It's hard to know what hurt the Elders share price the most yesterday, the downgrade of the outlook or the general sell-off across the market, led by banks.

Elders did improve its performance in the first half to March 31, cutting its loss substantially, but the increased caution for the second half was a surprise.

As a result, Elders shares lost 9% yesterday, or 4.5c, to end a tough day 45c.

At one stage they were down around 12%.

Factors like the strength of the Australian dollar, the rising cost of fuel and wages, the impact of the March 11 disasters in Japan on cars and woodchip demand, were all mentioned as reducing the confidence the company had for the rest of the year.

Elders told the ASX yesterday the first half loss of $14.6 million was sharply lower than the loss for the first half of the 2010 financial year of $165.9 million.

The company did not declare an interim dividend.

It said an increased contribution in underlying earnings from Elders' rural services division and cost cuts helped the improvement and offset lower contributions from its forestry and automotive divisions.

"Both periods were affected significantly by non-recurring items, with the 2011 first half including previously advised impairments to recognise cyclone damage to forestry plantation, the write-off of the carrying value of Elders' shareholding in HiFert and dividends and gain on sale from the divested shareholding in Rural Bank," the company said in yesterday's statement.

Excluding non-recurring items, Elders recorded an underlying profit after tax to shareholders of $1.0 million compared with the loss of $2.4 million for the 2010 first half.

Underlying profit before tax of $3.9 million is in line with guidance and 2010 first half comparative of $2.1 million.

Underlying EBIT for the first half of $20.0 million was 94% higher than the 2010 comparative of $10.3 million.

Underlying results for 2010 have been adjusted to recognise discontinued operations, the most significant of which was Elders' shareholding in Rural Bank, which was divested in December 2010.

Despite this improvement, the company said risks to its earnings continued to emerge, and it had lowered its expectations for its full year underlying profit.

Elders said it was now looking at a full year result in the lower end of ''the current market range'' of between $7.5 million and $24.5 million, excluding any impact from its woodchip price negotiations.

That compares to the previous guidance in March for a result between $15 million and $30 million.

Chief executive Malcolm Jackman said Elders expected a customary increase in second half earnings and sales, but those expectations were being moderated by several ''headwinds''.

"While we are expecting our customary increase in second half sales and earnings, our expectations are being moderated as headwinds increase in a number of business areas.

"Rural Services operations are clearly on track, notwithstanding the disruptions of the first half.

"While last year's experience showed that results can vary significantly month to month, the seasonal conditions so far have most regions in their most promising condition for many years.

"Western Australia is the exception after the extended hot dry conditions that have prevailed there, but we hope the recent rains prove to be the start of a good season.

"Sales and demand levels for farm supplies remain healthy, albeit competitive.

"Livestock supply volumes are continuing to tighten, impacting both the agency and trading operations.

"Automotive operations now face stronger headwinds than anticipated with forecast motor vehicle build levels in Australia having been revised downward substantially in recent weeks, and the rising A$ level posing further threats.

"The management team within Futuris is working diligently to minimise the impact on employment and returns but, on the schedules advised, we have been forced to lower earnings expectations from the automotive business to a full year underlying result that approximates that achieved in 2010, Mr Jackman said.

Forestry operations are also facing softer than anticipated woodfibre demand volumes following the Japanese tsunami and the added uncertainty arising from high exchange rates and the yet to be concluded annual woodchip price negotiations with Japanese buyers.

"The outcome of these price negotiations, which is expected to be finalised in the next few weeks, has the potential to materially impact underlying earnings.

Mr Jackman said high commodity prices were partly offsetting the impact of the high Australian dollar on farm incomes.

"If commodity prices were to fall away, we'd all be under a huge amount of pressure,'' he said. ''Cost pressure - fuel prices and wages - are impacting our business and impacting our clients."

Mr Jackman said seasonal conditions in most areas of Australia were the most promising for many years, except for Western Australia, where dry conditions prevailed.

He said that completion of the third quarter sales season will enable the current year financial outlook to be determined with greater certainty.

"Accordingly, Elders expects to provide a Trading Update on its FY11 outlook in July, or earlier, should circumstances permit," Mr Jackman said.