we will be complete with that ramp-up.

In '08 are you going to be at a full production level appropriate to the market or are there still things that are being staged in order to get to full production? Marie Ziegler: By the time you would get to the latter part of our fiscal year, we will of course be at regular levels of production.

Your next question comes from Jamie Cook – Credit Suisse. Jamie Cook - Credit Suisse: Marie, my first question, you talked that little bit about your ability to get pricing. I was surprised. Could you give a little more color by segment in North American ag? I was hearing some people were being more aggressive. If you could comment in what you're so seeing in North American and overseas. Or rank order by segment where you've been most successful on the pricing front? Marie Ziegler: In the quarter, 2 points of price realization. We have talked quite a bit about the difficult conditions in the construction and forestry. It would be fair to assume that there was a slight increase and there was a bit of an increase in the commercial and consumer. We don't provide guidance or breakout by product line. But that would imply you actually had something north of 2 points in our ag division. I don't have anymore geographic comments. Jamie Cook - Credit Suisse: Getting back to the construction and forestry business, you did mention that the commercial construction business or non-res was up 8%. How are you looking at that going forward? We're hearing some commentary from other people to suggest we might have seen the best in commercial construction. Do you expect that to follow residential? How are you looking at that internally? Marie Ziegler: By the way that was an industry forecast for U.S. spend. We have it up about 8% this year. We have it up about 2% next year. So the rate of growth would slow, but we still see positive growth there and you heard that we see housing stabilizing at about 1.4% in 2008. Jamie Cook - Credit Suisse: But you didn't see anything in the quarter to suggest the commercial construction was slowing? Marie Ziegler: Again, just the rate of growth is slowing. But our most current estimate is the 2% increase. Jamie, maybe just before you leave. Just to go back on that pricing. I do want to point out that we have helped ourselves with our price realization through an extensive array of new products over the years through our very strong dealer distributions through our discipline in terms of the amount of product that we are providing into the marketplace. So we've done an awful lot over the last several years to help support the kind of pricing that we're achieving in this environment. Thanks. Next question.

Your next question comes from Daniel Dowd – Sanford Bernstein. Daniel Dowd - Sanford Bernstein: I wanted to touch base on your U.S. commodity price estimates. I noticed that your '07/'08 previous forecasts and your updated forecasts show a good deal of volatility. You're projecting corn to be down quite a bit from where you were three months ago, but you're also predicting wheat and soybeans to be up a good deal. Can you talk about the things you're seeing in the marketplace that are leading you to move these estimates around? Marie Ziegler: They'd be the same sorts of things that you guys would be looking at. We've seen nearby futures come in just a little bit. But you still see extremely good levels of the overall, they're still at extremely good levels. You get into '09 and you're seeing corn over $4 in the futures market. So we're taking a look at basically the same sorts of things that you are in terms of trying to adjust what we see in our forecast. Not sure where you're going with that. Daniel Dowd - Sanford Bernstein: I guess my question here is any of this based on your insights into farm yield or acreage dedicated to corn or other kinds of things? Perhaps the demand side on ethanol or other sources of demand for corn? Marie Ziegler: Well, I think you're aware in terms of ethanol, the USDA just increased its projection of ethanol production for the '07/'08 crop; they had been at 3.2, they're at 3.4 billion bushels. In our own internal forecasts, we're still at 3.2. Again, I don't really have any other insight in terms of yields you saw what the USDA did last Friday. Our own internal yield forecast is 152.5, the USDA is 152.8.…

Your next question comes from Charlie Rentschler – Wall Street Access. Charlie Rentschler - Wall Street Access: Can you give us some more detail on new products you alluded to being released here in the near future? Marie Ziegler: We will be announcing them to our dealers starting next week. Until that time, we really are not in a position to make comments about those products. There'll be a rollout. Charlie Rentschler - Wall Street Access: Going back to the last couple of questions. The upturn that we're talking about here in North America, what kind of legs does this have under it? Do you see this thing? You are clearly suggesting that your fiscal '08 is going to be very strong. But do you see this thing going on a couple three years more? Is there a case that could be made for that? Marie Ziegler: It appears to be what the futures markets are telling you. Again, that's not a guarantee. But futures for corn as I mentioned a few moments ago, up over $4. You've got soybean futures into '09 going over $9. You look at wheat prices, again into '09 well over $5.50 to $5.85 so really pretty good levels of prices. So the futures markets are giving you one neutral or one not company-biased indication that the expectation is quite good. We are in the midst of people being able to upgrade our diets. This is something we've talked about for a very long time. But you're really seeing it get some legs here. People know they can eat better. They have the income growing to support improved diets. On top of that, you layer on what's happening with interest and renewable energy. The fundamentals look to be very encouraging. Charlie Rentschler - Wall Street Access: Thank you, you're truly setting the table. Marie Ziegler: Correct. Nice way to put it. Next question.

Your next question comes from Seth Weber – Banc of America Securities. Seth Weber - Banc of America Securities: Most of my questions have been answered. But on the raw material impact, Marie, you left that number the same $200 million or so even though the production number is going higher, the tonnage number is going higher. Can you talk about where you might be seeing some pressure still and what might be getting better there on the material side? Marie Ziegler: Let me start by saying we try to adjust that increase for volumes so it's volume neutral. We are taking a look at, had we had the same rates of spend last year as this year. That does not take into account the fact that you're going to have higher levels of production. Do you understand what I'm saying on how that's calculated? Seth Weber - Banc of America Securities: Yes, thanks. Marie Ziegler: Now, regarding where we're seeing pressure, we've said steel was up about 2% for the year. If you look at maybe in the quarter we may have just tweaked our guidance slightly down. You are seeing a little bit of relief on the sheet steel side. On the other hand, at the very margin, tires are maybe a little bit more costly than they were a quarter ago. But basically, the year is playing out pretty much as we had anticipated.

Your next question comes from David Bluestein - UBS. David Bluestein - UBS: The $200 million increase in your ag inventories, how much of that is Brazil? Just expected ramp? Marie Ziegler: Really, the bulk of that increase is probably more directed at North America. We're talking about the change in the guidance from 175 up to 375 up. David Bluestein - UBS: Right so the bulk of that big tractor is North America? Marie Ziegler: Would be in several product categories, but certainly big tractors would be a part of it. David Bluestein - UBS: Somewhere in the press release or prepared remarks you mentioned rental channel customers buying significantly less. Do you think we're done with that in 2007? Do they snap back next year? A flattish environment you've laid out for the housing starts and nonresidential construction activity. How do you peg their demand? Marie Ziegler: I'm not prepared to comment on that at this time. They were down last year, as well. They're at fairly low levels of volume as we would go into 2008. I just do not have a comment on 2008 at this time. David Bluestein - UBS: A final question just on fourth quarter with the revenues you've given us, your guidance would imply some fairly low incremental margins, but you've got a big ramp in production. What else is slowing you down in Q4 from blowing up the number? Marie Ziegler: We will have some higher raw material costs and it goes really back to this R&D and SA&G that we talked about. In addition, when you look at the sales guidance, I know we said it, but I think it's worth repeating. Although we're up 16%, you've got ex-LESCO and currency we're up 8% so the gain is really half of that. The LESCO, which is $225 million of sales in the quarter, actually we come in with a slight operating loss in the fourth quarter. Again a change for the year. The other thing to think about is taxes. Last year in the fourth quarter, our effective tax rate was 27.5%, and of course our guidance for the full year which would imply the fourth quarter would be at 33%. That's a chunk of money.

Your next question comes from Robert McCarthy – Robert W. Baird. Robert McCarthy - Robert W Baird: I just have a couple quick follow-ups. First related to your comments about price realization, would it be fair to assume that in the quarter seeing much stronger growth internationally than domestically that similarly price realization would have been stronger internationally? Marie Ziegler: No, I don't think you can assume that. In fact, you should not assume that. I don't want to imply it was bad overseas either. Robert McCarthy - Robert W Baird: Would you mind sharing with us your acreage assumptions for corn and soybeans for '07/'08 and '08/'09? Marie Ziegler: I certainly have those, but not committed to memory. I presume you want corn? Robert McCarthy - Robert W Baird: Right. Marie Ziegler: For the '08/’09 marketing year, we think we will plant about 87 million acres, this is compared to the 92.9 million acres planted in the U.S. We have a yield of 156.7. For beans plan about 70 million acres up from 64 million and that's the interesting dynamic between what's happening with corn and bean prices with bean prices up so significantly and a yield there of about 43.3 million. Do you want wheat, as well? Robert McCarthy - Robert W Baird: As long as you're at it. Marie Ziegler: Wheat planted acres about 59.5 million compared to 60.5 million this year and then the '08/'09 yield of 44 bushels per acre. Robert McCarthy - Robert W Baird: I'm sorry just for reference, the bean number for this year? Marie Ziegler: Sure. Bean number in terms of yield was 42. And again the planted acres this year 64.1. There's quite a jump in soybean plantings next year. That'll be something that'll be interesting to watch as we move into next year and what the dynamics are between corn and bean markets. I think we're ready for our last question now.

Our final question comes from Barry Bannister – Stifel Nicolaus. Barry Bannister - Stifel Nicolaus: I am trying to reconcile slides 11 and 20 with regard to your receivable exposure in Brazil. As we bear down on a rewrite of the agricultural financing regime down there, what percent of your average owned portfolio is Brazilian receivables? Could you put a dollar amount around it also? Marie Ziegler: Sure. I'm not sure exactly how you're trying to reconcile. We are very well-provisioned in the event of any potential losses. The first thing I should say is that even though farmers have not yet been required to make the 2007 payments, we've collected about 68% of what is already due. The current deadline is the 31st of August., but as you know, the Congress has not yet approved this proposed program. It's expected that that deadline might actually slide just a little bit. In terms of what we have for our Brazilian portfolio overall, July in dollars it's about $800 million. Barry Bannister - Stifel Nicolaus: What is your own portfolio total worldwide? Marie Ziegler: You mean in the credit operations? Barry Bannister - Stifel Nicolaus: Yes. Marie Ziegler: Worldwide 14, 15, I'd have to look at it up. I don't have anything that has that handy. I will get back to you on that. Barry Bannister - Stifel Nicolaus: One last sort of housekeeping question to tie it together. Historically, at least in the last three years, and even beyond that, about 80% of the year's profits was made in the first three quarters. If you would just annualize that, your earnings would be somewhere in the 775 range for the year, not the 750-ish range that you're guiding to. I wonder if, perhaps, the fact that two-thirds of the beat from this quarter was from non-ag operations where housing and consumer durable spending might be at risk has led you to be a little more cautious on your forecast. Marie Ziegler: Well, no, again when we take a look at that specifically it's the raw material, it's the R&D, and it's the SA&G and the taxes. The tax effect is about $45 million alone between last year and the presumption for the fourth quarter of this year. So that's where it is. Thank you all for participating in the call. The numbers. Portfolio owned net receivables would be actually about $20 billion. Thank you all. Bye.