Despite continuing strong farm fundamentals and projected strong ag equipment purchases through the end of this year, at least two analysts, JP Morgan and Wells Fargo, downgraded Deere & Co. shares.

According to Ann Duignan, machinery analyst for JP Morgan, Deere’s stock is up 29% year to date on “bullish sentiment around the agricultural commodity space.” But she cites higher pension and R&D costs as well as dealer allocation plans for North American combines as reasons for downplaying shares of the world’s largest farm equipment maker in coming months. She says she expects Deere to issue conservative fiscal year 2011 guidance on the back of these factors.

“DE will issue FY’11 guidance in November and we are at $5.01 for fiscal year ’11 vs. consensus of $5.19,” Duignan says. “We are comfortable with our below-consensus number given the headwinds that management has already cited. These include higher pension costs ($0.19 headwind, JPM estimates), elevated R&D spending for emissions standards, as well as its decision to allocate combines to NA dealers in 2011.”

Duignan says these factors make valuation of Deere stock “less compelling.”