Worries about raw material costs persist, despite the recent commodities selloff. Tractor titan Deere (DE) on Wednesday posted softer-than-expected fiscal third-quarter earnings and guided lower for the fourth quarter, citing narrowing profit margins. Deere made $575 million, or $1.32 a share, for the quarter ended July 31, up from the year-ago $537 million, or $1.18 a share. Revenue rose 17% from a year ago to $7.74 billion. Analysts surveyed by Thomson Financial were looking for a profit of $1.36 a share on revenue of $7.23 billion.

“Though agricultural commodity prices have moderated, they remain quite favorable by historical standards and are continuing to provide strong support to farm incomes and to the sale of productive farm machinery worldwide,” said CEO Robert W. Lane. Deere said a “continuation of positive conditions in the global farm sector is helping the company maintain record financial results at a time of rising raw material costs and a sluggish U.S. economy.”

But the high costs will hurt the fourth quarter, when Deere is expecting to earn $425 million. That works out to about 98 cents a share - well short of the $1.15-a-share analyst estimate. Deere shares, already down 25% for the year, fell 6% in early premarket trading.

Deere (DE) shares dropped after the Moline, Ill., tractor maker said rising material costs will weigh on earnings for the second half of its fiscal year.  Deere made $764 million, or $1.74 a share, for the second quarter ended April 30, up from the year-ago $624 million, or $1.36 a share. Sales rose 18% from a year ago to $8.1 billion. Analysts were looking for a $1.75-a-share profit on sales of $7.6 billion.

Deere said the global agriculture boom is helping the company weather the weak economy in the United States. Net equipment sales outside the United States and Canada rose 46% from a year ago, Deere said. But the company added that “escalating raw-material costs and the availability of various parts and components are expected to have an impact on operations for the balance of the year,” and Deere’s guidance appears to be short of the Wall Street consensus estimate.

The company forecast a third-quarter profit of $550 million to $575 million, which works out to around $1.25 to $1.30 a share on a back of the envelope basis. Analysts were looking for $1.49 a share. For the year, Deere said it expects to make $2.2 billion, or about $5 a share - shy of the $5.20-a-share Wall Street target. Shares of Deere, which are up 80% over the past year as farm prices soared,  dropped 7% in early trading Wednesday.

Deere (DE) profit leaped in the first quarter as the global farm boom rolls on. The Moline, Ill. tractor maker posted a profit of $369 million, or 83 cents a share, up from the year-ago $239 million, or 52 cents a share. Sales surged 18 percent from a year ago, to $5.2 billion. The results were better than expected: Wall Street analysts were looking for a 78-cent profit on sales of $5.07 billion. Like another maker of heavy machinery, Caterpillar (CAT), Deere is finding that strong global growth and a weak dollar are helping to offset a softening performance at home.

“Advanced product offerings that help John Deere customers be more profitable and productive are supporting the company’s financial performance and helping expand our global market presence,” CEO Robert Lane said. “Further, benefiting from our ongoing actions to create a fundamentally more resilient, more successful business, Deere’s non-agricultural operations remain on a profitable course in spite of weakening economic conditions in the United States.”

Indeed, sales outside the United States surged 37 percent from a year ago, dwarfing a 9 percent rise in North America. Deere expects strong overseas demand to continue, which is why it’s forecasting a 23 percent sales increase for the second quarter - well above the analyst consensus estimate. “The company remains in a prime position to benefit from powerful trends sweeping the world,” Lane said, “such as growing affluence, increasing demand for food and infrastructure, and the rising use of biofuels.”