Deere & Co. shares fell after the world’s largest tractor manufacturer posted disappointing earnings as it battles higher freight and raw-material costs.

The Moline, Illinois-based company on Friday posted lower-than-expected fiscal third-quarter earnings and kept its full-year earnings forecast unchanged, despite analysts’ predictions for a higher outlook. The shares dropped as much as 3.7 percent in New York, their biggest intraday decline in three months.

The company is paying more for steel: Prices are up after the U.S. imposed tariffs on imports from some countries. And like other industries, Deere is paying more freight costs amid higher fuel costs and a shortage of big-rig drivers.

“We have continued to face cost pressures for raw materials and freight, which are being addressed through a combination of cost management and pricing actions,” Chief Executive Officer Sam Allen said in a statement.

Deere said it also saw an increase in expenses after offering sales incentives for its construction equipment. “Demand is really strong, so it’s unclear why they had to discount,” said Karen Ubelhart, an analyst at Bloomberg Intelligence.

Profit excluding one-time items was $2.59 a share in the three months through July, missing the $2.74 average of analysts’ estimates compiled by Bloomberg. Deere kept its full-year earnings forecast unchanged at $3.1 billion, compared with an average estimate of $3.17 billion. Deere traded 2.5 percent lower at $133.98 at 9:40 a.m. in New York.

Cost inflation is marring what is proving to be a strong uptick in demand for agricultural-machinery. U.S. farmers, the company’s biggest market, are finally returning to dealerships to replace worn-out tractors and combines, despite a multi-year downturn in the crop markets. That helped to boost Deere’s worldwide net sales of equipment by 36 percent in the quarter from a year earlier.

“Replacement demand for large agricultural equipment is driving sales even in the face of tensions over global trade and other geopolitical issues,” Allen said.

Chinese tariffs on imports of U.S. soybeans and other farm products have depressed crop prices in recent months, hurting the purchasing power of American farmers. Indeed, sentiment dropped a record amount in July in a CME Group and Purdue University index.

“If trade disputes escalate, it could dent confidence among a lot of different businesses, including agribusiness,” Matt Arnold, an analyst at Edward Jones & Co. said before the earnings were released.