Steven Fisher downgraded both stocks to "Neutral" from "Buy," and kept a "Neutral" rating on shares of CNH Global NV. He said the stocks should do well into the next quarter, but risks will start to increase in June, when the size of the upcoming corn crop starts to become apparent.
A severe drought pushed corn prices above $8 per bushel in 2012, and the price remains over $7 a bushel. However, the U.S. Department of Agriculture believes corn prices will fall to $5.40 a bushel for the 2013-14 season, and Fisher said he agrees with that assessment — as does Deere.
"The relative performance of farm equipment stocks, and Deere in particular, has historically traded closely with corn," he said. That means Deere shares would underperform the market if corn prices do go into a steep decline.
Agco stock lost $1.19, or 2.2 percent, to $52.91 in afternoon trading. Deere shares fell $1.48 to $90.34 and CNH Global shares slipped 87 cents, or 2.1 percent, to $40.33.