JPMorgan Downgrades Deere & Co, Sees Coming 'Liquidity Crunch' For Farmers

In a report published Friday, JPMorgan downgraded the rating on Deere & Company DE from Neutral to Underweight, while reducing the price target from $90 to $84. In the report JPMorgan noted, "We recently spent some time in the Midwest meeting various agriculture industry participants including dealers, farmers and industry experts. We believe it was clear from what we heard that the industry is currently in dire straits with the potential for a liquidity crunch for farmers into 2016." Moreover, the dealers indicated that a large number of used high HP Deere tractors were in inventory, which could exert pressure on new tractor sales for the foreseeable future. "In the USDA's most recent quarterly Grain Stocks report (as at March 1, 2015), total US corn stocks of 7.745B bu were up 11% YoY; 4.380B bu (~57%) of those stocks are stored on-farm, up 14% YoY," the analysts added. The EPS estimates for FY15 and FY16 have been reduced from $5.28 to $5.20 and from $5.27 to $4.20, since the industry is expected to remain under pressure till then.