Good morning and welcome to the Deere & Company fourthquarter earnings conference call. (Operator Instructions) I would now like toturn the call over to Ms. Marie Ziegler, Vice President, Investor Relations.Please go ahead.

Good morning. Also on today’s call are Mike Mack, our ChiefFinancial Officer, as well as Susan [Carlitz], Karen Thompson, and Bill Ratzburgfrom the Deere IR staff. Today, we’ll take a closer look at Deere's fourth quarterearnings and then spend a few minutes talking about our markets and wherethings are headed next year. After that, we’ll respond to your questions.Please note that slides are available to complement the call this morning. Theycan be accessed no our website at www.deere.com. First, though, a reminder; this call is being broadcast liveon the Internet and recorded for future transmission and use by Deere, Thompsonand 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 aspart of the earnings call. This call includes forward-looking comments and concernsconcerning the company’s projections, plans and objectives for the future andare subject to important risks and uncertainties. Actual results might differmaterially from those projected in these forward-looking statements. Additionalinformation concerning factors that could cause actual results to differmaterially is contained in the company’s most recent Form 8-K and periodicreports filed with the Securities and Exchange Commission. The company, except as required by law, undertakes noobligation to update or revise its forward-looking information. This call also may include financial measures that are notin conformance with GAAP -- that would be accounting principles generallyaccepted in the United States of America. Additional information concerningthese measures, including reconciliations to comparable GAAP measures, areposted on our website at www.deere.com/financialreports, under fourth quarter2007 report. Call participants should consider the other information on risksand uncertainties and non-GAAP measures in addition to the informationpresented on this call. Now, for a closer look at the quarter, here’s Bill Ratzburg.

Thanks, Marie. This morning let’s start with a comment onthe two-for-one stock split approved by our shareholders one week ago today. Asshown on slide three, the additional shares will be distributed on December 3rdand begin trading at the new price on December 4th. Slide 4 then clarifies what the earnings per share wouldhave been on a pro forma basis. In addition, the appendix contains a slideshowing earnings per share by quarter for 2007 on a pro forma basis. Turning to actual results, this morning Deere reportedrecord fourth quarter net income of $422 million on record fourth quarterequipment operations net sales of $5.4 billion, as shown on slide five. On acontinuing operations basis, income increased 53% and diluted earnings pershare rose 57%. On slide six, fourth quarter total worldwide equipmentoperations net sales were up 21% compared to the prior year quarter. There wereabout two points of price realization. In fact, all three equipment divisionshad positive price realization in the quarter. This is particularly gratifying given the impact of the U.S.housing downturn has had on construction, forestry, commercial and consumersectors. About four points related to positive currency translation and LESCOadded about another five points. The remainder is primarily from increasedvolume with our fourth quarter production tonnage up 26%, as can be seen onslide seven where we have provided a table with production tonnage data. Getting an initial look at 2008, you’ll note that productiontonnage for the worldwide equipment operations is expected to be up about 7%from 2007. For the first quarter of next year, tonnage is expected to increaseabout 18%, supported by a strong AG market. Regarding our company outlook, let’s turn to slide eight.For the first quarter of 2008, we expect company-wide equipment operations netsales to be up about 25%, with AG contributing the bulk of that increase andwith sales from…

Thank you, Bill. We are now ready to begin the Q&Aportion of the call. The operator will instruct us on the polling procedure butas a reminder, in consideration of others, please limit yourself to onequestion with a related follow-up. If you have additional questions, we askthat you rejoin the queue and we’ll get to those as time permits.

(Operator Instructions) Our first question comes from Jamie Cook andplease state your company name.

Good morning and congratulations. Marie, my first questionis in regard to your incrementals forecast for the farm division. I think yousaid 25% for 2008. I’m just trying to understand that. To me, that seems a bitconservative. I understand you said there’s some growth investment and spendingrelated to tier three and tier four, but can you quantify that for me and howmuch that is relative to what you spent in ’07? I guess the other thing too, I would expect that you wouldget some benefit in 2008 from, at least in the back half of the year, from theplant opening in Montenegro, so if you could just flush through that for me.

There is no question that we will get some benefit from theopening of Montenegro and that factory is up and running and beginning to makethe transition between the tractor production that’s been in Horizontina thatwill be gradually moving into the factory at Montenegro. However, we do continue spending at a pretty good rate as weinvest to grow in other markets. I think that’s one of the reasons why it’s sohelpful to see what the detail that you do on slide 32 which provides somecolor on what is happening in terms of the different markets. We do continue torequire investments in developing a dealer organization, for example, as wemove into Eastern or Central Europe and the CIS. I don’t have a specific breakdown in terms of how much weare going to spend incrementally on tier three, tier four and growth other thanall I can say is that it is about five points of margin, of incremental marginrelative to that about normal 30.

Okay, and then just my second follow-up question, as youlook -- I understand your forecast is for the industry but as you look at Deerein your internal sales forecast, as you look at ’08 are you expecting anynegative impact from third-party supplier constraints or any internal capacityconstraints? And if so, where?

We -- actually I just went around and checked with ouroperating units and we have the material plans to meet the forecasts that wehave just provided to you, so we know that there are -- it’s tight periodicallyin different commodities but we can meet these build plans, these buildschedules.

Okay, so you are not seeing any third-party supplierconstraints or capacity constraints?

I’m not saying there aren’t any because again, at any giventime there are some areas where there are -- there’s tightness, but again wehave the material plans and the agreements with our suppliers to meet theseprojections.

Great. Thank you. I’ll get back in queue.

Thank you. Our next question comes from Ann Duignan. Pleasestate your company name.

Good morning. Just building on what Jamie was talking about,could you just expand a little bit on your outlook for worldwide AG tonnage up9% in ’08 versus revenues up 17%? I know you are saying that you havecommitment internally that you can meet this forecast but how much of theforecast is constrained by either your capacity constraints or suppliercapacity constraints?

That’s not an issue at this point. Again, we are takingcustomer orders on tractors and -- as you look at that 9% tonnage, what mightbe helpful is to remember that we did a pre-build in the fourth quarter, so wehave some pretty significant increases. The other thing that comes into playhere is some of that 17% increase is coming from just the incremental add ofNingbo, you get some currency and you do get pricing on that.

-- comment on the early order program for combines.

Well, combines and sprayers and planters all have had verygood early order program. Maybe one other thing that might help add a littlebit of color is as you think about that up 9%, remember that reflects allproduct lines in the AG markets and as you are seeing very good levels ofactivity in things that are candidly primarily related to beans and corn, bigtractors, big combines, the sprayers and planters. You look at cotton. That’s avery tough segment right now. Smaller tractors, which would have more of aneconomic tie, would be a little tougher and also hand forage equipment. So thatestimate is looking at all segments of the market.

Okay, and just in the interest of time, my second follow-upquestion is around your share repurchase program. If I look at slide 38 whereyou lay out your share repurchases through history, it really does beg thequestion as to why Deere would not consider an accelerated share repurchaseprogram. If you look at -- you could have bought back -- you bought back 14million shares for less than $1 billion two years ago and 17 million shareslast year for $1.3 billion. I guess philosophically, why would the company not consideran accelerated share repurchase program?

Well, we’ve been buying these in the open market since theinception of this program and I think we do have at our option the flexibilityof either accelerating or decelerating this. We are not going to signal thepace of this, but we kind of view this as a steady approach is what makes sensein our circumstance. So a balanced use of cash, invest in the business,dividends, as well as share buy-back. But as you are pointing out, we do have quite a bit ofliquidity available to us.

And you wouldn’t consider an accelerated share repurchaseprogram at this point, given your liquidity?

We’re not going to --

We’re not going to say right now what the pace is going tobe for next year.

Okay. I’ll get back in line. Thank you.

Thank you. Our next question comes from Andrew Casey andplease state your company name.

Happy Thanksgiving, everybody. A question on the outlook forAG equipment. First, can you comment further on the early order program forcombines and four-wheel drive tractors? Specifically, it would be helpful ifyou could talk about the percent of planned combine production that’s alreadybooked for ’08. And then if you can further comment on four-wheel drive orderdelivery lead times, whether they extend past January 1st.

I’d be happy to. We don’t actually have early order programson tractors. We have early order programs on seasonal equipment. Tractoravailability for the 9000s, as you know that’s a new product for us and we arevery delighted with the market’s response to it, availability would actually gointo July right now. On 8000s, just anticipating another question, 8000s you’relooking at about April. In terms of combines, the take rate has -- again, that’s anew product family with significant improvements in productivity for ourcustomers and we are seeing extremely good market reception to those combines.We actually are -- we still have a little bit of availability left but sufficeit to say that our numbers are quite high.

So if I go back a few years, Marie, this type of surge inordering by the customer base, what time in history would that remind you of?Would it be end of ’96 or before that?

I’m not sure that I have in my history, have a period whereyou’ve seen in the corn and beans this kind of early order activity. I don’thave anything -- we didn’t use to run early order programs like we do today, soI don’t have as good a feel.

Prior recent peak for performance in the AG division I thinkwas 1997 --

That would be true.

-- OROA and SG&A performance, before we started a newmodel.

I appreciate that. Thanks, Mike. The spirit of the questionwas really given that you don’t really have an early order program on tractors,it seems like these lead times are extraordinarily long and they are happening a lot quicker thanusual. Is that a fair assessment?

We’re doing our very best to meet customer demand. I thinkyou are aware that we did pre-build in the fourth quarter. We talked about thatwith our receivable build, so we are doing our very best to meet our customerdemand. We are -- on the 9000s, it is fair to note that we are in aproduct transition, so you kind of cleaned out the inventories of the olderstuff as you transition to the new stuff and the market response to thoseproducts has been just extraordinary, so we are really quite pleased. Don’t forget you are looking also at a global market forthese bigger products on combines and on the big tractors, so we are satisfyingcustomer demand in many geographies.

Okay. Thank you very much.

Thank you. Our next question comes from Andrew Obin. Pleasestate your company name.

Good morning. Just to follow-up on your ability to raiseproduction, how disciplined are you willing to be next year and are you willingto walk away from business to maintain your focus on operations, to keeppricing? How much cushion do you have to raise production the second half ofthe year if demand let’s say comes in two times what you are expecting?

I don’t think it’s appropriate probably to speculate withspecific numbers, but suffice it to say that we do have additional ability andit would vary timing wise and by geography. But we are very interested inmeeting our customer demand. That said, we are also interested in doing so in arational, reasonable and sustainable fashion and we’ve talked about that alsofor some period of time. So I think we are doing a very good job of balancing that inthe face of good market conditions and new products that have been introduced.

But would you -- am I correct in thinking you will raiseprices if we are raising production in --

No, I said it would be inappropriate for us to speculate inthis forum on pricing.

Andrew, we have expanded some of our capacity in terms ofmaking capital investments in Waterloo and Montenegro and [inaudible] heldcapacity in [Toreone], but nevertheless in the face of a surge, there is onlyso much you can do respond to at a certain period of time. I think there are some constraints at some point.

I was just a bit surprised by your outlook for constructionequipment for next year, given just how weak residential is and what retailsales data shows, for example, for you, from Caterpillar. What makes you confidentthat construction and forestry will effectively bottom out in ’08?

Well, I think what you are seeing is that in ’08, we areable to produce to retail demand. Don’t forget that in the comparison, you havein it a time when we took out about $250 million out of inventories, bothdealer and company-owned, so you’ve got that ability to produce to retail andthat is a significant factor. You also have the overseas forestry markets, which we seedown a little bit but still holding up very good. You are also, for theindependent rental companies, we’ve had a very significant decline in 2007. Ourmarkets were down about 70% in that segment. We expect that to be flattish nextyear, so we’ve got a number of factors at play there. But the single biggest factor has been the fact that we havemanaged those inventories and so we are able to produce to retail. Nowobviously if the market conditions change, we may have to reassess that but ouroutlook is based on housing starts, which we indicated of 1.1 million.

So given your destocking, the communication from yourcustomers and your dealers supports this forecast -- that’s the right read,right?

That’s absolutely right. We actually talked to our dealersand very recently we had annual meetings and dealer advisory meetings and wesurveyed them and they feel that their inventories are in alignment with thecurrent market outlook.

Thank you very much.

Thank you. Our next question comes from Terry Darling.Please state your company name.

Good morning. A couple of clarifications; you were kindenough to mention that the impact of the growth initiatives, tier three, tierfour is probably about five percentage points incremental margin hit in FY08.What was that hit in FY07, if you would?

I don’t have a specific quantification but incrementalmargins generally for the AG division for the full year were around -- let’ssee, around 30%, so there would have been some impact. I don’t have it -- I’msorry, I’m struggling. I don’t have --

Could you give us a feel though, higher, lower, or about thesame?

Tier four investments are higher in ’08 as compared to ’07.

The ramp-up in the growth expenditures, the year-over-yearincrement in growth would be less.

Okay, so overall a harder hit in ’08. That’s helpful. Aquestion on your pricing outlook; I think you are mentioning 1%, which is lowerthan the 2%.

No, two points is what we said. For the whole company.

I’m sorry. I missed that. Thank you. And then I’m wonderingif you could just talk all little bit about --

Terry, excuse me; it’s one point of currency. That may bewhere the confusion is but two points of price.

Okay, still on price though you are assuming no strongerpricing next year than this year, despite the industry utilization being much,much higher entering the year?

Well, don’t forget you can’t look at it on a single-yearbasis. We have a string of price increases, of positive price realization. Andagain, I’m looking at the overall company. You’ve got different factors goingon in that up to, but we are looking at positive price realization in thiscompany since 2002, a string of them, so you can’t just look at it in a singleyear. The other thing that two points reflects is frankly somepretty tough conditions in the construction equipment market, where we hope notto lose price but it is hard to envision that you will -- you have a lot ofupside when you’ve got market conditions such as they are.

So looking at the pieces, maybe a little better AG, a littleworse construction?

That would certainly be a fair assumption.

And then finally, I’m wondering if you can comment on yourexternal engine business growth and maybe qualify how this growth is trending’08 versus ’07. Are you expecting stronger growth, weaker growth? I thinkthat’s probably a factor we haven’t talked about yet.

Generally speaking, for the external side of the business,probably a little less robust growth as we go into 2008, reflecting some of the-- a little more difficulty in some of the construction related sectors thatmight impact that. On the other hand, obviously pretty good activities in ourown internal business.

Thanks very much.

Thank you. Our next question comesfrom Alex Blanton. Please state your company name. Alex Blanton - Ingalls& Snyder: Marie, the inventory for the quarter, it was down slightlyfrom the third quarter but up quite a bit from last year, up almost $400 million.How much of that is coming from acquisitions?

LESCO added 165 and -- Alex Blanton -Ingalls & Snyder: I’m sorry?

LESCO added 165 year over year and then we had -- we haveabout $50 million going the other way from the sale of Nortrax Southoperations. Alex Blanton -Ingalls & Snyder: Okay, so the net --

So the net is 115. Alex Blanton -Ingalls & Snyder: Net 15, so the rest, did that --

One-hundred and fifteen. Alex Blanton -Ingalls & Snyder: I’m sorry?

Net is 115. Alex Blanton -Ingalls & Snyder: And did that represent the pre-build you are talking about,the --

No, no, no -- those are two different divisions. Thepre-build occurred in AG. Alex Blanton -Ingalls & Snyder: I know, but I’m talking the overall went up about almost$400 million, and 115 came from acquisitions, so there was another almost $300million somewhere else.

And that’s AG, and that is correct, and that would be our --a lot of that is pre-build. There’s some growth just supporting some highermarkets but a lot of it is pre-build. Alex Blanton -Ingalls & Snyder: And the second question is --

And currency. Currency is -- for the AG division, currencyis about $200 million, and in total it’s about $300 million for the fullcompany, which is what we show on the slide. Alex Blanton -Ingalls & Snyder: Okay, so the currency had a lot to do with that --

Sure. Alex Blanton -Ingalls & Snyder: Okay. The rest of world was up 27% according to slide 32,which is astounding really, and different from I think most of your experiencein the past, where the larger Deere tractors have had to compete with smaller,cheaper tractors in emerging nations, and not that effectively. But now, it seems as if your products are really catching onin some of these emerging nations. What do you think are the biggest growthdrivers in places like Central Europe, Russia? I mean, in Russia they havetractor producers but you seem to be doing very well there, and also in Centraland South America. Those are very big sales increases.

I think our tractors do very well in Russia and the otherCIS countries as well, so you are right that that’s an area of real strengthfor us and I think our lineup and the horsepower sizes is a very good match forthat, and so we anticipate some strong demand in those countries for some time. In markets like Latin America, I think this additionalcapacity we have and new product lineup also positions us very well for thegrowth that’s going to be occurring in Brazil and we have continuously beeninvesting in the small tractor lineup in other parts of the world as well, sothey can compete more effectively and have a better value proposition. Alex Blanton -Ingalls & Snyder: You say you are reducing the size of the tractors to be morecompetitive in local markets?

It depends on the market.

Or changing the features so that it’s featured appropriatelyfor the market. Alex Blanton -Ingalls & Snyder: More compatible. Because I mean, 50% increase in CentralEurope, these are really quantum changes.

Some of that is currency too, don’t forget. Alex Blanton -Ingalls & Snyder: Okay, how much of that, say?

Well, for the full company, I would have to go back to thepress release.

The company is 5% of the 8 is currency, full company. Alex Blanton - Ingalls& Snyder: Yes, I know full company, but do you have it broken down byregion?

No, absolutely not. Alex Blanton -Ingalls & Snyder: Okay. All right. Thank you.

Thank you. Our next question comes from Mark Koznarek. Pleasestate your company name.

Good morning. A question here about the operating margin inthe AG equipment, given that you had this 56% volume production that didn’t allgo to revenue, I would have assumed that there would have been considerableover-absorption of your fixed costs and therefore a higher reported margin, andit didn’t seem to come through. The margin is quite good at face value butconsidering your production plan, it actually seems like it might have been alittle bit light and so I’m wondering if you could talk about that, and thenwhat this over-production implies for how to think about margin improvement inthe early part of ’08.

Well again, our guidance for 2008 for the AG division is incrementalmargins will be 25%. In terms of what happened in the fourth quarter, we didcite in the press release that we did have some higher R&D. A lot of thatis AG oriented in the quarter because of this huge number of product launches,like the 9000 series tractors, the cotton pickers, the new combines, and so wehad introduction expenses that would have affected SG&A and plus a lot ofgrowth, a lot of the increase ex-LESCO certainly would still be related to theAG division. The other thing is that when you increase your production, whennot all of that ended up getting sold so it’s not all included in sales of thatincrease in our ending receivables and inventory, and so some portion of that,we only got a manufacturing margin on. We didn’t actually get the sellingmargin and that will flow through over the course of the next year.

So because you only captured the manufacturing margin, youare saying there is actual margin dilution that occurred here in the quarterand that we are going to get a supplement in the early part of next year?

I wouldn’t say on the timing exactly and in terms of whenthat benefit will arrive, but again you are talking about a portion of thatbuild in the AG division.

Okay, then on LESCO, that was a public company before youbought it, so if you look at the financials, it was marginally profitable andclearly it lost some money in the fourth quarter. What’s the outlook for nextyear? Is it going to be gradual profit improvement or are there some -- are youexpecting something more dramatic there? And if so, why?

Well, LESCO is also absorbing -- we are absorbing some ofour integration expenses as we are moving through our outlook. It has been andcontinues to be that they will be profitable after we have owned them for ayear. Of course, that will occur later next year, later in 2008 for us. For thefull year outlook is that LESCO is basically break-even on an operating profitbasis and they are performing basically in line with plans.

So full year 2008, break-even?

Mmm-hmm.

Okay, very good. Thank you.

Thank you. Our next question comes from David Bleustein.Please state your company name.

Good morning. Can you give us some sense for the size of thefacility in Brazil, either a tractor capacity or expected revenues in ’08 orexpected run-rate in ’09? Just some quantification on that thing?

That’s a great question and it’s one that we have actuallydeclined to answer, obviously for competitive reasons. But it does -- there isno question that it improves our ability to respond to the market, not only inthe horsepowers in which we had traditionally competed in but it’s also allowedus to broaden our horsepower offerings. And the first two models that were inproduction in Montenegro are actually higher horsepower tractors -- 180 and 200horsepower, and they were ones that we did not previously manufacture inHorizontina. But other than that, I am not able to be specific.

Okay, fair enough. Which raw materials are driving theexpected increase in 2008?

We’re assuming that we will see some higher tire prices basedon what we’ve already seen. We think our -- in our landscape business becauseof where oil prices are, that will drive some higher costs for irrigation pipeand that will also -- those oil prices will affect our inbound logistics. We are in contract negotiations for steel right now, so weprefer to take a pass on that, but that gives you some idea of the things thatwe are thinking about.

Okay, and then the last one is the pipeline of projects oracquisitions that you see that currently meet your financial targets, is therea big pipeline? Are there a lot of global opportunities for you to invest yourdollars at your current financial targets?

Well, we have a lot more focus and resource devoted to thisnow than we did a year ago and certainly much more than a couple of years ago.It takes time. You have to have a number in the pipeline to make these come tofruition. We are going to maintain a disciplined approach towards thisin terms of our criteria and we are not going to deviate from that. These haveto at the end of the day create economic profit or we are not going to beinvesting in it. But we are active in virtually all our divisions in lots ofgeographies looking for opportunities.

Terrific. Thank you.

Thank you. Our next question comes from Daniel Dowd andplease state your company name.

You mentioned in there that Brazilian, there wereuncertainties around government-backed financing programs. Can you give alittle more color on that?

I’d be happy to. Our business, our plan for 2008 has thatfarmers are required to make their [tsunami]-backed payments on the 17th ofDecember. That is what the legislation is, and as you know about two-thirds ofour customers have already made their payments and that’s actually beensomething we’ve talked about a couple of conference calls ago. The reason we felt that we should at least put that in therethough is that there are some constituents in Brazil continuing to lobby thegovernment for potentially an extension or for some additional terms, and so Ithink we feel until we get to that date and see what actually happens withthat, that continues to be an area of uncertainty. Again, our base case, our business plans are all based onthose farmers making those payments on the 17th of December.

Okay, that’s helpful. Can I just turn to construction forjust a minute? You indicated that prices were actually up in that market. Canyou talk about under the market conditions hardware that came about and werethere specific things that were driving that?

Well, it would be our price realization, which is acombination of list prices, as you know, and what happened with -- what happenswith the discounts and I would say that you have to attribute some portion ofthis to the excellent discipline that we have had in our asset management. Weare really quite proud of what’s been accomplished there in terms of thesuccess of our build-to-order -- it’s called estimate-to-cash in that division,in terms of responding to the changing market conditions. And that is incontrast, candidly, to what we have done in the past. And again, I think it’s areflection of the discipline with the FCA and the OROA. Again, in any quarter, you can always get some unusualthings. Our outlook certainly is still quite cautious in terms of what’shappening with pricing, but I think that certainly reflects well on thedivision’s management efforts.

It certainly does. So is your view that the inventorydraw-down that you and others have done in that sector over the last threeyears has actually stabilized pricing generally, or do you think this isactually just Deere absorbed this and probably other manufacturers did not?

I would be -- really I have no way of responding to whatother manufacturers have been doing. I can really only comment on Deere.Clearly it’s a reflection of again the quick response to the changes in marketconditions at Deere.

Thank you.

Thank you. Our next question comes from Joel Tiss and pleasestate your company name.

That same sort of spirit, the question over again; can youtalk in the non-AG businesses on the pricing on the like-for-like products? Iknow you are introducing a lot of new products and maybe if you include thechange in the mix, then prices would be positive. But what about on thelike-for-like products?

On the non-AG businesses, we haven’t announced the pricingfor 2008 on the construction and I don’t have -- I don’t think -- none of ushave seen -- I don’t know what’s coming out on the commercial and consumerside. Typically the pricing strategy there is that you get alittle bit of benefit from the features in the markets, but on the consumerside --

More on the commercial side and we do have a very extensiveproduct introduction on the commercial mowing side and the C&C divisionthis year, and it will be the best product lineup we’ve had there on the largeframe zero turning radius mowers since we’ve ever been in the business, sothat’s going to be a real positive on that side.

That in fact is helping support our sales outlook in what isotherwise a tougher market.

Okay, and I meant in 2007 but in the AG business, if thevolumes are better than expected, would it be fair for us to assume that theincremental, that the pressure on the incremental margins would be to theupside?

I think I will have to let you make your own conclusions onthat.

All right, and just last, the credit portfolio, can you talka little bit about the mix of what’s in there between AG and construction?Thank you.

Yes, I actually have to look that up, though. In terms ofthe credit portfolio -- I’m almost there -- do you happen to know what pagethat’s on? Portfolio -- okay, I got it. By market, AG equipment is about 60% ofthe portfolio, construction is about 20% to 25%, commercial and consumer about10%, and AG financial services, which would really be the farm plan, is about5%.

Thank you.

Thank you. Our next question comes from Robert Wertheimerand please state your company name.

Good morning. I have two quick questions, one on the outlookfor Western Europe where you have it I think for the market, flat to upslightly. I know that’s a market that hasn’t grown much secularly but it’s beendoing much better than that now, so what is causing to see the slowdown?

Well again, it is a market that essentially we have for avery long time viewed as one somewhat in decline as they’ve been changing thecommon agricultural policy payout. We did in 2007 see some pull ahead actuallyinto 2006 because of the change in the value-added tax in Germany. In 2008, again we see very good farm incomes but reallycoming from -- unlike the U.S. where you have a dip in industry demand, you’vealso got some recovery here, you really didn’t ever have that in the WesternEuropean markets. They have a lot more livestock, so the income streams are alot more diversified than they would be in the U.S. market. So you are justreally coming at it from a better base, if you will.

And is that something you are seeing in your order flow, oris it more just a projection let’s say?

Well, we don’t do those things in a vacuum, to be fair.Again, when we look at where maybe a little more of the AG growth is, it seemsto be occurring a little further east.

Thank you. My second question is on credit and net incomeguidance, which I think is up around 4%, which is fine but it seems a bit low,given how strong your volumes will be and have been recently. Is that fundingpressures or is that higher provisioning or what is that?

No, it’s not funding pressures. A couple of things; thefirst one is that if you’ll recall in 2007, we increased our leverage in thecredit company and that occurred mid-year, so the 2008 results really reflect afull year of the higher leverage and the impact on an after-tax basis was about$6 million. So if that leverage change had occurred at the beginning of 2007,credit’s income would have been $6 million less, so that’s in the play. The other thing is remember as you -- when you book a note,you have to take the full provision on the note at the time you book it. Butlet’s say you book it mid-year, you may only get a partial year’s worth ofincome. So increased volume in a given year can actually mute, ifyou will, somewhat expected income because of the provisioning. We don’t -- wehave seen our portfolio perform very well in terms of past dues and write-offs.We anticipate we’ll see maybe a slight increase in write-offs next year butstill remaining below historic trend levels, so there’s no issues in theportfolio. It’s really growth and then the leverage.

I’d also say there are no issues relative to the margins. Imean, we have a very conservative interest rate risk management approach tothat, since we are able to keep that in a very narrow band and that’s not anissue.

That’s very helpful. Thank you.

I think we’re almost at the top of the hour. I’ve got timefor one more question.

Thank you. We’ll take the final question from David Raso.Please state your company name.

A question on getting more comfortable with the constructionand forestry guidance. First, the retail outlook for ’08, and I apologize if Imissed it, what is the retail outlook for construction and then for forestry?

We don’t have an industry guidance. We have our own salesguidance which is, as you are aware of, is flattish. Certainly with housing,one would expect certain segments to be under some pressure. On the other hand,we expect non-residential spending to remain at a very high level, remain flatwith 2007.

Can I at least read into that the level of under-productionin ’07 could allow you to have flat production, even in a down retail?

That’s what we’ve said, a little bit, no question.

And that said, can you help us understand the sale of theNortrax assets, and there is even word of maybe further, there is some benefitobviously now that some external third party sale, regardless of how fast thedealership turns that inventory, still now when you sell that to Nortrax andits new owners, it’s a third-party sale. Is there any benefit in your ’08construction guidance from this?

Actually, it turns out it would be a slight detrimentbecause you don’t pick up the used equipment sales that were running throughthe income statement and the margin, the retail margin on the parts and thecomplete goods and the servicing, so it actually would be a slight negative --it’s not --

Very small.

Yeah.

And then when it comes to the external engine sales in thisdivision, can you just give an idea of the growth in that business and if youcan roughly size it for us?

We a year ago talked about a business that was roughly300,000 engine units and roughly half external and we had not put sales dollarson it. We don’t, as you know, manage the business separately. It’s incorporatedwith our equipment lines, it’s integral, so I don’t have any other financial --I don’t have the financials on those.

Well, is it a growing -- basically a lot of it seems to behoused in this line item and people are trying to figure out how you areoutperforming --

That would not be correct.

It’s not mostly in construction?

No, that would not be correct.

Okay, and then lastly the forestry comment about downEurope, when I think of international forestry, given what’s going on in Russiaand so forth, is your forestry international expected to be down next year?

Well, we had some unusual circumstances in Europe that --and Europe is certainly a big piece of the business. You may recall there wassome storm damage that occurred early in the year. You had some harvesting.There was also taxes. Europe has taxes on the export of logs that have actuallysupported the forestry business in Finland and the Nordic countries inparticular. We are looking at the absence of the storm damage having aslightly, a slight -- putting some slight downward pressure, if you will, onthe sales but still looking for a very decent year and I’m stopping short ofprojecting what you might see in any given market.

I’m sorry, my question though was all international forestrydown as per your European comment?

Don’t have that level of detail available for you, David.

Thank you very much. We’ll talk offline.

Thank you so much for participating in the call, everyone.

Thank you. That does conclude today’s conference call. Wethank you for your participation. You may now disconnect your lines.