Deere & Co reported a 46 percent rise in quarterly earnings and projected substantial growth for 2012 amid strong global farming conditions and higher prices, sending its shares higher in an otherwise weak stock market.

The world's largest farm machinery maker said hefty incomes of the world's farmers -- driving record 2011 results -- are expected to be stable in 2012. Demand for agricultural commodities, such as grain, will remain high.

The company solidly outpaced analyst expectations in the fourth quarter as agricultural and turf equipment sales were stronger than expected. Those results offset a slightly disappointing result on construction and forestry margins.

Deere's projection of 2012 net income of about $3.2 billion, compared with $2.8 billion in 2011, was also higher than Wall Street's expectations.

During a conference call, the company said it plans to more tightly manage inventory of combines, which is a closely watched indicator of company health.

Moline, Illinois-based Deere's strong earnings and positive outlook come during particularly good times for U.S. farmers. Farmland prices in the United States surged to the highest level in three decades in the July-to-September period, even as major crop prices have fallen from peaks earlier this year.

Deere said it has continued investing in its product line to meet demands from farmers.

Our success reflects a continued pattern of strong customer response to our innovative lines of equipment, Chief Executive Samuel Allen said, adding that Deere remains well positioned to carry out its extensive growth plans and capitalize on positive long-term economic trends.

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For a graphic on Deere earnings results: http://link.reuters.com/qax25s

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RECORD 2011

Deere posted net income of $669 million, or $1.62 per share, for the fiscal fourth quarter that ended October 31, compared with $457 million, or $1.07 per share, a year earlier. Revenue rose 20 percent to $8.61 billion.

Wall Street expectations called for Deere to earn $1.43 a share, according to Thomson Reuters I/B/E/S.

For full-year 2011, Deere's net income reached a record $2.8 billion, and the company generated $3.6 billion in cashflow from operations.

Sales, positively affected by currency translation and price increases, topped $32 billion in 2011, helping the company offset a $665 million increase in raw material costs, which are expected to rise another $500 million in 2012.

During the fourth quarter, Deere continued its pace of double-digit growth in both established and emerging markets. In the United States and Canada, equipment sales rose 14 percent, while sales outside that region grew at more than twice that pace -- posting a 31 percent equipment sales rise.

Last month, Deere rival Agco Corp posted stronger-than-expected third-quarter results and raised its full-year outlook for the fourth time. CNH Global , which also outpaced analysts' forecasts, said full-year revenue growth would be at the upper end of its prior forecast of 15 percent to 20 percent.

Deere's shares rose about 3.3 percent to $75.28 in morning New York Stock Exchange trading. The wider market slumped on concerns over unemployment, consumer spending and the economy in Europe.

SUBSTANTIAL GROWTH

Deere executives remain bullish on its ability to thrive.

In spite of an unsettled global economy, demand for John Deere products is expected to experience substantial growth in fiscal year 2012, Deere said in a press release.

The company said momentum is expected to be strong in the current November-to-January period, with sales seen rising as much as 16 percent to 18 percent compared with the same period a year ago. Full-year equipment sales growth will moderate in coming quarters, settling in at 15 percent for all of 2012.

In Europe, sales are expected to be flat next year as a result of general economic concerns there. South America industry sales, which were strong in 2011, are expected to be flat as well.

Increased availability of financing and higher crop production in China and high agricultural commodity prices in India are expected to be key factors fueling Deere's momentum in Asia.

(Reporting by John D. Stoll in Detroit, editing by John Wallace and Maureen Bavdek)

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