UPDATE 1-Deere lifts full-year earnings forecast on resilient farm equipment demand

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CHICAGO, Aug 21 (Reuters) - Deere & Co, the world’s largest farm equipment maker, lifted its full-year earnings forecast on Friday after a smaller-than-expected decline in quarterly profit, as the sector benefits from replacement demand and government stimulus.

The Moline, Illinois-based company said it now expects net income of about $2.25 billion for the full year, higher than $1.6 billion-$2 billion estimated earlier.

For the quarter ended on Aug. 2, it reported earnings of $2.57 per share compared with $2.81 per share last year. Equipment sales during the quarter declined 12.4% year-on-year to $7.9 billion.

Analysts surveyed by Refinitiv, on average, had expected earnings of $1.26 per share and equipment sales of $6.7 billion.

The coronavirus pandemic has lowered commodity prices, squeezing farmers who are still reeling from the U.S.-China trade dispute. However, U.S. farmer sentiment has rebounded on the back of improved planting conditions as well as additional government subsidy payments.

President Donald Trump has announced a $19 billion relief program to help U.S. farmers cope with the impact of the health crisis. Also helping agricultural equipment demand is a growing need for farmers to replace their aging tractors and combines.

Deere expects a recovery in sales for farm machines on the back of improved demand in North America and Asia. Still, Chief Executive John May warned that uncertainty caused by the pandemic could weigh on sales. (Reporting by Rajesh Kumar Singh; Editing by Alex Richardson and Susan Fenton)